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Wednesday, January 11, 2012

God help them.

The Greek one-year note hit 376% yesterday. And five-year credit default swaps on Greek debt sell for $6.2 million per year to insure $10 million in Greek government bonds. Read it here


GreasyGreek said...

How does monetary policy work with the ECB? If there aren't EU securities, how is policy conducted without open market operations as the US knows it?

I saw 385% today - I'll take some of that action.

Randall Parker said...

Dear Mr. Greek (we'll forget about the slur): This is about Greek fiscal policy and it is not good at all. Where it stands right now, it looks like the ECB may be the only savior for the Greek government and they have already said they are not bailing out the Greeks. I think the Germans have said pretty much the same. I don't blame them since the last time I checked the Greek government has not laid off one single solitary employee through this whole mess. The other problem is European banks and how much of the Greek government debt they have as tier one capital as per the Bassel Accords. Not good at all.

If you want some of that, come get you some. It is sold in $10 million dollar amounts although I am sure there are brokers who will split that further.

Non-GreasyGreek said...

Oops, didn't intend for that to be interpreted as a slur.

The posted WSJ article references the ECB numerous times....... and hence the question that you did not answer.

Randall Parker said...

Dear Non-Greasy Greek: The ECB actions referenced in the article are just like discount lending in the US, along with the scores of other what are called "13-3" lending facilities that emerged after August 2007. Indeed the Fed is now playing a part in it as they have loaned billions of dollars to the ECB to lend to European banks who need to settle dollar accounts.

Many are calling for the ECB to lend much, much more and even to monetize the debts of member countries to save the euro. That would be the ECB buying EU securities and printing euros. We'll see about that. Usually when the end comes it comes quickly and it is very messy. I don't see how Greece survives.

Did I answer the question?