SOVS Update

It’s all moving very quickly now.

The US 10 year is down over 25 bp from the highs, US stocks are leveling off as the dollar is looking up, hurting foreign earning translations as are rising risks of more serious trouble in the euro zone.

It’s also becoming more apparent that the austerity measures do not ‘fix’ anything but instead slow growth and cause the automatic stabilizers to keep the national gov. deficits high and growing, causing further credit deterioration.

While higher deficits are the answer for growth, at the same time they reduce already deteriorating creditworthiness.

The question is now whether the deficits get large enough to support the needed GDP growth that might restore credit worthiness before the loss of credit worthiness causes widespread defaults.

On Thu, Apr 22, 2010 at 6:35 AM, wrote:
EU release of budget deficit estimates for 2009 which were revised higher hurting the peripherals

Ref Entity 5y$ COD 5y/10y Coupon

Germany 35-39 1.5 4/5 25x
France 59-64 4 3/5 25x
Netherland 37-41 2 3/5 25x
Finland 26-30 1.5 3/5 25x
Norway 17-20 0.5 2/4 25x
Denmark 35-40 1.5 3/5 25x

Belgium 68-73 4.5 2/4 100x
Austria 66-70 4.5 2/4 100x
Sweden 36-40 2 3/5 100x

Greece 545-585 85 -120/-85 100x
Portugal 268-278 45.5 -22/-15 100x
Spain 178-188 23 -8/-3 100x
Italy 148-153 17.5 -1/3 100x
Ireland 175-180 24.5 -3/3 100x

USA €’s 38-41 0 2/4 25x
Switzerland 45-55 0 2/5 25x
UK 73-76 2 1/3 100x

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36 Responses to SOVS Update

  1. Curious says:

    “I use a case study every semester on LTCM in my financial markets/MMT/Minsky class . . . gets the point across fairly well.”

    Do you have anything online that you can post a link to? Thanks.


  2. warren mosler says:


    Neil Armstrong Reply:

    “For example, the US terms of trade would be worse if it had to export more copies of Windows 98 for every gallon of oil it imported.”

    Remember what you said earlier about data glitches regarding China Warren and thier accounts on US FED computers that may be subject to a VIRUS. See they can STEAL and do STEAL tons of our intellectual capital, win98 and windows 7 and nuclear science from los alamos and corporate secrets from many US corporations, car designs, engineering information for our buildings etc etc. We can’t COPY the oil like they can and do copy our DATA :(


  3. Neil Armstrong says:

    “Russia defaulted on ruble-denominated debt (as well as Russian law $-denominated debt, and old Soviet restructured debt) because it thought it could make foreign investors take the losses”

    There is a poster here panaytos saying Greece debt is held mostly by foreigners too.

    ” and allow its banks to escape financial ruin (such bonds were predominantly held by foreign banks and hedge funds, including one of Warren’s funds I believe).”

    Yes – didn’t Warren call it a “HIGH RISK” fund? Thereby preventing the lawyers from having a field day? :)

    Rubin has said LTCM had nothing to do with financial anything, the whole scheme was predicated on a belief that the world would not let a nuclear weapons country “default” LOL!


  4. warren mosler says:

    Michael, who stole ‘exchange rate policy and full employment’ from mandatory readings?

    Please replace, thanks!


  5. warren mosler says:

    the russian thing is in ‘exchange rate policy and full employment’ under mandatory readings. :)

    it was a fixed fx policy that blew.

    but then instead of floating it the boys at the cb just packed up and left. it reopened several months later when for the most part they made good on the (devalued) ruble balances.


  6. BFG says:

    It looks like its spreading to Germany.

    But, Wednesday, the auction of €3 billion (just over $4 billion) of 30-year German government bonds, or bunds, attracted only €2.752 billion in bids and wound up selling €2.458 billion at a yield of 3.83%.


  7. john says:

    Russia defaulted because they did not understand the possibilities available to a sovereign currency issuing govt… In that sense the default was voluntary…


    Benedict@Large Reply:

    Interesting. So Long Term Capital Management crashed and burned, nearly taking the global financial system with it, because Russia made a mistake?

    That would mean that either it’s true that NO ONE of any “position” gets MMT at all, or someone WANTED to crash and burn LTCM. Any guesses?


    zanon Reply:

    The LTCM boys are very good at crashing and burning. I think Merriweather has just blown up his second fund, and no doubts will be starting a third.

    Russia is a wonderful and complex country that cannot be understood by foreigners.

    No one in any position of power understand MMT. like I ask earlier, is there single economist in top 10 university who understand MMT?!

    There is not. case closed.


    vipul Reply:

    There are a couple of reasons I feel like Dick Cheney might have understood part of MMT:

    – Cheney said deficits don’t matter.

    – The Bush administration stopped offering 30 year bonds for sale.

    – Warren mention he’d tried explaining MMT to Donald Rumsfeld.

    jcmccutcheon Reply:

    Vipul, I agree. On MMT alone Bush/Cheney were better. ( sorry Tom)

    Scott Fullwiler Reply:

    Right, Zanon. LTCM was heavily short Treasuries in the midst of the Asian crisis and the stock bubble. Even without Russia, it was just a matter of time. Anyone who gets MMT would know not to be short a sovereign currency issuer–particularly when you’re also long corporates as they were–when things start to get fragile. I use a case study every semester on LTCM in my financial markets/MMT/Minsky class . . . gets the point across fairly well.

    Tom Hickey Reply:

    @ Jcmccutcheon

    I think that Cheney did get MMT, perhaps from Laffer, and clued Bush in. I doubt Bush bothered to understand it completely. But as long as Cheney assured him he could run big deficits to finance his imperial wars and cut taxes at the same time without consequences on his watch, W was fine with it. The timing was just off by a bit, or the GOP would have been able to dump the crisis on Obama as happening on his watch. As Greenspan said, he never dreamed that Wall Street was so greedy, it would kill the goose that lays the golden egg. But he was wrong. By then, Cheney had lost his influence, and Paulson was at sea about what to do. So he threw $$$ at Wall Street.

    The GOP strategy seems to be to use MMT principles to spend on the military and cut taxes while in power, driving up the deficit and debt, and they forcing the Dems to cut back on social spending with the come to power by crying “fiscal responsibility” and the “the sky is falling.” So far it’s working. Just fine for them and their cronies, but not so much for anyone else.

    zanon Reply:

    Tom Hickey:

    You are truly insane. Only someone whose mind is Democratic Poodly and not actually brain could blame Bush imperial wars on understanding of MMT and not, you know, gang of muslims flying two jet liners into world trade center.

    Bush’s deficit spending was actually good thing as per MMT larger deficits are better. If Bush tried to cut deficit, things would be worse now. Not that I would credit Bush with understanding anything about economy.

    GOP strategy is, while in power do what they want, and while out of power try to stop democrat. Democrat strategy is exactly mirror image. It takes blind brainwash to not see this.

    Matt Franko Reply:

    here found this interview with Chaney from about a year ago (softballs from Kudlow).

    He touches on how the Dems are spending/deficits a bit but doesnt “go off” on them. Doesnt say we are borrowing from the Chinese.

    Tom Hickey Reply:

    Thanks, Matt. Cheney sounds pretty “wise” in comparison to the rest of the current GOP raving and crazy talk, but its same-o, same-o as far as the familiar “big government” and “tax and spend” line goes. But not much in the way of MMT principles there, for sure. OK, he admits that the government “had” to step in and bailout Wall Street as lender of last resort, but that happened on his watch. Apparently, debts and growing national debt are only trundled out for military spending and tax cuts for the super-wealthy.

    Tom Hickey Reply:

    Zanon, I realize you don’t like Noam Chomsky, either, so I feel in good company.

    Matt Franko Reply:

    Now Peterson Fdn is starting to take aim at the military. I read a Walker spech he gave at the naval academy from when he was still in Govt where he was telling the mids that they were going to have to figure out how to do with less in the future, this while also stating that he had a son in NROTC at Villanova (he’s probably in the Navy now). and he was recently over there again. so here you have Walker thru his ignorance actually indirectly putting his son in more danger than is necessary. These idiots will put us in a position where they let al queada walk right in here and cut our heads off because “we cant afford it”.
    Now Peterson himself: here is a link to Blackstones portfolio of Companies. You can see, many these companies are in such sectors as consumer staples, food, medical supplies, travel & leisure, entertainment and amusement (btw no “Defense” as far as I can tell). All of Blackstones cos. would especially prosper if citizens incomes were restored from bottom up, (in the interview I posted at billy Peterson admits his businesses are not doing as well) instead, he creates a Foundation whose sole purpose so far as I can tell is to destroy US citizens incomes! (I wonder if Schwarzman knows this!)
    I dont think they realize what they are doing. I think if Warren & his posse put together a small elite team and a presentation and took it to Peterson, he could be reasoned with along these lines.

    Neil Armstrong Reply:

    creates a Foundation whose sole purpose so far as I can tell is to destroy US citizens incomes!

    The most vocal dissident is Thomas Hoenig, president of the Federal Reserve Bank of Kansas City and the Fed’s longest-serving policymaker, who has twice formally objected to the Fed’s “extended period” language. That commitment plus zero rates, he explained on April 7th, lead “banks and investors to search for yield… take on additional risk [and] increase leverage”. He argued the Fed should soon raise rates to 1% to “end the borrowing subsidy”.

    The next day Narayana Kocherlakota, president of the Minneapolis Fed, voiced a different concern: that the excess bank reserves created by the Fed’s MBS purchases create the potential for high inflation. He advocated selling $15 billion-25 billion of MBS a month, which would clear the Fed’s inventory in five years instead of the 30 it would take for the bonds to mature.

    Matt Franko – did you say some people don’t know what they are doing? Stop the INsanity! :)

    I though at least a fed bank governer would understand about reserves and inflation, how silly!

    Tom Hickey Reply:

    Matt, I am glad that someone is putting cutting the military on the table. I am a former naval officer, so I’m not anti-military. The Cold War is over, and so is WWII. The US does not have any good reason to have the military it now has. It is Military Keynesianism pure and simple. Military spending is distributed across the states and congressional districts, and people in Congress have no appetite for cutting spending in their own backyards.

    The US military needs to be redesigned for the 21st century and that means changing attitudes as much as forces. The US has no role as the world’s cop. That should be the job to the UN. Yes, I’m glad Saddam, but I’m appalled at the illegal war of aggression, the justifications of war crimes, the loss of life, and the devastation that were involved. And Osama bin Laden is still on the loose, and Qaeda is still threatening terrorist attacks. Wrong policy, strategy, and tactics, and wrong commitment of resources.

    As as sovereign nation the US has the right and duty to defend itself. That does not mean a blank check policy, however. It means developing policy, strategy and tactics to meet potential challenges, not imagined ones, or feeding the military-industrial-governmental complex.

    The US also has to get back to a military force that is drawn from civilians, not based on mercenaries. Mercenaries are the disease of democracy, and it can be a fatal disease. There is not place for “contractors” doing the military’s job, regardless of the “efficiencies.” It’s just bad policy.

    It’s not just a matter of cutting back the military now that the 20 century job is finished and a new one has arisen posing different needs. It’s also about shrinking the global arms industry that is devouring real resources that could be put to far better use. The arms industry is a key element of crony capitalism.

    Finally, people like Noam Chomsky have documented that neo-imperialism and neo-liberalism are two sides of the same ideology. The “free market, free trade, fred capital flow” mantra is backed up by covert and overt operations world-wide to expand “democracy and free markets.” This has to end, too. And it’s not just the program of neo-conservatives, although recently they have been the ones chiefly driving it. This attitude has become accepted as “patriotic,” even though it is oppressive. Taken to its logical conclusion, it spells disaster for the US middle class in the race for the bottom.

    Neil Armstrong Reply:

    I am career US Army – 27 years – how many years did you serve Tom? Funny how many of us got a leg up because of this military you want to scale back Tom.

    We need a military to keep the energy flowing and cheap. I enjoy my american way of life. I know a strong national military makes that possible. Otherwise perhaps more pirate raids on oil transports would happen. Perhaps some would decide to invade the USVI and take the refinery there – like Russia just did to Georgia – a strong military keeps sillyness like that from happening and keeps refined oil for warren on the USVI.

    This advantageous american way of life has allowed much of the technology, democracy, and progress that has benefitted the entire world over the past 100 years. Neil Degrasse Tyson (carl sagan’s protege) just recently spoke how the middle east and the muslim nation – 1 billion strong – have no nobel prizes – while the west has made many advances to science but back in the 1200’s the muslims were technological geniuses. Some nuts got in charge of the nations though and sent these blooming scientists back into the dark ages with bad national policy. So leaving the oil in the middle east with a bunch of people who aren’t doing much for human progress sounds damn stupid to me. Maybe one day we can retool Darfur and the UAE to be the cupertino and silicon valley of the world, but not yet.

    The military is redesigning, we have UAV robot planes, satellites with lasers on them *shhh* robot tanks and such. These UAV’s are being used to patrol the US border to keep illegal immigrants from exploting the lack of a fence.

    They are talking about cutting cops here in my local city, crime is already rampant, fewer cops and it is going to get worse. On a world scale I think fewer cops will scale the same way. More human trafficking, drugs, somali pirate raids etc etc without a strong cop presence.

    As for mercenaries, that is part of your new 21st century strategy, it is more cost efficient and economical. Keeping those idle youth in the middle east and others employed as our war enforcers has been a great HELP to us and them. It gives them skills, a sense of belonging, a platform to lead from for other civilian work after thier fine military disciplined training. Most importantly it keeps them from turning into common thugs in thier local economy or enemy combatants against us. Gen Petreaus has spoken how this outsourced MERCERNARY military has many economic advantages for everyone involved.

    The arms industry, all I can say is that if it takes the militarization of space to get silly humans off this planet, that is an acceptable evil. The asteroid coming for us like the dinosaurs may show up anytime, and if we aren’t out there off the planet, you can kiss humanity and all your economic history goodbye. So which is it Tom, and evil military space presence and gobs of government policy in that direction – or the fate of the dinosaurs? Of course I am a NASA guy so I am biased :)

    Tom Hickey Reply:

    Neil, what you say is scary. It’s basically we’ve got the power and we’ll take what we want, and if we don’t someone else will. This is Cheney-think.

    In my view that is a recipe for disaster. It’s what every empire previously based itself on, and they all failed in the end.

    But I do believe that this is ultimately what the kerfuffle in the US (and West) is about between right and left, nationalists and globalists. So far you guys are winning.

    beowulf Reply:

    Neil, Tom– can’t we all get along and agree that the Air Force is what’s wrong with America? :o)

    The best defense spending we can make now is making North America energy independent (ironically, its the USAF that’s focused on this issue). I posted a link a few days about a company that’s developed, essentially, a microwave oven that quickly and cheaply extracts petroleum from tires, capped oil wells, coal and shale*. Even using inefficient WW II German coal to oil technology (the constraining factor there actually is the huge amount of fresh water it requires) would be worth the cost. What killed functional finance (politically) in the 70’s was that it was blamed for the economy’s stagflation (high inflation, high unemployment), the real culprit, of course, was the cost push inflation in petroleum.

    As for a citizen army vs. a mercenary army, it was Machiavelli who said of Switzerland’s militia system centuries ago (and which is still in use), the Swiss are the most armed and most free.

    *Global Resource Corp’s HAWK recycler extracts oil and gas in seconds from most everyday objects like tires, plastic cups, as well as from shale, coal, and tar sands. Microwaves tuned to an optimum frequency separate the component parts which can be burned or condensed into liquid fuel, using only a small portion of the energy produced.

    ESM Reply:

    I have no military experience at all, but I know my history and I have spent countless hours contemplating human nature. I am totally with Neil here. Spending 4% of GDP on the military to remain the (mostly) benevolent, global hegemon and keep the peace is a bargain. Yeah, you can pick some nits as to where we get involved, and how we act when we’re there, but the alternative to the US remaining the sole global superpower is a dystopia of endless regional conflict and war.

    And Tom, you cannot seriously want the UN to be the world’s policeman, can you? The UN is a joke, and it’s a good thing it is too, because if it wasn’t, we would be ruled by a democracy of thugs and tyrants.

    jcmccutcheon Reply:

    I’m with Neil although , as always, Tom’s views are thought provoking. We cannot de-militarize til there is a viable uncorrectable world government/world policeman that can guarantee security everywhere for everyone(don’t see it happening). Till then we have to be on the frontier of military technology.

    Tom Hickey Reply:

    ESM, if you read what I said, I said that the military needs to adapt to a 21st century defense policy that is aimed at actual threats, not specters from WWII and hangovers of the Cold War. A lot of military expense is misdirected and could be eliminated without force deterioration, given current needs. The US is lagging seriously in important areas such a 4th and 5th gen counter-warfare. The chief threats the US is now racing are not being addressed adequately and some hardly at all, such as cyber-security, where key US non-military but strategically vital institutions, like the power grid, are undefended by the military and defense is left to the companies involved at their own expense. Dumb.

    What I meant by saying that the US in not the world’s cop and that this policing, which I would like to see increased, not decreased, is not properly handled unilaterally or though partisan alliances. Oppressive dictatorships that don’t actively threaten other sovereign nations with imminent attack need to be addressed through other means than what amounts to illegal aggression base, e.g., based on fixed intelligence. This does not make for a stable world and international trust. But oppressive dictatorships do make for an unstable world in addition to afflicting an entire people, and the world needs to address this and get rid of them. Right now, the appropriate means is through the UN, not unilateral action. Unilateral action is properly reserved for imminent threat that exists beyond a reasonable doubt, based on evidence.

    I am not saying that there should be a UN military but rather than the political job of policing policy decisions should be handled commonly by nations through an international procedure and in accordance with international law.

    Countries and alliances cannot be trusted to act impartially in such matters. When one examines US policy one discovers that much of it is determined by national interests, such as “securing vital resources.” “Securing national resources” was the policy reason for Vietnam according to DoD, even though it was publicly billed as the domino theory. Several countries were destroyed doing this, and it was a failure in the end. Neither Vietnam nor Iraq should have happened. While the US had justification for attacking Afghanistan after 9/11, it has since botched the operation to the point of likely failure and risking the possibility of igniting a regional conflict.

    What I am saying is that there is a smart way to do defense and a dumb way. The percentage of the budget spent on defense is no indicator of this. Right now the US is spending a lot still fighting the Cold War, and starting another one in the process, while ignoring the wars it is actually involved in.

    ESM Reply:

    Tom, I think I did understand your point, and I agree with it partially and disagree with it partially. Yes, we need to be smarter about how to defend against specific 21st century threats. We agree there.

    But I disagree with you when you argue that we don’t need a “Cold War” military anymore. Within a few years of disbanding our “Cold War” military, we will find that the world will have changed in such a way that we will need one again. The idea sort of reminds me of a Simpsons’ episode in which Homer complains about paying for vaccinations for Maggie for “diseases she never gets.” Paying for our “Cold War” military is like paying for a vaccination. Case in point: Obama abrogates the missile defense agreements with Poland and Czech last year on the basis of a report that Iran won’t have an ICBM capability until 2025 or 2030. Of course, not only did Iran demonstrate the ability to launch a rocket into space earlier this year, but it has an added incentive to develop an ICBM capability because we won’t have a viable defense. A new DOD report now says that Iran might have an ICBM capability by 2015. Great!

    I also disagree with you when you argue that the US shouldn’t be in charge of being the world’s cop. I simply don’t trust another country or world body to do the job. The US has demonstrated a remarkable benevolence that is unique in human history. Culturally and politically, the United States is less likely than any other country I can think of to want to start a war or dominate another country for monetary gain. All the elements for our benevolent role are there: a free and open democracy, a heavy emphasis on rugged individualism, a people largely distrustful of government, and a national mood which leans heavily towards isolationism. The US is the reluctant hegemon, and that reluctance is what makes it perfect for the role. Now, if only we could find somebody to be president who is reluctant; then we might really have good leadership for once.

    Tom Hickey Reply:

    ESM But I disagree with you when you argue that we don’t need a “Cold War” military anymore. Within a few years of disbanding our “Cold War” military, we will find that the world will have changed in such a way that we will need one again.

    If we don’t end the Cold War mentality and the military that goes with it, we find ourselves in an arms race that we won’t necessarily have the advantage in during the 21st century. This is going to divert a lot of real resources to wasteful and dangerous use.

    The US has demonstrated a remarkable benevolence that is unique in human history.

    This is the propaganda that everyone reads unless they research the subject. Read some Noam Chomsky on this, for example, He is a researcher who documents his stuff. It isn’t made up, like the propaganda is. Needless to say, this has been marginalized and is considered “fringe” by the mainstream. That is the result of the propaganda machine that the elite controls. Take Fox News, for instance, it is an out and out propaganda machine. But the rest of the mainstream media is on board, too, in less obvious ways. The so-called balanced reporting never includes anything from the actual left, just center left. As result, the conventional wisdom is just the result of drinking the kool-aid.

    When I joined the military in the Vietnam era, I was a right-wing Republican. Based on what I saw US policy really involved, I became radicalized. It is not only the militarism that has devastated many countries, but also the economic policies that have impoverished much of the world while enriching the elites. Pretty much the same in Afghanistan where our partner Karzai is notoriously corrupt, like the leaders we were supporting in Vietnam. And if Bush/Cheney had gotten their way, they would have installed Chalabi in Iraq.

    This started with the way the Native Americans were treated, and it continued in US “relations” with Latin America. So this is nothing new. It is a sad history that most American know and care little about.

    ESM Reply:

    “If we don’t end the Cold War mentality and the military that goes with it, we find ourselves in an arms race that we won’t necessarily have the advantage in during the 21st century. This is going to divert a lot of real resources to wasteful and dangerous use.”

    You missed my point. By maintaining a strong military, other countries are dissuaded from even thinking about getting into an arms race with us. They don’t bother, and that’s the way I would like to keep it.

    “This is the propaganda that everyone reads unless they research the subject. Read some Noam Chomsky on this, for example, He is a researcher who documents his stuff. It isn’t made up, like the propaganda is. Needless to say, this has been marginalized and is considered “fringe” by the mainstream.”

    It is not propaganda. I am a student of history, and it is a conclusion I reached as objectively as I could. I am not arguing that the US is perfect or that it has never acted collectively in ways which were damaging or fundamentally immoral (obviously, the first 120 years of the United States’ existence were pretty awful). I am only arguing that on a relative basis, the United States is the most benevolent military power in history. By a wide margin.

    Your hero Noam Chomsky has made comments that come close to agreeing with this view, by the way, but obviously, being relatively good is not good enough for him. Chomsky is reflexively distrustful of any power and believes that power and authority are inherently illegitimate.

    Chomsky’s world view is not only completely impractical, but it is immoral because it doesn’t distinguish between intentional and unintentional acts (as almost all systems of jurisprudence in the world do). On top of that he is inconsistent. He distrusts power, believes in individual freedom and free speech, and yet lends moral support to Hezbollah and Bashar Assad. Chomsky has become one of Lenin’s “useful idiots” in his old age.

    Tom Hickey Reply:

    You missed my point. By maintaining a strong military, other countries are dissuaded from even thinking about getting into an arms race with us. They don’t bother, and that’s the way I would like to keep it.

    You aren’t keeping up on the thinking of the Russian and Chinese military. They realize that the US way over armed for the current situation, and they suspect, based on stated US policy to maintain hegemony, that the US plans to extend the empire. They aren’t going to sit by and let this happen, and they are presently expanding their military capability and forging political and economic alliances.

    As far the US being relatively benevolent goes, I won’t dispute that, given the abysmal record of the past. However much better the US has acted, it’s historical record has been abysmal, beginning with the Native American genocides such as “the trail of tears.” Anyone defending this record as benevolent is sipping the kool-aid.

    And it continues as the US fights two wars that are devastating the countries involved and is also destabilizing other regions of the world clandestinely. We can do better.

    ESM Reply:

    Russia defaulted on ruble-denominated debt (as well as Russian law $-denominated debt, and old Soviet restructured debt) because it thought it could make foreign investors take the losses and allow its banks to escape financial ruin (such bonds were predominantly held by foreign banks and hedge funds, including one of Warren’s funds I believe). Devaluation of the ruble was not considered a viable option by Russian authorities because Russian banks had entered forward purchase contracts on the ruble with foreign banks to such an extent that they would be bankrupted by even a modest decline in the value of the ruble against the dollar. As it turned out, the default led to a run on the ruble (not surprising since there was not much difference between a Russian T-bill and a ruble, aside from the triple-digit interest rate), and the devaluation happened anyway.


  8. jcmccutcheon says:

    Russia back to debt markets . Why did they default back in late nineties if they bonds were issued in rubles?


    Curious Reply:

    Warren wrote a paper analyzing the Russian situation but I can’t find it. If anybody who knows where it is could post a link. Thanks.


  9. BFG says:

    In Ireland the commission today revised its estimate of the deficit in
    2009 because it reclassifed 4 billion euros pumped into the nationalized Anglo Irish Bank Corp as general government spending. The commission said last year it expected Ireland’s deficit to be about 12.5 percent.

    “There is no additional borrowing associated with this
    technical reclassification,” Lenihan said in an e-mailed
    statement. “This is a once-off impact, and will not affect the
    Government’s stated budgetary aim of reducing the deficit to
    below 3 percent of GDP by 2014.” Not a hope in hell of that happening!

    He’s a spoofer, why are banks turning to the government for rescue when they should go to the central bank which is supposed to be lender of last resort? These banks I’d say are insolvent and want €10-€20b more, which according to the commission has to be put down as general government expenditure. Our whole debt is about €79,082 million euro. This whole situation is pathetic.


  10. Panayotis says:


    Your dilemma regarding deficits and creditworthiness is a real concern for all those revenue constrained either voluntarily or involuntarily! However, an answer to this dilemma, given charter arrangements, is debt restructuring(not default!) so that the burden capacity can be lifted and deficit spending can happen.


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