Some more scare tactics from Ambrose; suggesting as I implied yesterday that LTRO will end in tears. When sovereigns importune their banks to borrow at the ECD and stuff their balance sheets with the sovereign’s own IOU’s, the risk becomes compounded. Three year money into 5 year bullet bonds doesn’t go. However great the round tripping spread may be. In the case of Ireland and Iceland, the banks took the sovereign down by unregulated stupidity, cupidity, greed, self-importance, arrogance and worse. Infinite leverage became conservative. In contrast to Spain and Italy where the sovereign will be directly complicit in taking their banks down with them. Presumably they retain the quaint notion that sovereign debt may be risk free. Not so if it’s denominated in a currency that cannot be printed (without Draghi obliging and buying the bonds and transferring the losses to the Bundesbank et al). Not so if there’s a maturity and intermediation mismatch. The EZ is living way over the edge and seems to be infatuated with the idea that ever more convoluted schemes to take in one another’s dirty laundry represents sane economics.
The Titanic too was unsinkable. Hubris can be a dangerous thing. Buy the CHF and NKr. (remember the Norwegians are really pissed off that their sovereign fund took a Greek 75% haircut. Kiss of death for future Club Med issues).
I guess Christina Fernandez de Kerchner thinks that with Mariano up to his culo in aligátori and the Brits cowed by her sabre rattling, she can stake a claim to be heir to Hugo Chavez (is he still alive). Or maybe she’s just paying Cuban health insurance. But expropriating Repsol of YPF should really help boost the economy and inspire boat-loads of OFDI. Cutting off imports of Marmite should endear her all around. Never underestimate the ability of the Argies to shoot themselves in both feet with one round. The Brits are now demanding payment of £45 mil in loans that financed arms exports to the Argies right before the Falklands War (only 30 years ago). Fat chance of getting paid. In response no doubt the Argies will set up their own Marmite factory. Look for shortages of Fray Bentos corned beef in the High Street. That’ll bring the Brits to their knees.
Ascribing logical thought processes to Christina is not a rational approach. Preservation of power by such as Christina always trumps the misery her people will suffer.
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