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At the risk of whip-sawing, or even crashing, the Hungarian economy where 44% of all household debt and 55% of mortgages are denominated in Swiss Francs.  

 

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Aug 16th, 2011 at 02:00:04 PM EST
[ Parent ]
Bank lending denominated in hard currency, like inflation-indexed bonds, is an abomination onto God and must be exorcised with fire, garlic and holy water.

Or a severe currency crash. Y'know, whichever comes first.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 16th, 2011 at 02:16:09 PM EST
[ Parent ]
It gets better:

[Emphasis added]

The potential for a debt spiral is very real, as any deterioration in the economy causes the HUF to weaken further, creating a negative feedback loop with Swiss Franc loans and further deterioration in non-performing loans.  With another peak in gross government re-financing coming next year amounting to about 20% of Hungarian GDP, and the foreign debt burden denominated in HUF worsening, the markets are watching closely.

Interestingly, the Swiss themselves weren't foolish enough to do any of this lending. [!] Austrian banks provided about 40% of CHF loans in the euro-zone. And between 15-25% of the balance sheets of the top four Greek banks are exposed to SE Europe, including almost 40% and 30% of loans to the private sector in Bulgaria and Romania respectively, according to Macquarie Bank.  In turn, German, French and other northern European banks are heavily exposed to Greece. No wonder then, that the EU fears the chain reaction which would ensue from a Greek default.

Wheeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee!

I'm beginning to think there are two scenarios:

  1.  Everybody gets together and writes off and offsets their debt, one to another, to reduce the mutual plunder via interest payments to a realistic level

  2.  A cascade failure ripples through the system and everyone's FIRE sector goes bye-bye


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Tue Aug 16th, 2011 at 02:35:17 PM EST
[ Parent ]
The entire continent is run by EPP or, at the very best, the Quisling wing of the PES.

#1 is not even within shouting distance of the Overton window.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 16th, 2011 at 02:48:20 PM EST
[ Parent ]
Bank lending denominated in hard currency, like inflation-indexed bonds, is an abomination onto God

The problem is that central bankers are idiots and didn't do their job properly. Moreover, they used the EU's free movement of capital for cover:

"There is nothing we can do to stop foreign exchange borrowing, and we don't even try. As members of the European Union, we have to respect the free flow of capital," he [Hamezc Istvan, director of Hungary's Central Bank] said.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue Aug 16th, 2011 at 05:09:48 PM EST
[ Parent ]
See also: this thread from 3 March 2009, and this thread from 27 October 2008.

In the interim, an IMF intervention and a rescue of the Central-Eastern European economies by encouraging Western Banks to not bail themselves out of their Central-Eastern European investments, going by the name of "the Vienna Initiative" has been in place since 2009.

We're going to have another round of currency crises in the same countries we have already had to rescue?

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue Aug 16th, 2011 at 05:07:59 PM EST
[ Parent ]
Not as such.

You're going to have countries going further into recession, making it harder for them to service their debt, that will be seen and responded to as a currency crisis.

The ECB, et.al., is dealing with the symptom, not the problem.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 17th, 2011 at 12:40:46 PM EST
[ Parent ]
You're going to have countries going further into recession, making it harder for them to service their debt, that will be seen and responded to as a currency crisis.

So you're saying another three iterations of Teh Stupid: One to realise that it's a currency crisis (European Tribune: Get your news two years early), but deal with it by the IMF playbook. Another one to realise that maybe it's time to dust off the proper policy response (John Maynard Keynes: Get your policy response eighty years early). And a third one to actually get their act together and convince even the dumbest Bild Zeitung reading meatbrain that Keynes was right all along.

What great fun. Maybe I should move to Germany.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 17th, 2011 at 12:47:09 PM EST
[ Parent ]
Got no idea how many more iterations.  Apparently our global Masters, as advised by people with neo-liberal brain rot, are feverishly working on the premise, "If you're in a hole.  Keep digging."

The recent boffo-socko idea of a BALANCED BUDGET!!1!11!!eleventyone!!!! is Yet Another bit of evidence showing how removed from reality TPTB are.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 17th, 2011 at 01:04:14 PM EST
[ Parent ]
Maybe I should move to Germany.

Why bother? German policy, at a minimum, is coming to you.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Aug 18th, 2011 at 03:55:55 PM EST
[ Parent ]
Germany policy is designed to benefit Germany.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Aug 18th, 2011 at 08:16:07 PM EST
[ Parent ]
And the former West Germany, to boot.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Thu Aug 18th, 2011 at 09:22:42 PM EST
[ Parent ]
Germany policy is designed to benefit Germany.

It might not work out that way and, in any case, it is designed to benefit only a few Germans, on whose behalf the others are resolutely sacrificing their prospects.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Aug 19th, 2011 at 12:23:35 AM EST
[ Parent ]

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