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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


Skepticism is the first step on the road to truth. -- Denis Diderot
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 ]

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