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Author Topic: Behold: one of the largest Ponzi schemes of all times  (Read 4952 times)
Vandroiy
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January 09, 2012, 08:54:35 PM
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Welcome to the EU government bonds market.

Bankrupt countries pay back bonds by printing new bonds. Last buyers: bag holders.

I really wouldn't want to play the game they're currently starting. EUR inflation is at its limit before a feedback may hit all bond interest rates, however, Italy and Spain are at the limit of destabilizing their rates because their finances are too bad. Now the ECB tries to buy just the right amount with newly printed money to walk the edge. But with each further mistake or inefficiency of the participating governments, the path grows narrower. And these "inefficiencies" might even be of short-time advantage for the governments in question, possibly causing a Tragedy of the Commons in which the debt increases further.

An attempt to solve the problem with printing money. No, I really wouldn't want to play it like that. These people are either too good at this for me to understand their plan, or they're just not giving a shit anymore. My guess is the latter, politicians never gave a shit before.

Let's see who the bag holders will be. According to interest rates, the market does not consider banks any safer and has already switched from making profit to limiting losses. Some big deals have negative yields even before inflation is factored in.
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January 09, 2012, 09:13:20 PM
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And here I thought this was going to be yet another thread about Bitcoins...

Yeah, the EU is screwing things up.  Though, the screwups really started many years ago, it's just that the consequences weren't realized until now.
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January 10, 2012, 08:41:24 AM
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And here I thought this was going to be yet another thread about Bitcoins...

Yeah, the EU is screwing things up.  Though, the screwups really started many years ago, it's just that the consequences weren't realized until now.

I think they were realised, only wat they also realised, was the truth in "après nous le déluge".
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January 13, 2012, 08:01:41 AM
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An attempt to solve the problem with printing money.

Even there is no problem, money still needs to be printed more and more every year, and printing more money does not necessary cause inflation, as long as printed money have somewhere to go (in this case paying the debt), and the productivity of goods and services can catch up

Actually this will encourage the loan activities, since the borrower will always be backed by printed money in a worst case scenario

Vandroiy
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January 13, 2012, 04:24:28 PM
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Even there is no problem, money still needs to be printed more and more every year, and printing more money does not necessary cause inflation, as long as printed money have somewhere to go (in this case paying the debt), and the productivity of goods and services can catch up

Actually this will encourage the loan activities, since the borrower will always be backed by printed money in a worst case scenario

Am I the only one who thinks this is completely insane?

You can't fix the speculators at negative interest rates after inflation, and if you don't, they will end up with more money, causing inflation, bang feedback to the interest, game over.

You have to trust the governments to not play a Tragedy of the Commons in which they compete to borrow just at the limit and spend, inflation, double feedback to the banks, kills you in just a few years. But simply deleting the debt gets you a burst of bankruptcy filings together with the financial equivalent of an MW 9 earthquake due to illiquid markets.

How the hell is this supposed to work? Who should pay the bill of the debt that is never intended to be paid back? I don't have the feeling that someone thought this through to the end.

One simple question is: once locked in debt feedbacks, can you ever reduce inflation again without the governments dying instantly?
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January 13, 2012, 09:26:25 PM
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So, any speculation as to how long until I can buy a small Italian villa near the beach for very cheap? I'm hoping for something in Nettuno...

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January 14, 2012, 10:38:37 AM
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An attempt to solve the problem with printing money.

Even there is no problem, [...]

Ending [Krugman] here. First start with your definition of 'inflation'. In my perspective, that would be the increase of the money supply (in the broad sense).

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January 14, 2012, 04:02:07 PM
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I live in EU and from my perspective, most of things you have said are correct. Add to it that "wealthier" countries are helping paying depts for "poorer" countries, which don't give a damn about this help and continue to increase their depts.
Sweet place to live, eh?
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January 14, 2012, 04:04:50 PM
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Ending [Krugman] here. First start with your definition of 'inflation'. In my perspective, that would be the increase of the money supply (in the broad sense).
And how would you measure it?

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January 14, 2012, 04:27:05 PM
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They can go on printing euros (actually letting banks create money out of thin air) until the end of times for all I care as long as they let the productive economy use another currency (like bitcoin).

The thing is since the euro and the dollar are in a simultaneous free fall, everybody can pretend nothing is happening: its only showing in the cost of living, affecting the poor much harder than the rich who has disposable income.

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January 14, 2012, 08:43:21 PM
 #11

Ending [Krugman] here. First start with your definition of 'inflation'. In my perspective, that would be the increase of the money supply (in the broad sense).
And how would you measure it?

I guess I am condemned to believe the official data from Central Banks.

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Prze_koles
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January 15, 2012, 01:28:32 PM
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Ending [Krugman] here. First start with your definition of 'inflation'. In my perspective, that would be the increase of the money supply (in the broad sense).
And how would you measure it?

I guess I am condemned to believe the official data from Central Banks.

Yes, but they're not providing data about inflation by your definition. They're just measuring price changes of various goods. I was asking, how would you measure increase of the money supply.

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January 15, 2012, 01:39:49 PM
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Ending [Krugman] here. First start with your definition of 'inflation'. In my perspective, that would be the increase of the money supply (in the broad sense).
And how would you measure it?

I guess I am condemned to believe the official data from Central Banks.

Yes, but they're not providing data about inflation by your definition. They're just measuring price changes of various goods. I was asking, how would you measure increase of the money supply.

exactly as you say, measuring various price changes in goods. Imagine you have measure the water level in a huge lake then you would take measures on various scales previously set-up. Hope this explanation helps

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Matthew N. Wright
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January 15, 2012, 01:42:20 PM
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Aww....thread topic fail.

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January 15, 2012, 01:46:51 PM
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http://www.businessweek.com/news/2012-01-10/germany-to-enter-recession-on-eu-debt-crisis-deutsche-bank-says.html

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Vandroiy
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January 15, 2012, 02:12:27 PM
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They can go on printing euros (actually letting banks create money out of thin air) until the end of times for all I care as long as they let the productive economy use another currency (like bitcoin).

The thing is since the euro and the dollar are in a simultaneous free fall, everybody can pretend nothing is happening: its only showing in the cost of living, affecting the poor much harder than the rich who has disposable income.

I'd be very careful about that statement. The governments and all their patched-up markets are inside the loop between the ECB and lending. I wouldn't claim to know what happens if the ground starts shaking there.

Aww....thread topic fail.

Why? It's central (ECB, EU, government controlled) and it involves a bag-holder game about the bonds. At some point, they massively lose value, and whoever holds them then pays the bill.

It is exactly a Ponzi scheme. Sorry if you thought I was talking about Bitcoin. Wink
Wekkel
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January 15, 2012, 02:27:28 PM
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Ending [Krugman] here. First start with your definition of 'inflation'. In my perspective, that would be the increase of the money supply (in the broad sense).
And how would you measure it?

I guess I am condemned to believe the official data from Central Banks.

Yes, but they're not providing data about inflation by your definition. They're just measuring price changes of various goods. I was asking, how would you measure increase of the money supply.

The ECB publishes various data on money supply (such as M3).

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January 16, 2012, 02:47:24 PM
 #18

Even there is no problem, money still needs to be printed more and more every year, and printing more money does not necessary cause inflation, as long as printed money have somewhere to go (in this case paying the debt), and the productivity of goods and services can catch up

Actually this will encourage the loan activities, since the borrower will always be backed by printed money in a worst case scenario

Am I the only one who thinks this is completely insane?

You can't fix the speculators at negative interest rates after inflation, and if you don't, they will end up with more money, causing inflation, bang feedback to the interest, game over.

You have to trust the governments to not play a Tragedy of the Commons in which they compete to borrow just at the limit and spend, inflation, double feedback to the banks, kills you in just a few years. But simply deleting the debt gets you a burst of bankruptcy filings together with the financial equivalent of an MW 9 earthquake due to illiquid markets.

How the hell is this supposed to work? Who should pay the bill of the debt that is never intended to be paid back? I don't have the feeling that someone thought this through to the end.

One simple question is: once locked in debt feedbacks, can you ever reduce inflation again without the governments dying instantly?

Too extreme, most of the time it's in the middle.

The concept of debt is vague, depends on peoples relationship, the debt can be write off. I just send 1000 dollar to my father to celebrate his birthday, does he owe me that sum of money? I have seen many private debts end up with nothing, either paid back in a discounted form, or not at all. At government level I think it is more or less the same

Printing money to pay back the debt is a very good test of how much money actually there is available. If there is really a liquidity problem, then newly injected money will not cause inflation. Otherwise, if injected money caused high inflation, then there are plenty of money in circulation, these money will be able to refinance those debts easily


Vandroiy
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January 17, 2012, 05:03:39 PM
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Too extreme, most of the time it's in the middle.

The concept of debt is vague, depends on peoples relationship, the debt can be write off. I just send 1000 dollar to my father to celebrate his birthday, does he owe me that sum of money? I have seen many private debts end up with nothing, either paid back in a discounted form, or not at all. At government level I think it is more or less the same

Printing money to pay back the debt is a very good test of how much money actually there is available. If there is really a liquidity problem, then newly injected money will not cause inflation. Otherwise, if injected money caused high inflation, then there are plenty of money in circulation, these money will be able to refinance those debts easily

Why should money refinance debt just because it is in circulation?

How do you prevent an explosion of interest rate on government debt that would cancel out its benefits after a write-off? Or is the intention to delete all and have all the banks die?

Sorry, but this doesn't refute any of my points.
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January 18, 2012, 10:22:15 AM
 #20

Why should money refinance debt just because it is in circulation?

How do you prevent an explosion of interest rate on government debt that would cancel out its benefits after a write-off? Or is the intention to delete all and have all the banks die?

Sorry, but this doesn't refute any of my points.

If you get 5% return by refinance someone's debt, it is better than sitting there and collect 0 interest

In reality, governments can never write the debt off, they just refinance, and this refinance could go as long as several centuries... Have you heard the FED reinvesting short term loan income and principals into long term loans? For those who can borrow without debt limit, the only cost is interest, and that interest could be 0 (Germany bonds already reached negative interest)

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