as I understand it, and I'm not a bankruptcy expert by any means, a Ch. 7 corporate bankruptcy means a 100% liquidation. A Ch. 11 means they can reorg and there is more control on which creditors are paid back first (i.e. investors, customers). Ch. 11 I believes gives MF Global customers a better shot at getting any money back, whereas chapter 7 is a complete wipe out, and there is less analysis, it's just liquidated.
So, it seems that Ch. 11, if I understand the differences right, is the better situation, although bankruptcy generally ain't good to get any money back, which was kind of the point of this piece.
Part of the sea of Greek coverage so you cannot find anything out with the lame no info stories, I just put a little bit of who owns what that I could dig out in Numerian's comment thread. I agree, and part of the problem is most of the CDS market isn't regulated, we plain don't know.
On the U.S. economy, we're hearing some vague impacts, but it appears from what I've gotten so far, they are avoiding CDS payout triggers at all costs, because it's gonna hit U.S. banks to the tune of $80 billion.
I linked up and quoted what I could find and supposedly the SEC is asking U.S. banks to disclose more but it hasn't come out yet.
I sure agree with you, and to me this is part of the casino gambling game, corporations won't show their cards.
I can’t really be of much help. I’m not a student of, let alone analyst of economics - not even an investor - I’m just a ‘click around blog links’ reader. However, there are a couple of things that I have come across that seem significant and not given much coverage – more like parenthetical comments than in-depth coverage. Such comments about MF Global being a case in point.
Why has MF been give by a court the right to file for Chapter 11 bankruptcy rather than Chapter 7 subchapter 4 which (as I understand it) applies to commodities brokerage firms, given that MF had tens of thousands of commodities futures accounts on its books?
The implications of this decision has to do with who has first claims on the assets of the bankrupt organization – customers who put money in escrow or lenders who fronted the money for CDS transactions (think JP Morgan). What is implication for ‘futures market’ and the economy as a whole?
Why is there no criminal investigation - not moral lamination but legal analysis? What is implication for ‘futures market’ and the economy as a whole?
Why has the CME which claims to insure customer escrow accounts not covered those loses? What is implication for ‘futures market’ and the economy as a whole?
I can’t answer any of these question and don’t even understand them – I just read about them and they seem cogent. I wish the eco. blogs would lighten up a bit on the minutia of national accounts statistics and broaden their vision to the more subtle components of the economic situation.
For example, the volume of words written about the Greece situation without any discussion about who sold the CDS that issuer the bondholders. If JP Morgan, Bank of America and other American banks are the biggest sellers, then they no doubt are behind the German and French bank news scene that we read so much about. And, no discussion about the impact on the American economy if Greece defaults and American banks cannot cover their CDS.
That explains it, and I'll be sure to consult the AP style guide at every turn! Bummer AP cannot get the basics right in their economics and labor statistics reporting. Thank you AP reporters for being calculator disabled! But by golly, stick to those dictated grammar rules from 1950!
Please, be more OCD. The world obviously needs more grammar police, ignoring the main content, missing the point. Please dismiss hand calculated percentage declines on housing prices, straight from the S&P data. Please focus on grammatical context exclusive of comprehension. Finally we have an answer to explain so much inaccurate economic and financial reporting, especially coming from AP. Reporters are too busy making sure they do not violate grammar rules, even for stylistic emphasis through a double negative or use of slang terms to amplify a major financial scandal.
Mo' P's Plz Q!
What would ee cummings do with you people? Assuredly he would have been the bottom of the trash can if up to the Comma Cops, but we cannot live without the OCD, grammar police. Oh, punish us for the error of our ways......
Enough of these anal retentive comments versus the meat, content, point of these articles. Comments from grammar police, comma cops and spelling sycophants will not be published herein thereafter.
I find this almost a brain disease, some sort of OCD disorder. One can publish a beyond belief damning article on Contagion, proving there is no international macro economic model to isolate national economies from economic Armageddon, yet these people scour the web to point out the lack of a comma with nary a nod to the absolutely horrifying facts detailed. We love people who focus on the comma,,,, instead of the facts. Little does it matter housing hasn't hit a bottom and MF Global typifies the use and abuse of the little guy and their 2-bits. (OMG@! A friggin' dbl -- must = +, else no, if mix w/ lang.(sub)ENG). FREAK OUT, u have no context, now do u?)
;) Everyone else, this is the end of the grammar cops destroying the focus of posts in comments.
If you want people to read and respect your writing, then follow the rules of writing. If you want us to simply glean a summary, publish a summary table. I'm a numbers guy as well, but I just can't stand when ignorant grammar is used.
Last tally I heard on actual bond holdings, exposure by U.S. banks was about 29%. Dealbook has the most recent tally:
Five large American banks, including JPMorgan Chase and Goldman Sachs, have more than $80 billion of exposure to Italy, Spain, Portugal, Ireland and Greece, the most economically stressed nations in the euro currency zone, according to a New York Times analysis of the banks’ financial disclosures.
They say there are $602 billion in CDSes associated with PIIGS (doesn't list the breakdown).
As the European financial crisis worsened during the first half of 2011, U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish, and Italian debt. Guarantees provided by U.S. lenders on government, bank, and corporate debt in those countries rose by $80.7 billion, to $518 billion, according to the Bank for International Settlements.
BIS doesn’t report which firms sold how much or to whom. Almost all of those guarantees are credit-default swaps, according to two people familiar with the numbers who asked not to be identified because they weren’t authorized to speak. Five banks—JPMorgan, Morgan Stanley, Goldman Sachs, Bank of America, and Citigroup — write 97 percent of all credit-default swaps in the U.S., according to the Office of the Comptroller of the Currency.
To me, it's obvious Greece should default, leave the EU and hit the reset button or do what Iceland did. Iceland is now just humming along. They have high inflation and their economy is growing by leaps and bonds. I guess that's what happens when a nation is run by the people instead of the banks.
That said, it sure seems this is all about not triggering those CDSes so banks can continue using sovereign nations as their casino chips in the great international sovereign debt trading hall. Now it seems they are trying to claim Greece is isolated, wouldn't cause contagion. All I see is a nation being caught by the short hairs, being destroyed.
This insanity is condemning Greece, which is essence what I wrote in the short piece, Greece on Fire with Austerity.
Great piece Numerian, yes our Wall Street pals cannot think past one day, never mind one quarter and this short-term frenzy has wrought more pain on people than just what's going on in Greece.
Germany is a little nuts too. Not everybody can be a major exporter and manufacturing hub.
Under normal circumstances, the government meets its interest obligations by issuing new debt rather than raising money through taxes. For something like a zero coupon bond, principal is not paid at all until the final maturity of the bond. Theoretically, if the bond was "rolled over" a new one would be issued so that the net effect is that bond obligations never are extinguished, they just get melded into an ever-growing pool of indebtedness. That sounds, of course, like a Ponzi scheme.
In practical terms, there are government bonds which pay principal and interest every six months. The holder of the bond sees these payments flow into their account. If they do not wish to participate in buying a new bond on the roll-over date, they will see their particular holding extinguished. I've owned US notes through Treasury Direct and certainly seen some of these liquidated by maturity, with the principal paid in full (irrespective of whether I bought it at a premium or discount I still get the amount of principal on the note paid to me), and with interest also paid along the way.
That's just looking at it from the investor point of view. From the government point of view, since the pool of debt is getting larger by the day, the retirement of old bonds is a mechnical thing that only counts as an offset to the amount of new money brought in through further debt issuance.
Yes, yes, but this again means you are interpreting the negative sign, a mathematical symbol, into the sentence. I just like to use the mathematical symbols in additional to the words for I, at least, am a numbers person, when scanning, I'll read the number, skip the text. But technically this is a double negative, I know.
I've not seen a lick of information, including browsing the Trustee's documents about customer accounts being insured so that's a beyond belief outrage if true. Can you dig up where you read this and give a link, quote?
I don't see anything keeping this from happening again, why this article is on Populist rant level 5.
Sound familiar?
“The ostensible reason given by the government for proceeding with one austerity program after another, thereby avoiding default, is that the economic privation resulting from default would be unimaginable.” Brings to mind Paulson selling TRAP to the American politicians.
More interesting is a phrase used by a RT news commentator –“Financial Occupation”. They pointed out that Europeans have for centuries extracted wealth from third world countries by physically occupying the country. Now Europe is ‘feeding on itself” Greece is nouveau third world with the rest of the PIGS waiting in the wings. But, they don’t need armies to get the wealth. The politicians are the instruments of financial extraction. Who sold the bonds in the first place and who decided what to do with the borrowed money? Certainly, not the people in the streets!
$1.6 billion reads, $1.6 billion. One can put in the word "dollars" at the end, even though the number has the $ symbol and it's still correct, it's optional. If it read with an additional dollars by substituting in the dollar symbol the word "dollars" would be there. The $ symbol is similarly to commas (delimiters), quotations and period points. Slang bucks can be interchanged for dollars. The phrase stands,but at least your read the post!
I feel sorry and outraged for the people (“customers”) who had their money in de facto escarole accounts (i.e. it was THEIR money MF was holding in their accounts). As I understand it they literally were robbed. But, the ‘icing on the cake’, again as I understand it, is that they thought their accounts were insured by the CME or one of the organizations with a lot of initials. So there should be two Justice Dept. or AG investigations: MF taking the money and why the CME et al didn’t cover the loss.
But, the even bigger question is why haven’t there been massive runs on commodities brokerage firms in the form of ‘customers’ pulling money out of their escarole accounts. Clearly, a firm can rob them with impunity and their accounts are de facto not guaranteed.
Anyone who loses money from here on has no one to blame but themselves! And, is there any reason to believe that it will not happen again?
"We" don't pay principle on our old debt - the bondholders still have possession of an asset (T-bills) that is cash-equivalent. It can't be used to purchase consumer goods directly but is available for corporate transactions and is easily convertible to cash.
"We" don't "pay" interest on the debt either since the interest is a government balance-sheet accounting entity and that payment comes from new money creation (from the stock of numbers that exist in the universe, i.e. infinity).
Come on, guys. You wrote "-3.7% decline". A negative decline (notice the double negative) would imply a positive... drop the negative sign if you're going to say "decline".
First, by far, if one looks at the data, the largest energy import is oil. Second, coal and gas add to global warming. Third, we have plenty of gas and coal but politics won't let things to moved to gas from gasoline. Forth, China went and dumped, is giving massive government subsidies, undercutting any start-up U.S. industry in alternative energy.
The key is to reduce oil imports and another key is to subsidize more heavily, plus put import restrictions on alternative energy so a U.S. industry can start and grow.
Additionally, the U.S. electrical grid is extremely inefficient, it wastes much more power than it delivers. We need a new distribution system, as well as more of a "localized energy generation" system to take advantage of local resources as they occur (i.e. methane on farms, wind power on coasts, wave power on coasts and so on).
Literally we have "solar panel" manufacturers offshoring their actual manufacturing to China. There are so many vested interests when it comes to energy, not an objective, smart design or fact shall be had.
Renewable energy is the key to our future buy allowing us to burn less coal and gas and exporting it instead of burning it thereby earning tax income so they can charge less overall taxes which is the purpose it serves best.
You should charge these people . If we cannot trust in the Government to serve and protect the people. People will stop investing as their is a lot of miss-trust.
Shootings will rise in the Financial District if Investors have no recourse.
as I understand it, and I'm not a bankruptcy expert by any means, a Ch. 7 corporate bankruptcy means a 100% liquidation. A Ch. 11 means they can reorg and there is more control on which creditors are paid back first (i.e. investors, customers). Ch. 11 I believes gives MF Global customers a better shot at getting any money back, whereas chapter 7 is a complete wipe out, and there is less analysis, it's just liquidated.
So, it seems that Ch. 11, if I understand the differences right, is the better situation, although bankruptcy generally ain't good to get any money back, which was kind of the point of this piece.
Part of the sea of Greek coverage so you cannot find anything out with the lame no info stories, I just put a little bit of who owns what that I could dig out in Numerian's comment thread. I agree, and part of the problem is most of the CDS market isn't regulated, we plain don't know.
On the U.S. economy, we're hearing some vague impacts, but it appears from what I've gotten so far, they are avoiding CDS payout triggers at all costs, because it's gonna hit U.S. banks to the tune of $80 billion.
I linked up and quoted what I could find and supposedly the SEC is asking U.S. banks to disclose more but it hasn't come out yet.
I sure agree with you, and to me this is part of the casino gambling game, corporations won't show their cards.
I can’t really be of much help. I’m not a student of, let alone analyst of economics - not even an investor - I’m just a ‘click around blog links’ reader. However, there are a couple of things that I have come across that seem significant and not given much coverage – more like parenthetical comments than in-depth coverage. Such comments about MF Global being a case in point.
Why has MF been give by a court the right to file for Chapter 11 bankruptcy rather than Chapter 7 subchapter 4 which (as I understand it) applies to commodities brokerage firms, given that MF had tens of thousands of commodities futures accounts on its books?
The implications of this decision has to do with who has first claims on the assets of the bankrupt organization – customers who put money in escrow or lenders who fronted the money for CDS transactions (think JP Morgan). What is implication for ‘futures market’ and the economy as a whole?
Why is there no criminal investigation - not moral lamination but legal analysis? What is implication for ‘futures market’ and the economy as a whole?
Why has the CME which claims to insure customer escrow accounts not covered those loses? What is implication for ‘futures market’ and the economy as a whole?
I can’t answer any of these question and don’t even understand them – I just read about them and they seem cogent. I wish the eco. blogs would lighten up a bit on the minutia of national accounts statistics and broaden their vision to the more subtle components of the economic situation.
For example, the volume of words written about the Greece situation without any discussion about who sold the CDS that issuer the bondholders. If JP Morgan, Bank of America and other American banks are the biggest sellers, then they no doubt are behind the German and French bank news scene that we read so much about. And, no discussion about the impact on the American economy if Greece defaults and American banks cannot cover their CDS.
That explains it, and I'll be sure to consult the AP style guide at every turn! Bummer AP cannot get the basics right in their economics and labor statistics reporting. Thank you AP reporters for being calculator disabled! But by golly, stick to those dictated grammar rules from 1950!
Please, be more OCD. The world obviously needs more grammar police, ignoring the main content, missing the point. Please dismiss hand calculated percentage declines on housing prices, straight from the S&P data. Please focus on grammatical context exclusive of comprehension. Finally we have an answer to explain so much inaccurate economic and financial reporting, especially coming from AP. Reporters are too busy making sure they do not violate grammar rules, even for stylistic emphasis through a double negative or use of slang terms to amplify a major financial scandal.
Mo' P's Plz Q!
What would ee cummings do with you people? Assuredly he would have been the bottom of the trash can if up to the Comma Cops, but we cannot live without the OCD, grammar police. Oh, punish us for the error of our ways......
Enough of these anal retentive comments versus the meat, content, point of these articles. Comments from grammar police, comma cops and spelling sycophants will not be published herein thereafter.
I find this almost a brain disease, some sort of OCD disorder. One can publish a beyond belief damning article on Contagion, proving there is no international macro economic model to isolate national economies from economic Armageddon, yet these people scour the web to point out the lack of a comma with nary a nod to the absolutely horrifying facts detailed. We love people who focus on the comma,,,, instead of the facts. Little does it matter housing hasn't hit a bottom and MF Global typifies the use and abuse of the little guy and their 2-bits. (OMG@! A friggin' dbl -- must = +, else no, if mix w/ lang.(sub)ENG). FREAK OUT, u have no context, now do u?)
;) Everyone else, this is the end of the grammar cops destroying the focus of posts in comments.
As I said on the other post, if you want your writing to be respected, follow the rules!
http://boards.straightdope.com/sdmb/archive/index.php/t-337555.html
The AP style guide agrees with me. Just depends on what caliber writing you want to produce, I guess. Perhaps I won't come back!
If you want people to read and respect your writing, then follow the rules of writing. If you want us to simply glean a summary, publish a summary table. I'm a numbers guy as well, but I just can't stand when ignorant grammar is used.
Last tally I heard on actual bond holdings, exposure by U.S. banks was about 29%. Dealbook has the most recent tally:
They say there are $602 billion in CDSes associated with PIIGS (doesn't list the breakdown).
On CDSes, Business week from last November:
To me, it's obvious Greece should default, leave the EU and hit the reset button or do what Iceland did. Iceland is now just humming along. They have high inflation and their economy is growing by leaps and bonds. I guess that's what happens when a nation is run by the people instead of the banks.
That said, it sure seems this is all about not triggering those CDSes so banks can continue using sovereign nations as their casino chips in the great international sovereign debt trading hall. Now it seems they are trying to claim Greece is isolated, wouldn't cause contagion. All I see is a nation being caught by the short hairs, being destroyed.
This insanity is condemning Greece, which is essence what I wrote in the short piece, Greece on Fire with Austerity.
Great piece Numerian, yes our Wall Street pals cannot think past one day, never mind one quarter and this short-term frenzy has wrought more pain on people than just what's going on in Greece.
Germany is a little nuts too. Not everybody can be a major exporter and manufacturing hub.
Under normal circumstances, the government meets its interest obligations by issuing new debt rather than raising money through taxes. For something like a zero coupon bond, principal is not paid at all until the final maturity of the bond. Theoretically, if the bond was "rolled over" a new one would be issued so that the net effect is that bond obligations never are extinguished, they just get melded into an ever-growing pool of indebtedness. That sounds, of course, like a Ponzi scheme.
In practical terms, there are government bonds which pay principal and interest every six months. The holder of the bond sees these payments flow into their account. If they do not wish to participate in buying a new bond on the roll-over date, they will see their particular holding extinguished. I've owned US notes through Treasury Direct and certainly seen some of these liquidated by maturity, with the principal paid in full (irrespective of whether I bought it at a premium or discount I still get the amount of principal on the note paid to me), and with interest also paid along the way.
That's just looking at it from the investor point of view. From the government point of view, since the pool of debt is getting larger by the day, the retirement of old bonds is a mechnical thing that only counts as an offset to the amount of new money brought in through further debt issuance.
Yes, yes, but this again means you are interpreting the negative sign, a mathematical symbol, into the sentence. I just like to use the mathematical symbols in additional to the words for I, at least, am a numbers person, when scanning, I'll read the number, skip the text. But technically this is a double negative, I know.
I've not seen a lick of information, including browsing the Trustee's documents about customer accounts being insured so that's a beyond belief outrage if true. Can you dig up where you read this and give a link, quote?
I don't see anything keeping this from happening again, why this article is on Populist rant level 5.
Sound familiar?
“The ostensible reason given by the government for proceeding with one austerity program after another, thereby avoiding default, is that the economic privation resulting from default would be unimaginable.” Brings to mind Paulson selling TRAP to the American politicians.
More interesting is a phrase used by a RT news commentator –“Financial Occupation”. They pointed out that Europeans have for centuries extracted wealth from third world countries by physically occupying the country. Now Europe is ‘feeding on itself” Greece is nouveau third world with the rest of the PIGS waiting in the wings. But, they don’t need armies to get the wealth. The politicians are the instruments of financial extraction. Who sold the bonds in the first place and who decided what to do with the borrowed money? Certainly, not the people in the streets!
$1.6 billion reads, $1.6 billion. One can put in the word "dollars" at the end, even though the number has the $ symbol and it's still correct, it's optional. If it read with an additional dollars by substituting in the dollar symbol the word "dollars" would be there. The $ symbol is similarly to commas (delimiters), quotations and period points. Slang bucks can be interchanged for dollars. The phrase stands,but at least your read the post!
I feel sorry and outraged for the people (“customers”) who had their money in de facto escarole accounts (i.e. it was THEIR money MF was holding in their accounts). As I understand it they literally were robbed. But, the ‘icing on the cake’, again as I understand it, is that they thought their accounts were insured by the CME or one of the organizations with a lot of initials. So there should be two Justice Dept. or AG investigations: MF taking the money and why the CME et al didn’t cover the loss.
But, the even bigger question is why haven’t there been massive runs on commodities brokerage firms in the form of ‘customers’ pulling money out of their escarole accounts. Clearly, a firm can rob them with impunity and their accounts are de facto not guaranteed.
Anyone who loses money from here on has no one to blame but themselves! And, is there any reason to believe that it will not happen again?
"…paying principal and interest on the old debt…"
"We" don't pay principle on our old debt - the bondholders still have possession of an asset (T-bills) that is cash-equivalent. It can't be used to purchase consumer goods directly but is available for corporate transactions and is easily convertible to cash.
"We" don't "pay" interest on the debt either since the interest is a government balance-sheet accounting entity and that payment comes from new money creation (from the stock of numbers that exist in the universe, i.e. infinity).
Come on, guys. You wrote "-3.7% decline". A negative decline (notice the double negative) would imply a positive... drop the negative sign if you're going to say "decline".
look at the phrase "$1.6 billion bucks".
if I wrote "$1.6 billion", this would be pronounced "one point six billion dollars".
if I wrote "bucks", this would be pronounced "bucks".
you wrote "one point six billion dollars bucks".
First, by far, if one looks at the data, the largest energy import is oil. Second, coal and gas add to global warming. Third, we have plenty of gas and coal but politics won't let things to moved to gas from gasoline. Forth, China went and dumped, is giving massive government subsidies, undercutting any start-up U.S. industry in alternative energy.
The key is to reduce oil imports and another key is to subsidize more heavily, plus put import restrictions on alternative energy so a U.S. industry can start and grow.
Additionally, the U.S. electrical grid is extremely inefficient, it wastes much more power than it delivers. We need a new distribution system, as well as more of a "localized energy generation" system to take advantage of local resources as they occur (i.e. methane on farms, wind power on coasts, wave power on coasts and so on).
Literally we have "solar panel" manufacturers offshoring their actual manufacturing to China. There are so many vested interests when it comes to energy, not an objective, smart design or fact shall be had.
Renewable energy is the key to our future buy allowing us to burn less coal and gas and exporting it instead of burning it thereby earning tax income so they can charge less overall taxes which is the purpose it serves best.
You should charge these people . If we cannot trust in the Government to serve and protect the people. People will stop investing as their is a lot of miss-trust.
Shootings will rise in the Financial District if Investors have no recourse.
There is a missing final document, unsigned, plus others are reporting the final real deal will be much, much worse than the advertised one.
Tell the Attorney General of NY what you think. 103 day so far. Should there be indictments? I think so. If you do too, then let him know.
Its easy to send him a message. Use this form:
http://www.ag.ny.gov/online_forms/email_ag.jsp
Pages