Isn’t this exactly what is supposed to happen:
Ireland has finally taken its medicine, accepting the financial rescue package European officials have been pushing for several weeks.
But even as Europe moved to avert this latest debt crisis, economists and policy experts are increasingly debating whether it would be better, and fairer, for the Continent’s weakest economies to default on payments to lenders.
Many experts now say that bailouts only delay the inevitable. Instead of further wounding their economies with drastic budget slashing, the specialists assert, governments should immediately start talks with bondholders and force them to accept a loss on their investments.
Aren’t the bondholders supposed to take a bath when their investment turns out to have been utter shit? What am I not understanding? Where did this notion that there is never, ever any risk for bondholders come from?
BGinCHI
Prolly from bondholders.
kdaug
The haves, and the have-mores.
Next question.
Brachiator
The Irish debt crisis is taking the government down with it (Irish Leader to Dissolve Government After Budget), and it’s going to be painful:
Lesson: don’t mess with bankers and bondholders.
Max Power
This is Econ 101. Capitalism and free markets are inextricably linked to risk and reward. Specifically, investors take the rewards, and taxpayers take the risks.
Roger Moore
Banks. SATSQ.
dollared
Bingo! This is yet another plutocracy issue: I buy a bond, the borrower tanks, I lose. A billion dollar hedge fund buys lots of bonds, he calls some cabinet secretary that was a Princeton classmate, they arrange a bailout.
As Atrios says, “Ireland” is not getting bailed out. “Banksters who lent money to Ireland, or who made bets on Ireland” are getting bailed out.
B-I-N-G-O
Earl Butz
Private profits, socialize losses.
Folks, this IS 21st century capitalism.
The peons must underwrite any losses of their Galtian overlords, so that we not sink into the quagmire of communism or Godlessness.
POVERTY IS FREEDOM
arguingwithsignposts
@Brachiator:
Funny how he’s hanging on long enough to pass the pain out to the serfs before retiring to his back bench seat.
Suffern Ace
That this is considered at all “Medicine” for the sick makes no sense. I hope the Irish people pay back by electing anyone who says “In lieu of a social safety net, we will be putting our tax dollars into building thermo-nuclear warheads with our new friends, the North Koreans.”
Ash Can
Intuitively, you’d think so. After all, bonds aren’t without their risk. I think that the actual problem probably lies in the fact that, since bonds are a relatively safe investment vehicle (under normal circumstances, that is), pension funds and other risk-averse folks tend to buy them. As a result, it’s not just wealthy investors whose cans are on the line if the bonds fall off a cliff. In fact, I’d say it’s the less wealthy who are affected disproportionally.
Linda Featheringill
John, what you are talking about is capitalism.
I don’t have a name for what we have here, but it isn’t capitalism.
Dennis SGMM
When the salaries of financial services execs started skyrocketing the execs argued that they were taking the risks so they should get the rewards. Now we take the risks and they still get the rewards.
James E. Powell
@Earl Butz:
Actually, it’s was also 19th and 20th century capitalism. Without massive, and massively expensive, support from governments, all the “free” enterprise would not have accrued so much wealth. Consider how many companies would not exist but for the Cold War, or NASA, or the federal government’s obsession with building dams, and so on and so on.
General Stuck
They got a taste of gambling with other peeps money, or have any losses insured by taxpayers, learned from Phil Gramm, amongst other Americans. And once the vamps get the taste of no risk blood, it is hard to ween them off of it. Somebody, somewhere, had better do that weening, or we are all in an economic death spiral.
Mudge
I bet their corporate tax rate still isn’t increased.
cleek
he who has the gold makes the rules.
i think supply-side Jesus said that.
Spiffy McBang
Maybe I’m misunderstanding something, but isn’t what they’re talking about different than what happened here? They’re referring to government debt. Considering how common it is for countries to borrow money (or at least need to borrow money at some point), you’d want to do everything in your power to keep your country from being viewed as any sort of risky investment. So even if you think the idea of a bailout is bad, it’s not illogical.
What made it stupid and enraging here was that the shit was all private debt. Companies that invested in it absolutely should have taken a bath. Even if they needed some money to keep the economy going, they sure as hell didn’t need 100 cents on the dollar for their idiotic bets. There was no point other than to keep the billionaires from crying themselves to sleep.
Again, if I’m missing something, please fill in the blanks.
beltane
Having brought down Ireland’s economy and now its government, “they” are now moving on to Spain, or so says Calculated Risk. Spain is supposedly too big to fail and too big to bail out. That’s when things get interesting.
BGinCHI
@Linda Featheringill: Not following your reason, unless it’s snark.
It’s not a capitalism bug, it’s a feature.
beltane
@Mudge: You are correct. They are refusing to raise their corporate tax rate because to do so would “be harmful to the economy”. The financiers want it all, and may ultimately be left with nothing.
Linda Featheringill
@Brachiator:
[#3]
I read the article you quoted from. Damn.
As I understand it, Ireland plans to lower the minimum wage [how will that help?] and raise income taxes and lay off a bunch of people and significantly reduce social services.
Are we ready for A Modest Proposal?
If I were an Irish person living in Ireland, I would be tempted to send the kids/grandkids off to visit Aunt Mary in some other country and then raise holy hell.
Alex S.
Something that leaves me without words: The Republic of Ireland has got a population of about 4,5 million people. The size of the bailout could go up to 90 billion Euro, that’s about $122,5 billion. By the same per capita-rate such a bailout in the US with its 300 million people would have a size of more than $8 trillion. Somehow the Irish managed to create a bubble more than 10 times bigger than the American bubble.
SteveinSC
If Ireland were to default, could AIG or Goldman Sachs end up owning Eire? I mean then the Irish would become a wholly owned subsidiary of some international conglomerate. They might be bought and sold on stock exchanges. What did the Roman christian priests call them “Angels” for their blond hair? What modern seminary (sic) would not just be dying to buy a few?
Linda Featheringill
It is a feature of what we have now. We can agree on that much.
Bill E Pilgrim
@Earl Butz:
In a nutshell.
I mean the idea of course is to try to not have the entire country fall apart financially, which was the same idea with us, and that’s not necessarily a bad idea. The problem is that if anyone politely suggests that just perhaps we might want to follow all of that bailing out with some rules to follow and new regulations against treating the country like a casino again, Rick Santelli et al are screaming about Communism and you know the rest.
I have to say that in France they listened to these arrogant lectures from Anglos for years about the superior, less strangulating free-market miracle systems, now the ones doing the lecturing have their hand out. Again, this is actually not an entirely bad thing, the problem is that the arrogance will start again, or just continue, because ideology trumps reality every time.
The French and others call the system “The Anglo Disease”, and I mean started calling it that long before this Irish crisis.
It’s the same as reading Krugman day after day: He’s right, the conservatives are wrong, this is demonstrated over and over– and the world listens to the conservatives. Drive you nuts.
jacy
Hey, if the overlords ever have to take a cut in profits because of excessive, crazy risk-taking and ill-considered investments, they’re just going to take there toys and go elsewhere. I’m not sure where elsewhere is, but they assure me it exists.
sherifffruitfly
From the Department of Black Folks Are Soooooo Oversensitive:
http://jezebel.com/5696308/club-mistakes-black-harvard-crowd-for-local-gangbangers?utm_source=Jezebel+Newsletter&utm_campaign=fa77d40dc3-UA-142218-20&utm_medium=email
Possibly this would be a good time for the old bitter joke: What Do You Call A Black Harvard Graduate?
JGabriel
John Cole:
Umm, sort of?
Bondholders aren’t investors, they’re loaners. The shareholders are supposed to take a bath first. Then the bondholders.
But are we talking about government bonds here? Because that’s kind of a different can of worms, isn’t it?
.
beltane
@jacy: The construction of enough rockets to send them “elsewhere” would be a worthwhile stimulus project.
artful dodger
“Where did this notion that there is never, ever any risk for bondholders come from?”
It comes from people who want a secure investment, who want to invest in a city, state, or nation and allow that government to build an infrastructure, and rely on that government’s power to raise taxes to pay those bondholders.
And I am a tax and spend liberal progressive democrat.
Dennis SGMM
@jacy:
How many would we have to hang from lamp posts to make them go away and leave us alone?
Bill E Pilgrim
@Alex S.: You know, and I didn’t even realize that Fannie Mae* loaned money to poor Irish people at all, you would have thought they were restricted to the US.
Who as any conservative knows, caused the housing bubble singlehandedly.*
DonkeyKong
Det. Thorn: It’s people. Soylent Green is made out of people. They’re making our food out of people. Next thing they’ll be breeding us like cattle for food. You’ve gotta tell them. You’ve gotta tell them!
Hatcher: I promise, Tiger. I promise. I’ll tell the exchange.
Det. Thorn: You tell everybody. Listen to me, Hatcher. You’ve gotta tell them! Soylent Green is people! We’ve gotta stop them somehow!
Brachiator
@Linda Featheringill:
Funny you should mention that. I was listening to some BBC World News and Economist podcasts over the weekend. Some recent graduates and others, feeling that prospects were less hopeful there, were talking about going to Canada and other countries.
There is some concern, don’t know how real, that there might be a talent drain as a result of what is happening.
Update
Also, it should be noted that bondholders in one of the major banks in the country have, according to the Irish Times, agreed to a major writedown of their holdings.
Alex S.
@dollared:
2 years ago, the Irish government guaranteed their banks’ deposits and debt. Yes, they are in fact bailing out the banks, but if the banks went bust, the government would be next.
@beltane:
I actually think that there are “invisible bond vigilantes” (Krugman) out there, speculating against one country after the other. Now that they have taken Ireland down (while cashing in on Ireland government bonds), they’ll move on to another country.
Zifnab
Hurray! Austerity!
Wait, wtf kind of socialism is this?
Stupid Irish. Don’t they realize that you’re supposed to cut taxes if you want to grow your economy and reduce your deficit?
Tonal Crow
From Republicans who say that it prevents “moral hazard”.
PeakVT
Where did this notion that there is never, ever any risk for bondholders come from?
If Ireland was larger or had its own currency, it could tell the bondholders to go pound sand. (The same would be true if it could dollarize in short order, but the economy is probably too large and complex.) But in this case, the larger members of the EU are able to dictate terms, and those countries want their banks and citizens made whole.
The Grand Panjandrum
@Dennis SGMM:
All of them.
@sherifffruitfly:
Hey Cambridge is the great bastion of liberalism so it couldn’t possibly be …. never mind, Skip Gates is on the other line … gotta run.
Eric S
Moody’s.
Jager
@Roger Moore:
As an old, colorful buddy of mine used to say, “life is like a shit sandwich, the more bread you got, the less shit you gotta eat”! I think they have 2 day seminars on that in the banking “bidness”
Zifnab
Hurray! Austerity!
Wait, wtf kind of socia lism is this?
Stupid Irish. Don’t they realize that you’re supposed to cut taxes if you want to grow your economy and reduce your deficit?
beltane
@Zifnab: But notice how they still refuse to raise the corporate tax rate. It would seem that they prefer to drive their citizens into destitution rather than do that.
WyldPirate
@Alex S.:
No, the Irish didn’t create a bubble 10x what the American bubble was. A shitload of bad debts are still on all of the crappy, thieving banks books right now. Creative accounting is what is hiding much of it along with the chicanery that is in the process of trying to be manipulated away with the foreclosure mess.
The big shitpile as Atrios’ calls it is still out there. It’s being hidden with smoke, mirrors and bullshit like Obama saying we are making most of our money back from TARP (biggest lie ever).
Brachiator
@Jager:
Even tastier is the “Dutch Sandwich:”
In short, keeping the corporate tax structure in place may be good for Ireland, but it definitely benefits some of the companies which make use of this technique.
GregB
I figure a modest alcohol tax would fill the Irish coffers in a matter of weeks.
sherifffruitfly
What you’re not understanding, or at least pretending not to understand, is that all of the Very Serious People in fact believe in the mantra “socialized risk, privatized profits”. It’s republican-minded folks have always allowed it to work, and it’s what the bondholders have come to expect.
That shit about letting the rich investor class go under is just shit they say to gullible frosh in their macroecon 201 classes.
Bullsmith
@WyldPirate:
Exactly, America not only controls it’s own currency but is the world’s reserve currency (for how much longer, who knows) and thus has all kinds of tactical moves available to prolong, delay, lie, legalize and hope for the next bubble to get-a-blowing before the armed citizenry (got forbid) notice the pillage of their country.
But the pile is still of shit, and will never make good the original investments. Notice the headlines today about “US Banks 100 Billion short of Basel III agreements” whatever the hell that means. Some headlines had it as “Up to 150 billion short”. And how much were last year’s annual bonuses in the financial sector? Could it have been 140 Billion? What an amazingly random coincidence that explains nothing at all about what’s going on.
Alex S.
@WyldPirate:
Well, who says that the 90 billion Euro for Ireland are all that’s needed? So far, the numbers have been getting bigger with each day. Don’t underestimate the capability of other countries to fuck up as well or even better.
kdaug
@Dennis SGMM:
Make enough Irish forget about Catholic v. Protestant, and focus on foreign banks instead, and you’ll have your answer. The bomb-makers are still around, and the Irish have long memories. And nothing feeds Irish nationalism like being under a boot-heel.
I know. I is one.
ThatLeftTurnInABQ
@Zifnab:
Note the crucial modifiers income and property taxes. Not corporate taxes. My guess is that it is mostly Irish income and actual Irish people holding title to actual Irish property that will get taxed and taxed and then taxed some more. The likes of multinationals like HP, not so much. This is how you make a Celtic tigerskin rug.
[Do not try this at home. Closed track, professional banksters only. No non-Irish people will be harmed in the making of these austerity measures.]
LongHairedWeirdo
Bonds are supposed to be safe – as safe as things can be, at least. With common stock, if business goes south, you take a hit. With bondholders, if business goes south, you can demand repayment, and even liquidation.
POVERTY IS FREEDOM
Happy days are here again. Perhaps I can throw shillings at the parents of all the poor children I run over on my way home.
LongHairedWeirdo
@LongHairedWeirdo:
Just to clarify a bit:
It’s not that bonds are supposed to be risk free – it’s that, when bonds go bad, there’s typically a line of people in front who are supposed to take a hit before face value is lost. Of course, sometimes you *do* lose face value of the bond… but only in a bankruptcy style proceeding.
Jamie
will the EU survive the attack of the great pile of money? i wouldn’t bet on it.
Taylor
Marcie Wheeler made the best comment about Ireland. It is ultimately just like AIG: a backdoor bailout of the banks, in this case the British and German banks.
Notice that the Irish government did not want a bailout, it was forced on them by the ECB because they are worried about their plutocrat banker friends losing money down the road. So instead the ECB and IMF loan the money to the Irish Exchequer to bail out the German banks, and the Irish taxpayer will spend the next century paying back the loan.
The IMF actually thinks the bankers should take a bath, and Merkel a week ago was making the same noises. My reading is that the reaction of the bankers was, Nice European economy, shame if anything happened to it.
I agree with Dean Baker today in the Guardian. If I was an Irish taxpayer, I’d say it’s time to default. Take the pain now, better that than my children and grandchildren in hock to the bankers for the next century.
Will Cowen last long enough to sell the country down the river?
Joseph Nobles
As long as the musicians get paid, the game of Musical Chairs continues.
WyldPirate
On a related note (via Atrios) Yglesias catches Thomas Friedman in the act of being astonishingly wrong yet again:
This is a clip from a 2005 Friedman column in Yglesias’ post:
It’s amazing that Friedman has such a good-paying gig and such a loud megaphone given how wrong he is about nearly everything.
kdaug
@ThatLeftTurnInABQ:
You funny. Ha-ha.
BGinCHI
@Joseph Nobles: Right. It’s all fucking Van Morrison’s fault.
Dennis SGMM
@Bullsmith:
I’d guess that there’s enough toxic, overvalued shit out there to sink the economy. I’d further guess that the gov is quietly doing everything it can to make sure that the extent of it isn’t ever known.
Brachiator
@ThatLeftTurnInABQ:
Good wordplay.
However, Polish and other immigrant workers in Ireland may be harmed.
kdaug
@Dennis SGMM:
Make that governments. For the complete breakdown, see this PDF.
ThatLeftTurnInABQ
@beltane:
So they are going after one sovereign debt target after another, starting at the bottom (Iceland, Ireland, Spain…) and working up, until this method of blackmail stops working (i.e. the whole system blows up)? This sounds suspiciously like the Calvin and Hobbes method of calculating bridge weight tolerances.
I wonder if they’ve put any thought into what happens after the collapse.
BGinCHI
Don’t worry all, brainiac Eric Cantor will save SS, Ireland, and probably some little old ladies who are in danger somewhere.
http://wonkroom.thinkprogress.org/2010/11/22/cantor-social-security-reality/
Sloegin
So not surprised; when everything started going south at the start of this crisis, Ireland went on a total austerity kick to satisfy their credit overlords; massive cuts and layoffs, no tax hikes, did everything their conservative banking and market masters wanted…
And wow, the austerity thing didn’t work. Next, look for Britain’s austerity gig to lead them into double-dip in the coming year.
jwb
@kdaug: And yet on a previous thread, many here were claiming we will be seeing a recovery in 2011, due to the “normal business cycle” or some fucked over shit like that. Given the shape the states are in and the gooper state legislatures that have been elected, I’d say we’re more likely to see 15% unemployment by the end of the year than any kind of appreciable recovery. I’m almost certain we’ll slip back into official recession by the summer.
lacp
Interesting preview of what we’re going to get when the deficit hawks get in the driver’s seat…..which is going to happen in the very near future, no?
mikefromArlington
Man, I had this stock investment go bad once. Maybe I should write my Congressman for a bailout and he can get a loan from China to pay me back.
AhabTRuler
Hey, cool! How long ’til armies get involved?
daveNYC
Cut the minimum wage? WTF sort of master plan is that? That government needs to be locked up in a room with a herd of horny syphilitic goats with strap-on chainsaws.
And everyone in business knows the pecking order. Common equity eats it first, then prefered stock, then the bondholders.
arguingwithsignposts
So, apparently the Sadlynaughts have been kicking around Ross Douchehat for claiming that the problems the Irish are having is because they don’t listen to the Pope so much anymore (no, I’m not making this up).
Anyway, I got out of the boat and checked out some of the comments, and this one killed me:
Stuck, was that you?
Tim Ferg
Bondholders.
D-Chance.
@Ash Can:
This.
Stocks are for young, aggressive, gambling-types; bonds were pimped to the older, more cautious investors who were sold on the concept that they were safe havens from the roller coaster of the stock market. As such, the investor class in bonds is skewed towards the older and less affluent who don’t have the 2-3 decades to recover their losses like the stock players do. Many of them depend on those interest payments for the bulk of their retirement income.
edit: “pimped” threw this into moderation?
Bill E Pilgrim
@WyldPirate: And this is what everyone, at least of the Very Serious People, was saying for years.
Well, I can practically see the Louvre from here and this country is not melting down financially, while Ireland is.
Yeah, all countries have problems, it’s the wild and crazy swings that some of the less economically flashy ones avoid. When those swings are upward, everyone is snotty and judgmental about doing it any other way, but when they swing downward– they still are. Despite sitting in the smoldering ruins.
Of course, the fact that the bankers and Wall Street types actually do pretty well at both those times might be just part of the reason…..
Bill E Pilgrim
@WyldPirate:
Also: best comment in that Yglesias thread about Friedman:
burnspbesq
@Mudge:
“I bet their corporate tax rate still isn’t increased.”
Do you want it to be? And if so, why?
The Grand Panjandrum
OT: Remember that Dave Dayen blog post from the other day about problems with mortgage backed securities? A law professor from Georgetown Law weighed in and it is very troubling:
Move over Ireland here we come!
General Stuck
@arguingwithsignposts:
LOLwut? I love the Irish people, and would never recommend them to go to Reichland Arizona. They can come over here to NM, next door. And sing us some Irish lullabies. And we will enchant them with our cosmic luv vibes.
kwAwk
John Cole said:
Risk is the point. The reason government bonds can be sold with such low interest rates is that the perception is that there is no risk to the bonds.
The US treasury 30 year bond interest rate is about 4%, and can only be that low because there is a belief that the bonds themselves have no risk because they are backed by the full faith and credit of the US government. They are essentially sold at interest rates close to the inflation rate specifically because of the belief that the government will be able to pay out almost guaranteed for 30 years.
If governments in large industrial nations start to default on the bonds then the interest rates from these bonds will naturally have to rise along with risk making it that much more difficult for government to borrow money in the future, and making it difficult to finance the activities of government.
Also the entire ability of a large nation like our to control inflation and deflation through monetary policy is setting interest rates which would naturally go up significantly in the case of defaults and buying and selling of bonds. This allows for nations like our not on the gold standard to control the value of the currency.
Government bonds in essence are one of the major tools government has for exercising control in the economy.
burnspbesq
A reminder: if you have a 401(k), an IRA, a 529 account, or anything like any of those, “they” is actually “you.”
kdaug
@arguingwithsignposts:
I think Boston is the more traditional route.
But nice to know that Arizonians know which color the illegal immigrants come in.
(And yeah, I may be upholding the stereotype, but I love that song. Fuck off.)
arguingwithsignposts
@General Stuck:
My bad. I had you confused with one of the Arizona BJers for a moment. Promise it won’t happen again.
Cacti
So, what you’re saying is socialist “Old Europe” has to come to the rescue of the “Celtic Tiger”?
liberal
@Spiffy McBang:
Yes and no. IIRC, the government took on the banks’ debt, making it sovereign debt.
This was the real crime. IIRC there’s some kind of treaty requiring them to do so. (Maybe something about not being allowed to make any distincts between domestic and foreign asset holders.)
General Stuck
@arguingwithsignposts:
LOL, no problemo. Just remember, we have the worlds only commercial spaceport. That’s what you build when sandwiched between AZ and Texas.
liberal
@Bill E Pilgrim:
That’s a false dichotomy. The choices aren’t so black and white—bailout the banks (and their bondholders), OR ELSE economy collapses. There are plenty of ways to keep the core elements of finance in place while not handing money to the asset holders on a silver platter.
That’s certainly better than what we’re doing now here in the US, and is necessary, but IMHO it’s not sufficient, because it doesn’t address the moral hazard issue. Letting the banks fail and not bailing out their bondholders does do so.
liberal
@JGabriel:
Yes, but the bondholders are the big elephant in the room. And most people still think of them as investors, even though not shareholders.
As I already replied above, IIRC it wasn’t gov’t debt until the government took on the bank debt. It wasn’t originally gov’t debt.
Suffern ACE
@liberal: Exactly. But the reason they are being forced to do this is that the banks in the larger economies might fail with their default and the governments of those economies have also guaranteed their banks’ debt.
liberal
@artful dodger:
You’re claiming that the origin of the Irish debt was government-financed infrastructure? I think not.
liberal
@Suffern ACE:
Yes, but tough titty.
liberal
@kwAwk:
Barring Republican craziness, the US will never default on its bonds, because it can always print money to pay them back.
Not that that’s a great solution, but it would certainly come prior to default.
Odie Hugh Manatee
@Max Power:
Fix’t.
Capitalism died a long time ago but nobody went to the funeral. Why? Because they were too busy fighting amongst themselves for the few remaining scraps while the rich were partying their asses off, celebrating.
liberal
@burnspbesq:
Not necessarily. And even if so, so what? Bondholders should still take a haircut.
batgirl
@jwb: This is exactly what is needed to elect President Palin. We are so screwed.
Chris- The Fold
My guess is from the bond holders.
Or from this list of facts Republicans refuse to believe.
Eric Lindholm
Yes, if there’s a default, the bondholders are supposed to have first crack at payback before the shareholders.
Unless you’re a large American auto company and bankruptcy would dissolve union contracts and the President is beholden to the UAW. Then it’s different.
liberal
@WyldPirate:
Yeah, that one is really hilarious.
jake the snake
@Earl Butz:
“Freedom’s just another word for nothin’ left to lose” –Kris Kristopherson.
anticontrarian
The parasite class, who must be fed and grow fat no matter what the cost to the body politic, which exists only to feed them.
Sly
Clearly what Ireland needs is a program that allows the Irish to sell their children as food to foreign creditors.
priscianus jr
burnspbesq
@liberal:
Bondholders should get treated the way they should get treated. That may or may not result in a haircut, depending on who is in front of them in line (chiefly the depositors) and how crappy the assets are (by all accounts, pretty crappy).
It’s just that the “they” shit pisses me off. It’s either ignorant or self-absolving, and either way it’s bull. We are they (as you are he as you are me and we are all together).
burnspbesq
@Eric Lindholm:
Oh, bullshit. The secured creditors voluntarily took the deal that Rattner offered them.
Judas Escargot
@ThatLeftTurnInABQ:
So they are going after one sovereign debt target after another, starting at the bottom (Iceland, Ireland, Spain…) and working up, until this method of blackmail stops working
Ireland, then Greece, then Spain by Spring.
Right about when Alan Simpson gets to take his rejuvenating bloodbath.
How convenient. :)
Eric Lindholm
@burnspbesq: If you type “GM bondholders” into Google, the fourth choice that comes up is “GM bondholders screwed.” You can follow the story from there, unless you think it’s all a conspiracy.
Nylund
Isn’t the risk exactly why certain bonds pay more? Because there is a risk they may not pay at all? Banksters want the income of risky assets but with the security of riskless assets. So far, the world seems to think that’s A-OK.
Its like saying you want to be able to do your heroin and still be guaranteed to pass any drug test.
El Cid
It’s interesting that Kirchner’s Argentina, which took on both the debt and the crazy following of advice from US and Western backed economic advisers and international lenders on how to run their currency, budget, and economy, and used a default to renegotiate it for the benefit of the actual population, is always dismissed as a nightmare story.
Given the choices they face, it seems that Kirchner et al made the right one.
Whereas the IMF and WB etc completely dominated the economic policies of South America in the 1990s, vacuuming up more in interest payments from the struggling 3rd world nations than was lent in the first place, Argentina’s tough game and Venezuela’s purchase of Argentinian bonds broke the stranglehold these institutions had on South America, and in particular their enforcement of economic policies more suitable to the US and other Western investor interests less concerned with actual national development.
kwAwk
@liberal:
True. But the more money the government prints the less the bonds are worth, thus you could end up with a negative return on the bonds or with hyper-inflation the bonds could become worthless.
Wile E. Quixote
@Eric Lindholm:
What an incredibly stupid and lazy argument. Even before I clicked the link to your site I knew that you were a conservative because you’re too stupid and too lazy to read the article and provide a summary here or provide a list of citations. Are there any conservatives left who aren’t lazy retards repeating the same stupidly stale conspiracy theories?
For those of you who don’t want to click on the link to Eric’s blog you’re not missing much. He’s an Erick Erickson wannabe who’s over here at BJ trolling for page hits. You know, the usual conservative nonsense from another lazy, stupid moron who sat around waving the flag for eight years while George W. Bush and the Republican party ran the country into the ground and then got angry when a black Democrat was elected president.
Oh, and Eric, why don’t you show your conservative chops and up and move to a red state, like Alabama, instead of continuing to live in Massachusetts. Come on dude, put your money where your mouth is and stop living in nasty old Taxachusetts. Move to Alabama, or Alaska or some other conservative paradise, because if you don’t you’re obviously not a real conservative and are instead just a poseur.
AnotherBruce
@LongHairedWeirdo:
You know, Cole actually asked the wrong question here, but a lot of his commentors are providing the right answers.
Xenos
@burnspbesq: No, ‘they’ is not ‘me’. ‘They’ are a bunch of incompetent and venal intermediaries who can not be disintermediated, even when they are demonstrably corrupt and incompetent. The whole system is rigged for their benefit, and my role is to provide cash and to take losses, all in the hope of beating inflation once in a while.
Transferring moral culpability to me as well as all the financial risk is a bit much.
AnotherBruce
Perhaps I should be more generous, Cole asked the right question, but he phrased it in the wrong way. Artful Dodger said it all in comment 30. There is a damn good reason to protect bondholders, and it’s the same damn good reason to protect mortgage (debt) holders. Society benefits and even capitalism benefits when the nation (government and business) protects this relationship. It’s not a coincidence that this relationship has fallen apart. It’s a cynical ploy by a murder of wealthy ideologues that has allowed this to happen.
AnotherBruce
I hear a lot from the right wing about class envy. But I wonder if class envy does not come from the extremely wealthy. I really think that there is an elite (elite in their own minds) class that doesn’t really ever want to interact with the rabble, so they are creating a strict and stratified society so they won’t ever have to interact with any of their inferiors except as servants. It’s the exact perversion of the American Revolution.
They don’t want us in their restaurants or golf courses or Broadway productions. They certainly don’t want us questioning their motives or plans. America until very recently had an in-your-face attitude towards the blue bloods. The unions in particular did this. Fuck, if you think about it, The “common people” did as much to define Western civilization as these assholes did.
Now they have a huge part of America thinking that they create all the wealth, and they create all the jobs and for that we should be grateful for the scraps they give us . And a huge part of America has been narcotized by the television and so believe them. It’s not that people are stupid, but they have been made stupid by TV. The only solution that I can see is to talk to the druggies one by one, and slowly explain to them that they are watching a propaganda box.
It’s not different than treating any other addiction. Dirty work but someone has to do it.
burnspbesq
@Eric Lindholm:
And that proves precisely what?
The best account of the negotiations with the secured creditors is in Rattner’s book, which I highly recommend.
inkadu
@El Cid: Thanks, El Cid. Informative as usual. I’m looking forward to your promotion to the front page.
AnotherBruce
@El Cid: Ummm yeah wow. What Inkadu said.
Uncle Clarence Thomas
I don’t understand why some people so vilify other countries when they faithfully adopt President Obama’s policies and prescriptions.
El Cid
@inkadu: @AnotherBruce:
Thank you for the compliment. I don’t know about the whole front page thing even in an extremely hypothetical sense — I might be too irascible; since a number of times here I’ve gotten into some ‘fuck you / NO FUCK YOU’ type shouting matches with some very frequent commenters here.
Steve J.
Where did this notion that there is never, ever any risk for bondholders come from?
From the same super-geniuses who created credit default swaps.
Jado
They managed to game the system such that if we really did let them take a bath on these bad investments, their lawyers would start asking embarrassing questions.
Like, how did these investments get AAA ratings if they are such shit?
How did this all get past the government oversight regulators?
And finally, how is it that no one is going to jail for massive fraud?
If we actually answer these questions, we have to detonate most of the financial system, and put thousands of banksters and government officials in prison.
The combo of covering the government ass and covering for their very generous campaign contributors makes this a no-brainer for the legislature.
ThatLeftTurnInABQ
@inkadu:
Ditto that, as strongly as possible. Put El Cid on the front page – this site needs an actual left leaning voice and despite all the joking about DFHs the front pagers here are all either moderate centrists of one flavor or another, or EDK. Widen that Overton Window. Post-modern capitalism is destroying itself even as we speak – the time is now to start talking about what we want to build on top of the ruins after the collapse.
Oh and while we are waiting around for the next biweekly meeting of the anarcho-syndicalist commune in yonder castle to discuss this issue, could somebody please front page the article re: Kirchner’s Argentina that El Cid #108 linked to ASAP. One of the biggest weapons neoliberalism wields is the myth that there is no alternative path to prosperity. Puncture the myth.
El Cid
@ThatLeftTurnInABQ: I have to add that I’m not sure I have the time to post really worthwhile, well-considered, and evidence-based points. If on the other hand, some comment of mine is considered that valuable, noting on the front page is useful and complimentary enough. It used to happen to me quite frequently on Greenwald’s, but I lost the ability to follow along the second-by-second filling up of comments sections by the hundreds.