Research (Penizenavic.cz)
Finance  |  September 19, 2011 12:26:48

The crisis of government bonds, the principal can only come


Industrialized countries since 2007 are drawn into the draconian deleveraging, and that when they were on an unprecedented binge removed zadlužovacím cup never-ending debt.

Financial institutions have also had to make transparent the system is set during the credit boom. Along with that there were then governments around the world to address the dilemma of whether to support its banking system, or at risk of falling.

For example, in Ireland, after his European Union and the International Fund to provide rescue program in the amount of EUR 67.5 billion to issue private loans converted into a problem of national debt. Private investors and bond holders who held debts of these banks is to go without any harm, only to be replaced by the state.Irish taxpayers are then, understandably, outraged prospect of several years of economic measures for the recovery of bank bailouts, while leaving intact private investors.

In order to rescue banks, politicians spun wheels loose monetary policy with interest rates near zero. In the U.S., was introduced (and then again restored) quantitative easing, while the European Central Bank bought bonds issued by countries on the periphery, and remains for banks in Ireland, Greece and Portugal the only source of funds.

Precedents are not good

Nationalization of private lending solution was initially used by governments in Latin America during the debt crisis in the 80 the last century. After the guarantee of private loans, many of them went bankrupt, and this wave of bankruptcies in 1987 stopped theBrady Plan, which enabled these governments reduce their commitments by 30%.

Kennet Rogoff and Carmen Reinhartve in his major work dealing with the aftermath of banking crises in history. Serial bankruptcy, according to them is an almost universal phenomenon, which is fighting for his country's transformation from emerging markets to advanced economies. The main series of bankruptcies spread out over several years or decades, then creates the illusion of investors and politicians that this time it's "different."

The same is true today, when we Syndrome "this time is different" gives false confidence that domestic debt is a new feature of modern financial situation. The authors also confirm the fact that these crises often comes from the financial centers, and subsequently spread through shocks in interest rates and a collapse in commodity prices.This means that the recent crisis, the U.S. sub-prime mortgages was hardly unique. Our data also documents other crises that often accompanies bankruptcy, namely: inflation, falling exchange rates, banking crises and currency devaluations.

It was depreciating its currency is a phenomenon that began several years ago to apply the U.S. and Great Britain. Bankruptcy law may be "direct" or through inflation. The euro area is then released through belt-tightening and there is a rather clear disinflationary environment.

The fragility of the Eurozone

Paul de Grauwe of the Centre for European Policy Studies in his article suggests that monetary union for its members is a fragile structure in an environment where a group of investors speculating on the fall in bond prices look for countries with high debt.

De Grauwe also notes the fact that in a monetary union in which member countries renounce control of its currency through debt countries are more vulnerable to changes in sentiment in the bond markets. As an example, it says Spain. Why impose bond markets at the beginning of this year 200-point risk premium on 10-year Spanish bonds compared to those of the British?

The answer to this question is the fact that Great Britain has the option to pound her as necessary to force the central bank to buy up debt. Great Britain is not at risk of a liquidity crisis, which may in turn affect Spain. Investors should therefore be avoided Spanish bonds and not the European Central Bank to mix cards.

Countries undergoing stress tests

While banks are undergoing a new round of stress tests, testing the strength of the financial markets of individual countries and their debt in practice. Countries whose debt is then held in the vast majority of domestic investors (such as Italy and Belgium) are then at an advantage compared to those whose debt is mostly held abroad.

Nenadechnou if individual countries to significant economic increases, which would generate revenue needed to repay these debts can not be expected to permit the existing pressure to which they are exposed to these economies and the crisis of government bonds can also gradovat.

For financial aid to Greece would be in CR build 6,710 km of highways, further comparison of what would be purchased for aid to Greece: http://www.penizenavic.cz/clanky/co-lze-koupit-za-pomoc-pro River-

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