posted on Aug, 5 2011 @ 10:08 AM
Understanding the current debt crisis :
The task seems impossible but I'm still gonna try put it down using two tricks, empathy and logic.
First, we got to put ourselves in the shoes of a trader.
Objectives, targets, objectives.
The day of the trader most probably begins with a staff meeting where the Boss will remind you of your targets for the day. Let's be conservative and
say the Boss is asking you for a +20%
There you are, at your floor, looking for ways to make cash, usual stuff, the Boss, the economy, everyone wants more, that's the way it works.
If your work is to lend money to states, that's where it gets funky. You're gonna look for opportunities, look for weak spots, gauge the risks... So
far all good.
On this market, states come to meet money lenders and make deals. Basically.
So, today, we got this X country coming to the market and asking offers for a 100 billion loan. There is the opportunity we were waiting for. So we
look at facts, turn problems into opportunities i.e. cash, and since our Boss is still asking for more, then what do we do, we ask for more.
But if we go back a little, globalisation, delocalisation, factories closing... that means less. Less production, less salaries, less consumption,
that has to appear somewhere, doesnt it ? But less Gross Domestic Product (GDP) is called a recession, and WE CAN'T HAVE THAT.
So, the only way forward is more, just like the Boss says. Then, like any good trader, you're gonna try squeeze more of that country asking for
money. Of course, it helps if your fellow bankers agree with your way of doing things, they would be stupid not to.
Wait, what just happened ?
But the game is a little different now that Europe got its own Fed. All we did since the beginning of the crisis is put up in place a system that will
lend cash to states when the markets are asking for too much.
Too much ?
There is no such thing as too much ! There is only what the Boss says, and the Boss wants more.
Problem is that now, IMF, ECB stepped in and took away my toys !
I was just about to get a nice deal from that X country and it all vanished under my nose !
Damn them, and the Boss still wants more. So what do i do ? I wait for the next country to come ask for money and I'll try again with them.
And that is my friend, why that so called crisis "bounces" from country to country.