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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: bond_bubble who wrote (61386)	5/18/2006 2:11:14 PM
From: regli	Respond to of 110194

"Every country has something equivalent of GSE. And they have been the primary reason for global RE bubble." I am not aware of that. Also, the GSEs in the U.S. basically accept every conforming loan and even the concept of a conforming loan has been hugely expanded in the last few years. In most other countries with the exception of subsidized housing, the banks or building societies make the loans and take the risk. A very different proposition though it did not prevent a housing bubble in many other countries. Securitization is an infant industry in most other places compared to the U.S. businessweek.com "Five of Germany's leading banks announced on Apr. 23 that they would jointly shift up to $55 billion of loans off their balance sheets, turn them into securities, and sell them to investors. The move by Deutsche Bank, Dresdner Bank, Commerzbank, HVB Group, and DZ Bank is designed to strengthen the banks' finances, which have been weakened by a slump in profits and a rise in bad debts. Under the plan, the banks will pool the loans in a new joint venture to be run by Kreditanstalt für Wiederaufbau, the state-owned development bank. The move is likely to draw criticism from European Union officials in Brussels. Some may argue that the involvement of KfW, which will take a 20% stake in the new operation and oversee the securitization of the loans, is tantamount to state backing -- which is not allowed under EU rules. Because its operations are guaranteed by the state, KfW has an AAA credit rating that it could use to make the securitized loans more attractive to investors. As a result, EU Competition Commissioner Mario Monti, who has taken a tough line against state backing for banks, may decide to investigate the deal." The risk profile of the Euro is totally different from the dollar and much closer correlated to political instability within the Eurozone than to default. At this point, the Eurozone has a trade surplus and therefore far fewer creditors than the U.S. However, I agree that neither the dollar nor the Euro will be the future the reserve currency. As you say, I wouldn't be surprised to see a move closer to something of a gold standard especially in a multilateral world. Few if anybody will want to grant the inherent advantages of THE reserve currency of a single country again. I simply don't see how gold will not play some role in such a scenario.