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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (110538)	4/11/2010 11:52:31 PM
From: Hawkmoon	3 Recommendations Respond to of 116555

Mish, there's another element behind this below market rate low at 5% yield, IMO. It's claimed that speculation on Credit Default Swaps has been forcing the yield on Greek bonds up to 7.5%.. Therefore, one sure manner in which to make those CDS contracts lose value is to arrange for loans at a rate nearly 33% lower than the CDS markets are reflecting. Going to be a huge amount of activity in Greek CDS markets over this deal. Not to say the Greeks don't have problems. But it's been reported that the actual Greek economy may actually be twice as big as is currently reported, since tax evasion is rampant. If true, and tax revenue efforts are enhanced, they may not be in nearly as much financial trouble as is being asserted. CDS speculation on sovereign debt holds the potential of undermining national sovereignty as a whole, and seeing "big money" preying on smaller countries and attempting to drive them into bankruptcy so they can collect on their CDS contracts. Nothing wrong with CDS for those WHO HAVE AN INSURABLE INTEREST IN GREEK DEBT. But for those speculators, LACKING AN INSURABLE INTEREST, shorting the Greek Bonds and buying CDS on that same Greek debt, they need to have a clear signal sent their way. It's my hope that you'll spend a bit of effort on dealing with excess speculation in the CDS markets. The Greeks and many other governments, including in the US, deserve to be chastised for excess and non-productive deficit spending, but that shouldn't be an open door to encouraging CDS speculation aimed at driving those countries into bankruptcy by people who hold NO SKIN IN THE GAME. Hawk