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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (91561)	6/16/2012 5:16:32 AM
From: TobagoJack	Read Replies (2) \| Respond to of 217617

Absolute return letter figures, I quote by partial clip n paste Quote In order to implement a successful exit from a currency union, some strict rules must be followed. Some governments are undoubtedly already preparing contingency plans, so this is the kind of action plan you should be prepared for (greatly inspired by Jonathan Tepper at Variant Perception). Please note that the list below is not a complete list of required steps. I have only focused on the main action points. Many smaller and more administrative items have been intentionally left out. 1. The announcement will almost certainly come over a weekend with banks staying closed for at least a few days into the following week, allowing the government and the banks time to prepare for the new currency. 2. Capital controls will be implemented instantly although they will be temporary in nature. Note that the more capital that has left the country prior to the exit announcement, the faster the capital controls will be lifted again. 3. The new currency should begin to trade as soon as the banks re-open for business so that the desired devaluation can take effect immediately. 4. All interest payments on public debt will probably be suspended with immediate effect; however, the government would be wise not to make any declarations as to what haircut to expect on sovereign debt. Let the dust settle first but expect the IMF to be paid back in full. It is important to stay on good terms with your influential friends! 5. Expect a nationalisation of all systemically important banks that require financial aid. Expect shareholders to be wiped out; bond holders should expect a significant haircut. The banks need sorting out once and for all. Remember, they are the root problem. 6. Expect drastic labour market reforms to be introduced sooner rather than later. There is a window of public sympathy that the government must take advantage of, but the window will close again relatively quickly. The devaluation will improve the competitive advantage almost instantaneously, but the labour market reforms will secure that the advantages gained shall not be lost again over time. 7. One last ‘wild card’ (and this is Willem Buiter’s idea – not mine): The government should consider an elimination of all physical money and move to electronic money only. This carries two significant benefits. With such a move, the interest rate floor has effectively been removed and rates can be set at whatever (negative) level shall be required to stimulate investments and consumption. Imagine overnight rates at -3% with no coins and notes available to hide under your mattress. What do you think that will do to investments and consumption? The problem is that it might only work in conjunction with strict capital controls or if we all move to a moneyless society at the same time. Even more importantly, in the tax shy Southern Europe, tax revenues will improve markedly as a result of the reduction of the black market economy. We have all the technology available today to make such a move. Any takers? If structured correctly, a eurozone exit is not the Armageddon it is so often portrayed to be. When the perma bears realise that, and as they begin to see the benefits bestowed upon the first mover, the mother of all equity bull markets will be unleashed in Europe. As I have frequently pointed out in recent months (see for example here), European equities are extraordinarily attractively priced at levels not experienced since the dark days of the early 1980s. We are just waiting for the catalyst, but remember one thing – banks will not be the place to be. Unquote