It looks like they’ve agreed to something over in Europe, though it remains to be seen whether this deal will last any longer than any of the last half dozen or so agreements aimed at keeping the currency union from breaking apart.
Investors have reportedly agreed to take losses of 50 percent on Greek debt and French President Sarkozy told reporters that the EFSF bailout fund is about to be “leveraged up” to $1.4 trillion, the proverbial “bazooka” in the EU’s pocket. It looks like they’re on a roll…
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Well, the investors are taking a 50% haircut, How? Will they extend maturities like the last time? the haircut coming from the discounted present value? So Greece will have to pay the same amount just have to pay it for much much longer? that is a haircut to you? now on the guarantees. So Greece is going to have to pay the same amount over much longer period and if you guaranteed say 30% of new bonds, Greece with its commitments out until the next century will be able to borrow at lower interest rates? Have they spiked the punch? anyone still sane in this European house?
Creditors are losing 50% of the money owed by a sovereign nation. And the stocks are rallying.
Maybe we can strike a deal with our creditors, and lower our national debt to $7.5 trillion? In your face, super committee!
And…how would these losses not strike havoc on the monetary supply? Are they just printing the money that investors are losing?