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2012 May

Prepare for a long weekend

May 25th, 2012

There are solutions for sovereign borrowers with excessive debt. More borrowing Repayment Paying back with money worth less (inflation) Default Option (1) is difficult when lenders run out of patience. Politicians now know that voters don’t do austerity so option (2) doesn’t seem likely either.  Inflation? Unlikely if you don’t control the central bank. So […]

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Recovery & Resolution & Repression

May 25th, 2012

Earlier I mentioned that bail-in may leave unsecured depositors exposed to a higher loss given default. But it doesn’t stop there. There are at least four further potential knock-on effects: Collateralised bonds (covered bonds, MBS) become more attractive to investors. But encumbrance limits restrict the amount of funding that is available to issuers and reign […]

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