The ECB Opens The Door To Debt Forgiveness - News and Current Events | futures io social day trading
futures io futures trading


The ECB Opens The Door To Debt Forgiveness
Updated: Views / Replies:219 / 0
Created: by kbit Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

The ECB Opens The Door To Debt Forgiveness

  #1 (permalink)
Elite Member
Aurora, Il USA
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
 
kbit's Avatar
 
Posts: 5,872 since Nov 2010
Thanks: 3,301 given, 3,332 received

The ECB Opens The Door To Debt Forgiveness

Yesterday, the WSJ reported that the European Central Bank may have conceded to return Greek sovereign bonds to Greece in exchange for less money than the bonds' face value. This is probably the start of something big.

Some analysts have argued that the would-be (and highly probable) development does not constitute debt monetization—converting debt into money. While we would concede that making that argument might be a stretch, ECB willingness to forgive Greece some or all of its expected returns on that debt nonetheless mark a landmark moment in eurozone crisis management.

First, let's go over the rumored plan. According to the WSJ, the European Central Bank would exchange Greek bonds with face value of €50 billion ($64 billion) with the European Financial Stability Fund (EFSF) in return for the latter institution's more highly rated bonds.The key thing here is that the ECB only paid €39 billion for the bonds (as they are badly distressed).

Then the EFSF will give those Greek bonds back to Greece, and receive a payment of at least €39 billion ($51.8 billion).

Bottom line: Greece is effectively retiring €50 billion worth of debt for just €39 billion.
Fine, the ECB is acting through the EFSF, and sure, the money that the ECB paid out initially is being returned in its nominal—or even estimated net present value—sum. But that doesn't mean that the real value of the ECB's debt purchases is truly being accounted for.

In fact, the ECB is just letting the opportunity cost of the €39 billion ($51.8 billion) to effectively vanish into the monetary system. €39 billion today and €39 billion a year from now are not the same thing—in that time those €39 billion could have brought in returns not equal to zero.

This chart breaks it down:

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Simone Foxman for Business Insider



Regardless of the impetus for the ECB's Greek bond purchases, the assumption for everyone involved was that Greece still owed €50 billion. Therefore, those €39 billion were worth more than just €39 billion to the ECB in any time after the moment those purchases were made, and the EFSF (which holds the bonds) will now pick up the check for the difference.

While this isn't quite giving Greece money, it's not much different. It is materially reducing Greece's public debt burden—the first time an official institution has done that.

And surprise, surprise—now Ireland wants in on the fun.
Reuters reports (via @FGoria) that Irish Finance Minister Michael Noonan told RTE Television that the ECB might be convinced to make similar concessions to Ireland on a different kind of debt obligation.

"If the ECB are prepared to make this kind of concession to Greece it would encourage me to think that they might be ready to make concessions on the promissory note to Ireland," Noonan said. If the ECB forgives some of Greece's debt this will amount to "a strengthening of [Ireland's] negotiating position" in talks to reduce the €17 billion in interest that Ireland used to bail out its failing banks.

This is not necessarily a bad thing. Debt forgiveness is a big sign that the ECB is willing to—gasp!—reduce the real liabilities governments have on their balance sheets. And while it doesn't directly create money out of existing debt, it does eliminate the opportunity cost of investing these funds elsewhere.

Through the ECB's unlimited ability to create and destroy money, €11 worth of Greek obligations have now gone poof.
The fact that the ECB might be willing to go through with this plan is a far more dramatic development than politicians would have you believe. It's also a program that most of the PIIGS will eventually want to get in on.


Read more: GAMECHANGER: The ECB Opens The Door To Debt Forgiveness Across Europe

Reply With Quote

Reply



futures io > > > > The ECB Opens The Door To Debt Forgiveness

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Linda Bradford Raschke: Reading The Tape

Elite only

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

January

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Justice Department Opens a Door on Online Gambling Quick Summary News and Current Events 0 December 25th, 2011 11:00 AM
ECB Back-Door Bailout That Will End The Crisis? kbit News and Current Events 0 December 16th, 2011 11:24 AM
Guest Post: Unleashing The Future: Advancing Prosperity Through Debt Forgiveness (Par Quick Summary News and Current Events 1 December 6th, 2011 01:32 PM
Fed Opens New FX Swap Line With Bank Of Japan; Second After ECB Quick Summary News and Current Events 0 November 10th, 2011 11:00 PM
Consumer Debt Forgiveness May Be Needed for Recovery Quick Summary News and Current Events 0 August 22nd, 2011 07:40 PM


All times are GMT -4. The time now is 09:19 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-11 in 0.09 seconds with 19 queries on phoenix via your IP 54.226.227.175