I've never understood the dynamics here.
To lose confidence in the whole by the lack of confidence in such a small part may say more about what the whole is built on rather than what it's built of.
Every moment I wake up I realize I know nothing, and then I smile...
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Can't agree with this one.
Just remember what happened after Lehman.
This is my little conspiracy theory about the banks (of course can't show evidence but if you watch the news/public discussion vs. stock indices this is the pattern that appears):
Big Banks have a global agreement that as soon as some government allows one of the big ones to go bankrupt they all get out of equities and let the indices drop into a bottomless hole.
In this context what european governments did to Dexia makes some sense:
1. Bail out.
2. Split into smaller parts
Number 2. especially makes sense because default of smaller banks will not cause the global chain reaction.
It does not need an agreement. Usually they have a lot of business with each other, so if one of them fails, some of the other ones are likely to fail as well.
The main problem is that some of the banks
- are too large
- engage in excessive speculation
- have no appropriate risk management
Behind is in an agency problem. The employes of banks have an incentive to take massive risk, because that is the way they can earn bonuses. If the bank fails in the end, it is not up to them to pay for it, but it is left to the shareholders and the taxpayer.
A good example is UBS. If you look at the investment bank of UBS - not including the other business segements - here are the contributions before taxes of the last 10 years:
2001 CHF 2.741 million -> bonus paid
2002 CHF 1.368 million -> bonus paid
2003 CHF 3.889 million -> bonus paid
2004 CHF 4.610 million -> bonus paid
2005 CHF 5.181 million -> bonus paid
2006 CHF 5.943 million -> bonus paid
2007 CHF - 16.669 million -> f*** the shareholder
2008 CHF - 34.300 million -> f*** the taxpayer
2009 CHF - 6.081 million -> f*** everybody
2010 CHF + 2.197 million -> bonus paid
2011 CHF ? -> a rogue trader produces a loss of $ 2 billion
Source: Annual reports published by UBS.
UBS is one of the leading global investment banks. Over the last 10 years the investment banking has produced a cumulated pre-tax loss of CHF 31.121 million. Divide this by the population of Switzerland and you will get a share of CHF 3.956 per citizen of Switzerland, or after conversion US-$ 4.375.
If I was a Swiss citizen my personal share (as a head of a family of 4) would have been $ 17.500. Nice! I am really happy to be a German taxpayer paying for Greece and not a Swiss taxpayer paying for UBS.
Do you think that UBS should continue their investment banking activities?
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Germany has built small nano sized rockets on all organic and non-organic things within the sovereign state of Germany. They are preparing lift-off as I type this and will hover somewhere warmer, most likely off the coast of Turkey.
I think that puts to rest the argument of if they will leave the EU.
WOW. Amazing video. Amazing news. If these riches were brought out the ground that would shake economic status quo of Europe and that part of the world and would make Greece wealthy country (maybe richest in Europe) . Guess who would not be very happy about diminishing influence? Now imagine different scenario - make rich in resources country bankrupt, then exploit it's resources as price for debt. This way riches are controlled by second parties eliminating strong neighbor. The same happened with Southern American countries - read "Confessions of the Economic hit man". You can call me paranoid, but similarity is striking.
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