Generational Dynamics Forum - New Site

24-Oct-11 World View -- Sarkozy tells Cameron to 'shut up' in euro clash

Libya's interim leader declares support for Sharia law

** 24-Oct-11 World View -- Sarkozy tells Cameron to 'shut up' in euro clash
** http://www.generationaldynamics.com/cgi ... 24#e111024

Contents:
### World View -- Sarkozy tells Cameron to 'shut up' in euro clash
The European situation continues to worsen
Britain may hold referendum on leaving the European Union
Sarkozy tells Cameron to 'shut up' in euro clash
Anti-Immigrant party loses ground in Switzerland
Libya's interim leader declares support for Sharia law
Colonel Gaddafi's will calls for his supporters to fight on

Keys:
Generational Dynamics, John Kenneth Galbraith, Greece,
Europe, Christine Lagarde, International Monetary Fund, IMF,
Nicolas Sarkozy, France, Angela Merkel, Germany,
David Cameron, Britain, Jean-Claude Juncker, Tony Blair,
Jacques Cirac, Swiss People's Party, SVP, Switzerland,
Libya, Mustafa Abdul-Jalil, National Transitional Council,
Sharia Law, Muammar Gaddafi

European leaders are discussing Bond Holders volunteering to take a haircut of up to 60%

One of the newspaper articles claimed the benefit of this "voluntary haircut" was that the Bond Holders would forgo making claims against their Credit-Debt-Swap insurance as part of volunteering to take a 60% hit.

Why would anyone voluntarily agree not to make an insurance claim against their insurance policy for a 60% loss.

How do the European leaders expect to coerce the bond holders into volunteering for this ?

Reality Check wrote:European leaders are discussing Bond Holders volunteering to take a haircut of up to 60%

One of the newspaper articles claimed the benefit of this "voluntary haircut" was that the Bond Holders would forgo making claims against their Credit-Debt-Swap insurance as part of volunteering to take a 60% hit.

Why would anyone voluntarily agree not to make an insurance claim against their insurance policy for a 60% loss.

How do the European leaders expect to coerce the bond holders into volunteering for this ?

It would be in return for receiving AAA bonds guaranteed by the EU, valued at 40% of the
Greek bonds. The AAA bonds would be long-term - 20 or 30 years. - John

It would be in return for receiving AAA bonds guaranteed by the EU, valued at 40% of the
Greek bonds. The AAA bonds would be long-term - 20 or 30 years. - John

I am showing my ignorance of how the Credit-Debt-Swap insurance works, but it appears they would do better by letting Greece default and collect the insurance on their loses.

Of course it would spread the loses to parties holding the other side of the Credit-Debt-Swap contract, and who those other parties are is part of the calculation.

Reality Check wrote:

It would be in return for receiving AAA bonds guaranteed by the EU, valued at 40% of the
Greek bonds. The AAA bonds would be long-term - 20 or 30 years. - John

I am showing my ignorance of how the Credit-Debt-Swap insurance works, but it appears they would do better by letting Greece default and collect the insurance on their loses.

Of course it would spread the loses to parties holding the other side of the Credit-Debt-Swap contract, and who those other parties are is part of the calculation.

If the haircut is "voluntary," then there's no "credit event," so CDS
payments cannot be collected.

If the haircut is "voluntary," then there's no "credit event," so CDS
payments cannot be collected.

Which brings us back to the original question, why not just decline to volunteer and collect the payment from Greece until they default and then collect the insurance from the Credit-Debt-Swap after they default - and decline to volunteer for anything.

If the perception is the Credit-Debt-Swap insurance is worthless - then the world finance system has a much bigger problem than just Greece.