Comments on: Will Credit-Default-Swaps-Induced Distortions Continue? http://www.nakedcapitalism.com/2008/05/will-credit-default-swaps-induced.html Sun, 22 Nov 2009 07:56:24 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Tom http://www.nakedcapitalism.com/2008/05/will-credit-default-swaps-induced.html#comment-7613 Tom Tue, 06 May 2008 08:52:00 +0000 http://www.nakedcapitalism.com/2008/05/will-credit-default-swaps-induced-distortions-continue/#comment-7613 I tell you what, I'm getting pretty bored of these "if these prices reflect reality then the sun should be blotted out by brokers jumping to their death" comments. Bond pricing 101, "what's in the spread" - liquidity premium anyone? I tell you what, I’m getting pretty bored of these “if these prices reflect reality then the sun should be blotted out by brokers jumping to their death” comments. Bond pricing 101, “what’s in the spread” – liquidity premium anyone?

]]> By: Anonymous http://www.nakedcapitalism.com/2008/05/will-credit-default-swaps-induced.html#comment-7458 Anonymous Thu, 01 May 2008 19:48:00 +0000 http://www.nakedcapitalism.com/2008/05/will-credit-default-swaps-induced-distortions-continue/#comment-7458 "Until the synthetic CDO market re-emerges"<br/><br/>You might have a bit of a wait on that front...<br/><br/>No wonder UBS are in such trouble with senior staff making comments like that. “Until the synthetic CDO market re-emerges”

You might have a bit of a wait on that front…

No wonder UBS are in such trouble with senior staff making comments like that.

]]> By: Francois http://www.nakedcapitalism.com/2008/05/will-credit-default-swaps-induced.html#comment-7451 Francois Thu, 01 May 2008 14:16:00 +0000 http://www.nakedcapitalism.com/2008/05/will-credit-default-swaps-induced-distortions-continue/#comment-7451 "``Given what these spreads imply about defaults, we should be in a deep depression, and we are not.'<br/><br/>Hmmm! Could it be that these markets anticipate a deep depression? If Mish's take about deflation is correct,<br/><br/>http://globaleconomicanalysis.blogspot.com/2008/04/deflation-in-fiat-regime.html<br/>http://globaleconomicanalysis.blogspot.com/2008/03/now-presenting-deflation.html<br/><br/>It is difficult to explain "why credit will not contract greater than central banks' attempt to inflate, to account for global wage arbitrage, walk-aways, boomer retirement and a shift away from consumption, $500 trillion of derivatives that can never be paid back and a secular shift from consumption to saving.<br/><br/>I see no explanation of how consumers and businesses are going to pay back debts in a world of declining real wages, wealth concentration at the extreme high end of the spectrum, global wage arbitrage, declining home prices, rising unemployment, overcapacity at every corner, and insane overbuilding of both commercial and residential real estate.<br/><br/>On the other hand, my thesis is simple: The Fed can address liquidity issues not solvency issues, and we are facing a solvency issue. And because of the enormous amount of debt in relation to the pool of real savings, there is no way that debt can be paid back. Debt that cannot be paid back will be defaulted on."<br/><br/>Makes you wonder how we will be able to avoid one big bad recession/depression. ““Given what these spreads imply about defaults, we should be in a deep depression, and we are not.’

Hmmm! Could it be that these markets anticipate a deep depression? If Mish’s take about deflation is correct,

http://globaleconomicanalysis.blogspot.com/2008/04/deflation-in-fiat-regime.html
http://globaleconomicanalysis.blogspot.com/2008/03/now-presenting-deflation.html

It is difficult to explain “why credit will not contract greater than central banks’ attempt to inflate, to account for global wage arbitrage, walk-aways, boomer retirement and a shift away from consumption, $500 trillion of derivatives that can never be paid back and a secular shift from consumption to saving.

I see no explanation of how consumers and businesses are going to pay back debts in a world of declining real wages, wealth concentration at the extreme high end of the spectrum, global wage arbitrage, declining home prices, rising unemployment, overcapacity at every corner, and insane overbuilding of both commercial and residential real estate.

On the other hand, my thesis is simple: The Fed can address liquidity issues not solvency issues, and we are facing a solvency issue. And because of the enormous amount of debt in relation to the pool of real savings, there is no way that debt can be paid back. Debt that cannot be paid back will be defaulted on.”

Makes you wonder how we will be able to avoid one big bad recession/depression.

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