Tag Archives: South Korea

Roubini and the Nonsens of Voluntary Bail-ins

There’s plenty of nonsense circulating on the subject of dealing with the European debt crisis. Professor Nouriel Roubini takes a shot at one of the latest genius ideas – an “induced voluntary bail-in” of the Greek bank’s creditors…  Now, don’t ask me how that is supposed to work….

“Trying to apply something that was originally designed to bail-in cross-border short-term interbank lines among banks to the bonded debt of a sovereign is a big fudge.”

Nouriel Roubini

“Now that the ECB has, for the time being, effectively vetoed any bail-in of Greece’s creditors, even a modest profiling of the debt, the official sector is running out of options for a meaningful bail-in of creditors.”

The following article is written by Professor Nouriel Roubini and syndicated by eurointelligence.com:

The latest idea — apparently deemed acceptable even by the ECB — is a “voluntary” maintenance of the exposure of Greece’s bank creditors by inducing them to hold their exposure to the sovereign once their bond claims mature by rolling over their maturing bonds into new bonds.

This option has been compared to the Vienna Initiative, which induced the cross-border exposure of foreign banks to the central and east European banking system during the 2008-09 global crisis, when a number of sovereigns and banking systems in that region were at risk of rolling off the claims of foreign creditors.

However, the idea of bailing-in cross-border exposure to the banking system of a country under financial pressure has a longer history and includes similar bail-ins of foreign banks’ cross-border exposures to local banks in 1998 in South Korea, in 1999-2000 in Brazil and in 2001-02 in Turkey.

The more successful experiences were the more coercive ones or when it was in the banks’ interest to maintain their exposures to their foreign affiliates.

A purely voluntary maintenance of exposure at current market rates would make the sovereign’s debt even more unsustainable and, in time, will ensure a default on the new bonds.

The only way to prevent the coupon/yield on the new bonds from being close to market rates and thus unsustainable would be to provide the new bonds with seniority or some collateral; but both options are undesirable as a rollover is not a case of “debtor-in-possession” financing and thus doesn’t justify such credit sweeteners.

If, instead the rollover occurs at original coupon or well below market rates, so as to provide Greece with some debt relief, the rollover option is not purely voluntary and has coercive elements; thus, it is not different in any substantial way from the orderly debt restructuring, or reprofiling, that the ECB and other official sector folks so vehemently oppose.

Also, banks alone would be bailed in — inducing massive inequality among creditors — and only maturing bonds would be sequentially rolled over as they mature, rather than a significant part of the debt being subject to a uniform debt exchange at a single point in time.

Only the latter provides meaningful debt relief for the debtor. Thus, there would be little debt relief and consequently the unsustainability of the debt burden of the sovereign would remain unresolved.

There is also significant risk of arbitrage as banks pass their exposure to Greek debt to hedge funds and other mark-to-market investors who will not be bailed in. Thus, the entire scheme risks to unravel if such arbitrage were to occur.

A debt exchange avoids this problem by roping in all creditors, not just a sub-set.

Only an orderly and market-oriented, but partially coercive, debt exchange could restore debt sustainability while avoiding contagion; a purely voluntary approach would make the debt even more unsustainable — and would risk eventually triggering a disorderly workout — if the rollover occurs at market rates that price in massive default probabilities.

An application of the Vienna Initiative to the issue of Greek public debt is also totally unrealistic.

If the rollover occurs at unchanged coupon (original yield at issuance), there is little difference between such a rollover and a more traditional and efficient debt exchange with a par bond and maintenance of the original coupon. Thus, trying to apply something that was originally designed to bail-in cross-border short-term interbank lines among banks to the bonded debt of a sovereign is a big fudge.

If it is done properly, it is no different from the sort of clean debt exchange that the ECB and others abhor; and if it is done on a “voluntary” basis, it creates an even bigger and more unsustainable debt monster for the sovereign.

As in the case of Argentina, which attempted a voluntary mega debt exchange at unsustainable market yields—it would ensure that a disorderly default will occur in 2012 or 2013. Thus, claiming that one can apply a voluntary Vienna Initiative to the case of Greece is just a continuation of the big fudge and delusional kicking of the can down the road that the ECB and the official sector has indulged in for over a year now in Greece.

The discussion of a Vienna Initiative for Greece shows the confusion of the official sector and of some market analysts when they talk of the likelihood of massive contagion and financial Armageddon in the event of an orderly restructuring.

Yet, they also claim to support for “voluntary” approaches.

The latter are highly contrived and counterproductive if not outright destructive of the debt sustainability that everyone is trying to restore in distressed sovereigns.

By Nouriel Roubini

Nouriel Roubini is chairman of Roubini Global Economics, and professor of economics at the Stern School of Business NYU.

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Filed under International Econnomic Politics, Laws and Regulations, National Economic Politics, Uncategorized

Here's What You Get For Blogging About Chinese Banks

I can’t say I’m very surprised as I’ve  been quite busy lately blocking Chinese IP‘s from accessing my computer.

But when I tried to log on to The Swapper just a few minutes ago, I got this:

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Well, I must admire their tireless efforts to plant all kinds of bugs in my system.

However, I really can’t see why?

There must be thousands of bloggers and websites who publish a lot more critical stuff about The Great Red than I do.

So, I suppose I should take it as a compliment…..

Professional hackers know that Chinese and Korean computers are notorious exploiting bad security on many fronts.

This makes other people experimenting with hacking and exploiting prime targets.

However, it can get cumbersome trying to manually find IP’s of computers in these countries.

Here are the ranges of IP’s used in these countries. (Note, not all the IP’s are assigned. Use lower values for more likely hits.)

61.28.0.0 – 61.28.63.255  China
61.32.0.0 – 61.43.255.255  Korea
61.48.0.0 – 61.55.255.255  China
61.72.0.0 – 61.87.255.255  Korea
61.96.0.0 – 61.111.255.255  Korea
61.128.0.0 – 61.191.255.255  China
61.232.0.0 – 61.237.255.255  China
61.240.0.0 – 61.243.255.255  China
61.248.0.0 – 61.255.255.255  Korea
128.134.0.0 – 128.134.255.255  Korea
129.254.0.0 – 129.254.255.255  Korea
132.16.0.0 – 132.16.255.255  Korea
134.75.0.0 – 134.75.255.255  Korea
137.68.0.0 – 137.68.255.255  Korea
137.189.0.0 – 137.189.255.255  Chinese Unv of Hong Kong
141.223.0.0 – 141.223.255.255  Korea
143.248.0.0 – 143.248.255.255  Korea
147.6.0.0 – 147.6.255.255  Korea
147.43.0.0 – 147.43.255.255  Korea
147.46.0.0 – 147.47.255.255  Korea
150.150.0.0 – 150.150.255.255  Korea
150.183.0.0 – 150.183.255.255  Korea
150.197.0.0 – 150.197.255.255  Korea
152.99.0.0 – 152.99.255.255  Korea
152.149.0.0 – 152.149.255.255  Korea
154.10.0.0 – 154.10.255.255  Korea
155.230.0.0 – 155.230.255.255  Korea
156.147.0.0 – 156.147.255.255  Korea
157.197.0.0 – 157.197.255.255  Korea
158.44.0.0 – 158.44.255.255  Korea
159.226.0.0 – 159.226.255.255  China
161.122.0.0 – 161.122.255.255  Korea
161.207.0.0 – 161.207.255.255  China
162.105.0.0 – 162.105.255.255  China
163.152.0.0 – 163.152.255.255  Korea
163.180.0.0 – 163.180.255.255  Korea
163.239.0.0 – 163.239.255.255  Korea
164.124.0.0 – 164.125.255.255  Korea
165.132.0.0 – 165.133.255.255  Korea
165.141.0.0 – 165.141.255.255  Korea
165.186.0.0 – 165.186.255.255  Korea
165.194.0.0 – 165.194.255.255  Korea
165.213.0.0 – 165.213.255.255  Korea
165.229.0.0 – 165.229.255.255  Korea
165.243.0.0 – 165.244.255.255  Korea
165.246.0.0 – 165.246.255.255  Korea
166.79.0.0 – 166.79.255.255  Korea
166.103.0.0 – 166.104.255.255  Korea
166.111.0.0 – 166.111.255.255  China
166.125.0.0 – 166.125.255.255  Korea
167.139.0.0 – 167.139.255.255  China
168.78.0.0 – 168.78.255.255  Korea
168.115.0.0 – 168.115.255.255  Korea
168.126.0.0 – 168.126.255.255  Korea
168.131.0.0 – 168.131.255.255  Korea
168.154.0.0 – 168.154.255.255  Korea
168.160.0.0 – 168.160.255.255  China
168.188.0.0 – 168.188.255.255  Korea
168.219.0.0 – 168.219.255.255  Korea
168.248.0.0 – 168.249.255.255  Korea
169.140.0.0 – 169.140.255.255  Korea
192.5.90.0 – 192.5.90.255  Korea
192.83.122.0 – 192.83.122.255  China
192.100.2.0 – 192.100.2.255  Korea
192.104.15.0 – 192.104.15.255  Korea
192.124.154.0 – 192.124.154.255  China
192.132.15.0 – 192.132.15.255  Korea
192.132.247.0 – 192.132.251.255  Korea
192.188.170.0 – 192.188.170.255  China
192.195.39.0 – 192.195.40.255  Korea
192.203.138.0 – 192.203.146.255  Korea
192.245.249.0 – 192.245.251.255  Korea
192.249.16.0 – 192.249.31.255  Korea
198.17.7.0 – 198.17.7.255  China
198.97.132.0 – 198.97.132.255  China
198.178.187.0 – 198.178.187.255  Korea
202.0.110.0 – 202.0.110.255  China
202.0.160.0 – 202.0.179.255  China
202.4.128.0 – 202.4.159.255  China
202.4.252.0 – 202.4.255.255  China
202.6.95.0 – 202.6.95.255  Korea
202.14.88.0 – 202.14.88.255  China
202.14.103.0 – 202.14.103.255  Korea
202.14.165.0 – 202.14.165.255  Korea
202.14.235.0 – 202.14.238.255  China
202.20.82.0 – 202.20.86.255  Korea
202.20.99.0 – 202.20.99.255  Korea
202.20.119.0 – 202.20.119.255  Korea
202.20.120.0 – 202.20.120.255  China
202.20.128.0 – 202.20.255.255  Korea
202.21.0.0 – 202.21.7.255  Korea
202.22.248.0 – 202.22.255.255  China
202.30.0.0 – 202.31.255.255  Korea
202.38.0.0 – 202.38.15.255        China
202.38.32.0 – 202.38.47.255  China
202.38.64.0 – 202.38.138.255  China
202.38.140.0 – 202.38.156.255  China
202.38.158.0 – 202.38.161.255  China
202.38.164.0 – 202.38.176.255  China
202.38.184.0 – 202.38.255.255  China
202.90.0.0 – 202.90.3.255  China
202.90.252.0 – 202.91.3.255  China
202.91.128.0 – 202.91.131.255  China
202.92.0.0 – 202.92.3.255  China
202.92.252.0 – 202.93.3.255  China
202.93.252.0 – 202.93.255.255  China
202.94.0.0 – 202.94.31.255  China
202.95.0.0 – 202.95.31.255        China
202.95.252.0 – 202.122.39.255  China
202.122.128.0 – 202.122.128.255  China
202.127.0.0 – 202.127.63.255  China
202.127.128.0 – 202.127.255.255  China
202.130.0.0 – 202.130.31.255  China
202.130.224.0 – 202.130.255.255  China
202.131.208.0 – 202.131.223.255  China
202.136.252.0 – 202.136.255.255  China
202.189.128.0 – 202.189.191.255  Korea
202.192.0.0 – 202.207.255.255  China
203.81.16.0 – 203.81.31.255  China
203.87.224.0 – 203.88.3.255  China
203.89.0.0 – 203.89.3.255  China
203.90.0.0 – 203.90.3.255  China
203.91.0.0 – 203.91.3.255  China
203.92.0.0 – 203.92.3.255  China
203.93.0.0 – 203.94.31.255  China
203.95.0.0 – 203.95.7.255  China
203.128.128.0 – 203.128.159.255  China
203.184.0.0 – 203.184.3.255  China
203.192.0.0 – 203.192.31.255  China
203.196.0.0 – 203.196.3.255  China
203.207.64.0 – 203.208.19.255  China
203.212.0.0 – 203.212.15.255  China
203.222.192.0 – 203.222.207.255  China
203.223.0.0 – 203.223.15.255  China
203.224.0.0 – 203.255.255.255  Korea
210.5.0.0 – 210.5.31.255  China
210.5.128.0 – 210.5.143.255  China
210.12.0.0 – 210.13.255.255  China
210.14.160.0 – 210.15.191.255  China
210.21.0.0 – 210.22.255.255  China
210.25.0.0 – 210.47.255.255  China
210.51.0.0 – 210.53.255.255  China
210.72.0.0 – 210.78.255.255  China
210.79.224.0 – 210.79.255.255  China
210.80.96.0 – 210.80.111.255  Korea
210.82.0.0 – 210.83.255.255  China
210.90.0.0 – 210.127.255.255  Korea
210.178.0.0 – 210.183.255.255  Korea
210.192.96.0 – 210.192.127.255  China
210.204.0.0 – 210.207.255.255  Korea
210.211.0.0 – 210.211.15.255  China
210.216.0.0 – 210.223.255.255  Korea
211.32.0.0 – 211.63.255.255  Korea
211.64.0.0 – 211.71.255.255  China
211.80.0.0 – 211.103.255.255  China
211.104.0.0 – 211.119.255.255  Korea
211.136.0.0 – 211.167.255.255  China
211.168.0.0 – 211.255.255.255  Korea
218.0.0.0 – 218.31.255.255  China
218.36.0.0 – 218.39.255.255  Korea
218.48.0.0 – 218.55.255.255  Korea
218.56.0.0 – 218.99.255.255  China
218.104.0.0 – 218.108.255.255  China
218.144.0.0 – 218.159.255.255  Korea
218.192.0.0 – 218.205.255.255  China
218.232.0.0 – 218.239.255.255  Korea
218.240.0.0 – 218.247.255.255  China
219.72.0.0 – 219.72.255.255  China
219.128.0.0 – 219.159.255.255  China
219.216.0.0 – 219.219.255.255  China
219.232.0.0 – 219.235.255.255  China
219.236.0.0 – 219.237.255.255  China
219.240.0.0 – 219.241.255.255  Korea
219.242.0.0 – 219.247.255.255  China
219.248.0.0 – 219.255.255.255  Korea
220.64.0.0 – 220.92.255.255  Korea
220.112.0.0 – 220.115.255.255  China
220.160.0.0 – 220.191.255.255  China

And here’s a list of my recent Chinese coverage (and let’s se how long it’ll take them to crash this site again):

.

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The Fight Against Currency War

G20 pledges to avoid weakening currencies to boost exports and to let markets increasingly set foreign exchange values, after the weekend summit. The risk of a of currency war seems to have abated somewhat, and the USD is now at a 15-year low.

“The terms on currency policy are relatively vague and may be interpreted differently by each country. It remains to be seen whether actual practises will be changed.”

Camilla Viland


As expected, currencies were discussed at the G20 meeting over the weekend. The finance ministers of the group now pledges to avoid further weakening of currencies, to boost exports and to let markets increasingly set foreign exchange values. This could be interesting…

First of all; there was no decision on the US proposal for current account targets, and this debate will be continued at next months G20 meeting in Seoul.

And second; the terms on currency policy are relatively vague and may be interpreted differently by each country. It remains to be seen whether actual practises will be changed.

“However, it is very positive that they have come up with a joint statement on currencies,” analyst Camilla Viland at DnB NOR Markets writes in Monday’s Morning Report.

Previously this has been avoided in fear of alienating China, she points out.

USD At 15-Year Low

The USD weakened after the G20 meeting, as the risk of tensions in the currency market has abated, according to DnB NOR Markets.

Camilla Viland

“The dollar has, among others, weakened versus Asian currencies on the prospect nations in the region will refrain from intervening in foreign exchange markets,” Ms. Viland  writes.

Expectations of the Federal Reserve announcing another round of quantitative easing next week also helps in bringing the dollar down.

Another currency which has weakened over the weekend is the Swiss franc.

“The currency is normally seen as a safe haven in the currency market and the weakening may be a result of lower risk of a currency war,” the Norwegian analyst says.

 

Biggest Strauss Kahn Statement – Ever?

Dominique Strauss Kahn

The G20 financial leaders also decided that Europe will surrender two seats in the IMF’s executive board to emerging nations, like China, India and Brazil with the intent to give these countries more power.

IMF-chief Dominique Strauss Kahn said that this was the “biggest IMF reform ever.”

Yeah, right!

Mr. Strauss Kahn is about to get a reputation for distributing pompous – and not very well founded – statements.

See also: In The Brigh Minds Of IMF

 

German Economy Still Flying

The German IFO index rose from 106.8 in September to 107.6 in October.

German Economy Recover

This is the highest outcome since May 2007, and better than consensus’ estimate of 106.5 and the outcome signals solid growth for the locomotive of European economy.

However, it is worth noting that this month’s improvement was not only due to better current conditions, but also due to a rise in business expectations.

“The latest developments in the German economy have been positive. However, we do not expect this to last. Due to sluggish international growth and a strong euro, growth will abate going forward. Fiscal tightening will also weigh on German growth,” Camilla Viland at DnB NOR Markets writes.

And Now; The US Housing Market

From the US, figures for existing home sales in September will be released Monday.

The Pending home sales index, which is an indicator for actual home sales, has risen over the last two months.

Mr. Housing Market

And we may see a rise in existing home sales this month, too. (Consensus expects 4.3 million houses to have been sold in September, up from 4.1 million sales in August.)

“Such an outcome is positive. Nevertheless, the levels of monthly house sales are very low seen in a historical context,” Camilla Viland notes.

And yet to come; the impact of the foreclosure scandal…

Scandic Updates

Here in Scandinavia several important events are on the agenda this week.

In the Norwegian, Norges Bank‘s interest rate meeting and the release of a new monetary policy report, will probably get most attention.

“Both we and consensus expect the interest rate to be left on hold at this meeting,” Ms. Viland writes.

In fact, a survey by the financial news agency, TDN Finans, shows that out of 17 participating analysts, no one expects the Norwegian Central Bank to rise its key rate.

(But wouldn’t it be fun if governor Svein Gjedrem pulled one last stunt before he retires in December?)

Anyway – the central banks new interest rate path (a prediction of the key rate level going forward) will probably be the most interesting thing for Mr. Gjedrem & Co.

The interest path rate has been lowered a few times already this year, and the interest rate is currently set to be raised around New Year.

“Given the latest developments we do not see this as likely. Foreign swap rates have fallen markedly since the previous report was released in June and inflation has been lower than anticipated. This indicates that the interest rate path will be lowered,” DnB NOR Markets says.

Adding: “We expect that the new interest rate path will indicate that the next rate hike will not be until March or May 2011.”

Also the Swedish Riksbank meets this week, holding their monetary policy meeting on Tuesday.

“The Swedish economy has performed strongly lately and this is one reason why the Riksbank has raises rates by 50 bps since the bottom. The Riksbank has signalled that more is to come and both we and consensus expect them to raise the interest rate by 25 basis points, to 1.00%, at tomorrows meeting,” the Norwegian money market specialist says.

More from DnB NOR Markets:

OSE Share recommendations. 25 – 29 October 2010.

Weekly FX Update.

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