Post Tagged with: "collateral"
The Curious Case Of Liquidity Traps And Missing Collateral – Part 1
In this first post of a series of 3-5 posts, I try to present the building blocks of the argument as I see them and answer the question of why the traditional view on the liquidity trap does not apply in the current situation
Five Overlooked Euro Zone Developments
There are several developments that warn of future problems in the euro zone and these make us suspicious about the euro’s ability to sustain the upside break
Europe’s Three No’s in Two Parts: Part I
Banks can borrow as much as they want from the central for three years at the refi rate. They are limited only by their desire and collateral. The ECB also liberalized further its definition of acceptable collateral. But expectations of large banks borrowing money from the ECB to buy sovereign bonds to use as collateral to borrow more money from the ECB does not appreciate the risks involved. The cost of hedging and insuring sovereign risk has risen. Also, if the collateral is a sovereign paper and the sovereign is downgraded, or if the collateral loses value for another reason, the bank will have to pony up more cash or collateral
In an Undercollateralized World
Frederick Sheehan argues that we are overleveraged, undercollateralized, and accentuating these unsustainable imbalances through economic policy to smooth out volatility