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comment by kleinbl00
kleinbl00  ·  3576 days ago  ·  link  ·    ·  parent  ·  post: Jeremy Warner: Austria is fast becoming Europe's latest debt nightmare

Did they convince you? They didn't convince me. If you look at the wikipedia page for Creditanstalt (I had to look it up, having never heard of it), it was founded in 1855 and went bankrupt in 1931... two full years after the stock market crash of 1929 (which most people tend to point to when we're discussing the Great Depression). Then they follow up with a back-handed comment about Detroit (which didn't sink the US or even Michigan) and Ireland (which recovered quite nicely, thanks).





b_b  ·  3576 days ago  ·  link  ·  

I think what's going on here is that this guy has a narrative he wants to tell about debt, so he'll tie together otherwise uncorrelated bankruptcies to make his case. The fact that he doesn't really make the case isn't surprising. His diatribe in the above linked piece talks about how sovereign debts have gotten "worse" (his word, not mine) since the financial crisis, without mentioning that the borrowing rates are near, at, or even below zero. Not all debts are created equal, and if I'm paying you to hold my money for me, are you even in debt to me? The Detroit thing was just another illustration that the dude is trying to sell ad clicks and not teach anyone anything about how money works.

mk  ·  3576 days ago  ·  link  ·  

If tax revenue has fallen, then the same debt carries a heavier burden. The guy's narrative might be extreme, but the solution to debt is inflation and growth. To get there, Central banks print money and lower rates. Rates have been low and money has been printed. If inflation and growth don't kick in...

mk  ·  3576 days ago  ·  link  ·  

I am not convinced about a contagion, but it did surprise me to see an Austrian bank failing. I agree the author looks clueless speaking about Detroit. TBH I have no idea what the books of EU banks look like, or what their exposure might be. I do know that Greece won't be paying back its debt, however. That is a mathematically reality. I also assume that their debts aren't the only ones that won't be paid.

kleinbl00  ·  3576 days ago  ·  link  ·  

My understanding of European finance laws is they tend to be a lot less transparent than American ones. I mean, the SEC is toothless but compared to EU laws it's a fuckin' pit bull.

You follow this stuff pretty closely, I assume. I do as well. This is the first I've heard mention of Austria. Wiki lists them as #14 (with Greece at 17 and Spain at 6) so it's not like they don't matter... but with Greece, it's the banks while this article is about a bank.

mk  ·  3576 days ago  ·  link  ·  

Looking back into the article this one links, it looks like the bank in question was Hypo Group Alpe Adria which Austria nationalized in 2009.

    “We are at a very delicate phase when Europe’s banking system switches from a bail-out regime into a much tougher bail-in regime, and Austria has just thrown this into sharp relief,” said sovereign bond strategist Nicholas Spiro. The biggest bondholders are Deutsche Bank’s DWS Investment, Pimco, Kepler-Fonds and BlackRock. The World Bank also owns €150m of Hypo debt.

I guess the Austrian government is saying that it's Carinthian's problem, -their own little Greece.

kleinbl00  ·  3576 days ago  ·  link  ·  

Well now I'm truly curious. Looking over the Wiki article it looks like they only do half their business within the EU. Not only that, but many of their creditors aren't in the EU. So if I understand correctly (big if) this move gives them the ability to shaft non-EU holders of debt. EU holders as well, but that's internal and all on the same currency so it'll shake out... but it seems like one of the least harmful ways to get the debt off the books. I mean, if you get to shaft Serbia, Pimco and BlackRock, you might as well!