In this story, Greece, the mouse, saves itself by scaring the shit out
of the lion.
How so?
The Lion (Western governmebanks)
are gamblers who's liquidity
is about to be cut off.
So, they take care to give the mouse what he wants.
I'm hearing that little old Greece will cost the world
a cool trill . 9 zeros.
that's a lot of souvlaki, mousaka
that's a lot of souvlaki, mousaka
and hotels with one swinging light-bulb.
You can't hedge risk. You can externalise risk
by giving it to governments, for a while.
(dollar hedge-mony has just left the building)
I can see that Tsipras and his boys know all this
and they're swaggering like John Wayne.
"Well, pilgrim. If you keep hedgin',
them Griks are gonna scalp ya"
IshitUnot: 2 texts
zerohedge
Double or Nothing: How Wall Street is Destroying Itselfzerohedge
Submitted by Tyler Durden on 05/12/2012 13:34 -0400
Submitted by John Azis of Azizonomics
Double or Nothing: How Wall Street is Destroying Itself
There’s nothing controversial about the claim— reported on by Slate, Bloomberg and Harvard Magazine — that in the last 20 years Wall Street has moved away from an investment-led model, to a gambling-led model.
This was exemplified by the failure of LTCM which blew up unsuccessfully making huge interest rate bets for tiny profits, or “picking up nickels in front of a streamroller”, and by Jon Corzine’s MF Global doing practically the same thing with European debt (while at the same time stealing from clients).
As Nassim Taleb described in The Black Swan these kinds of trades — betting large amounts for small frequent profits — is extremely fragile because eventually (and probably sooner in the real world than in a model) losses will happen (and of course if you are betting big, losses will be big)....
This fragile business model is in fact descended from the Martingale roulette betting system. Martingale is the perfect example of the failure of theory, because in theory, Martingale is a system of guaranteed profit, which I think is probably what makes these kinds of practices so attractive to the arbitrageurs of Wall Street (and of course Wall Street often selects for this by recruiting and promoting the most wild-eyed and risk-hungry). Martingale works by betting, and then doubling your bet until you win. This — in theory, and given enough capital — delivers a profit of your initial stake every time. Historically, the problem has been that bettors run out of capital eventually, simply because they don’t have an infinite stock (of course, thanks to Ben Bernanke, that is no longer a problem). The key feature of this system— and the attribute which many institutions have copied — is that it delivers frequent small-to-moderate profits, and occasional huge losses (when the bettor runs out of money).
....
The obvious conclusion is that if the loss-chasing Martingale traders cannot resist blowing up even with the zero-interest rate policy and an unfettered fiat liquidity backstop, then perhaps this system is fundamentally weak. Alas, no. I think that the conclusion that the clueless schmucks at the Fed have reached is that poor Wall Street needs not only a lender-of-last-resort, but a counter-party-of-last-resort. If you broke your trading book doubling or quadrupling down on horseshit and are sitting on top of a colossal mark-to-market loss, why not have the Fed step in and take it off your hands at a price floor in exchange for newly “printed” digital currency? That’s what the 2008 bailouts did.
Only one problem: eventually, this approach will destroy the currency....
: that’s one reason why Eurasian creditor nations are all quickly and purposefully going about ditching the dollar for bilateral trade.
The bottom line for Wall Street is that either the bailouts will stop and anyone practising this crazy behaviour will end up bust — ending the moral hazard of adrenaline junkie coke-and-hookers traders and 21-year-old PhD-wielding quants playing the Martingale game risk free thanks to the Fed — or the Fed will destroy the currency. I don’t know how long that will take, but the fact that the dollar is effectively no longer the global reserve currency
2 Russia Today
Grexit could have Lehman effect - experts
Published: 17 May, 2012, 15:07
Earlier this year, the International Institute of Finance (IIF) calculated the losses from a possible Greek default. The losses would be above 1 trillion euro, with credibility of other European states hard hit, according to the IIF. China, India and Brazil, big exporters to the eurozone, would also suffer, with China seeing exports shrink by 4%, and India and Brazil by 2% each.
