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overtheedge
Member since May 2012
680 commentaries - 6 followers

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has posted a comment on the article :

Why Are Central Banks Terrified of Debt Restructuring?

- Graham Summer - Gains Pains & Capital

Thank you for explaining this far better than I could.
Perhaps a few of the "deflation" religious fanatics will finally recognize there is NO deflation nor will there be.
The great fear is collateral asset depreciation.

When the valuation of the collateral goes down, expect a margin call.
Either cover or get closed out.
Now factor in counter-party exposure (derivatives anyone?) and the whole system can take a serious dump.

Oh! Redefining words is NOT within anyone's sphere of authority.
Nor is it within the capacity of central bankers.
There exists only one logical reason to redefine economic terms: willful and intentional obfuscation.
Remember, cui bono?

Inflation and deflation are clearly defined using a child's balloon analogy.
To inflate, add air. To deflate, remove air.

Now consider the collateral concept.
The collateral remains the same. Only the perceived valuation has changed.
Think of it as measuring the diameter of the air-filled balloon using a tape measure made of rubber.
The content never changed, only the metrics by which it is measured.

Again thank you for a great post.

Commented 3370 days ago

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Beginning of the headline :Back in 2012, Mario Draghi promised to “do whatever it takes” to hold the Euro together. A lot of analysts interpreted this statement in a literal sense. However they are incorrect. Draghi is willing to… 1) Confiscate wealth by cutting interest rates to negative. 2) Permit regulators to seize bank accounts to “bail-in” banks. 3) Verbally intervene every time possible provided it pushes yields on EU nation sovereign bonds lower. 4) Buy EU sovereign bonds despite the fact that this c... Read More

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