Roubini believes that further attempts at intervention have only increased the magnitude of the problems with sovereign debt. He says, “Now you have a bunch of super sovereigns— the IMF, the EU, the eurozone—bailing out these sovereigns.”Essentially, the super-sovereigns underwrite sovereign debt—increasing the scale and concentrating the problems.
Roubini characterizes super-sovereign intervention as merely kicking the can down the road.
He says wryly: “There’s not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone.”
But, despite the paper shuffling of debt at the national level—and at the level of supranational entities—reality ultimately intervenes: “So at some point you need restructuring. At some point you need the creditors of the banks to take a hit —otherwise you put all this debt on the balance sheet of government. And then you break the back of government—and then government is insolvent.”
What is he saying? As the imbalance gets pushed up hill, the transaction sizes get larger and the transaction rates drop; we get more illiquid.
No comments:
Post a Comment