Seriously, they should just print. Print, accept that nothing other than printing money will avoid a lot of defaults, print, accepting that the consequences are unknown, but this seems “unlikely” to work at best. I think the latest iteration is a “TALF” except that on a single asset, all you are doing is allocating the recovery risk. It seems like the told someone, the existing plans aren’t working, and they were told a TALF would work. And TALF was great, my only regret was not pushing to get some. TALF had great upside, limited downside, and very quick payback. The problem with all the Eurozone strategies is that they neglect the fact that 1 default wipes out at least 50% of the asset value. I think they would have been embarrassed enough by now to hire some people who understood what they were doing, but in the end, they are back to plan C, which at one point was plan B, then became plan A, but got shifted back to plan C.
The best explanation for the rally is that Europe is so desperate, and so unwilling ot accept a default, that eventually they will print so much money that everyone will be made whole. Tomorrow, we will attempt to analyze this latest plan more closely, but I think we already have, and the problems remain the same.
EFSF Terms of Reference on Maximizing Capacity: EFSF Link
2011-11-07 21:50:45.494 GMT
Terms of Reference for Consulation With Market Participants
Maximizing the Capacity of the EFSF
-0- Nov/07/2011 21:50 GMT