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"Did Somebody Repeal The Laws Of Mathematics?"

Tyler Durden's picture




 

From Grant Williams' latest Things That Make you Go Hmm.

Remember late-2010? When Spain wasn’t a problem, but merely a potential problem? I do:

(FT, November 17, 2010): For some of the world’s biggest hedge funds, typically regarded as the savviest traders in the market, there is now one big question facing the eurozone: what is going to happen to Spain?

 

While Europe’s politicians are grappling with the crisis unravelling in Ireland, hedge fund managers are already turning their attention to  the issue of how – and if – a peripheral crisis in Ireland could leap via Portugal and Spain to become a systemic crisis for the eurozone as a whole.

 

“The Irish problem will be contained,” says Guillaume Fonkenell, chief investment officer at Pharo, one of Europe’s biggest and most successful macro funds, which specialises in trading on macroeconomic events and trends. “For us contagion is the issue ... If the market loses confidence in Spain, then all bets are off. Spain is too big to bail.”...

Back then, the general opinion was that if the contagion spread to Spain the game was over because there wasn’t enough money with which to bail out an economy the size of The Kingdom of Spain. I’m not sure exactly what happened— maybe I wasn’t paying attention—but suddenly, almost two years on and in an environment where even the rich nations of Europe are seeing an undeniable slide towards recession, there is no talk about Spain being ‘too-big-to-bail’ anymore.

Did somebody repeal the laws of mathematics?

Presumably, if the contagion reaches Italy that would be OK too now, I guess.

As it first hit the headlines as a potential problem, Spain made a presentation to potential investors that highlighted how strong the country actually was despite the conjecture amongst market participants. The presentation is highly educational and can be found in full HERE, but as a taster, here’s one particular slide that caught my eye:

Oh, to hell with it... here’s another:

Some opportunity.

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Full letter:

 

 

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Sun, 08/05/2012 - 18:03 | 2680245 Atomizer
Atomizer's picture

European Debt Crisis Explained --- December 18, 2011

Sun, 08/05/2012 - 18:23 | 2680279 icanhasbailout
icanhasbailout's picture

somebodyis going to take the opportunity to do some "widening", that's for sure

Sun, 08/05/2012 - 18:48 | 2680309 roadsnbridges
roadsnbridges's picture

So, Stolper got one right?

I'm afraid; very afraid.

Sun, 08/05/2012 - 19:00 | 2680335 robertocarlos
robertocarlos's picture

Is a silver certificate worth one silver dollar or one dollar of silver?

Sun, 08/05/2012 - 21:24 | 2680606 Boxed Merlot
Boxed Merlot's picture

It depends on the "purchaser". 

 

"Numismatic", "intrinsic" and "face" values are all open to interpretation.  Much like a lawmaker's definition of "is".

 

Brood of vipers, all.

Sun, 08/05/2012 - 20:26 | 2680509 tok1
tok1's picture

whats comical about zero hedge is you are preaching the US govt line while pretending to be anti establishment.  Obsessed with Spain (75% debt to GDP)  (they just announed they have finished their funding for the year hows hte US going)... Spainish banks are no worse than US or ther EU banks accept their doestic bonds have been pummeled by US investment banks and hedgefunds the gropu you profess to hate that are sdaving your ass.

 

The reality is the US is backing Germany to keep the pressure on Spain/Italiy to keep uo demand for US treasuries... because reality its US/Japan that have the excessive borrowings (105%/225%)  not Spain please they have 1trill you have 16 trill plus (I give you a tip spain is small but not 16 times smaller)

Stop preaching US govt policy wake up to reality.. the Us is depressing south EU to geep their funds flowing so they can pay your pensions.. and heatlh benifit and fund your army with periferial EU deposits that are flowing out to you...

 

Mon, 08/06/2012 - 08:35 | 2681256 Haager
Haager's picture

You are of course right to say that Japan and the US does have a serious problem with their debt and so on - noone really doesn't agree on that. I'm no US guy either.

But, don't close your eyes on the situation in Europe, especially the UK. The situation is - to say it mildly - threatening. The reason why Europe is in the spotlight is the management of the situation and the possible intentions of the government to act the way they do (it's somehow like the Sysiphos approach), whereas the special situation with the big differences in economical powers extends the thrill.

Although it already happens and will continue further: Would you mind BoJ to devaluate the Yen? Would you mind BoE to devaluate the GBP? Would you mind the US to devaluate the dollar? And what about the Euro?

 

Sun, 08/05/2012 - 20:52 | 2680547 BlankfeinDiamond
BlankfeinDiamond's picture

Million Dollar Bonus, your Swiftian coments really crack me up. Wait, that is satire, right?

Sun, 08/05/2012 - 22:00 | 2680738 Ying-Yang
Ying-Yang's picture

MDB is really Joe Biden in drag.

Sept 2008 After he was named the vice presidential nominee on the Democrat ticket, beating Hilary Clinton to the post, Mr Biden made clear who he thought was the better candidate: "Hillary Clinton is as qualified or more qualified than I am to be vice president of the United States of America," he said in New Hampshire. "Quite frankly it might have been a better pick than me."

Sun, 08/05/2012 - 23:07 | 2680836 monad
monad's picture

Ahmed Chalabi

Mon, 08/06/2012 - 09:06 | 2681329 M.B. Drapier
M.B. Drapier's picture

Back then, the general opinion was that if the contagion spread to Spain the game was over because there wasn’t enough money with which to bail out an economy the size of The Kingdom of Spain. I’m not sure exactly what happened— maybe I wasn’t paying attention—but suddenly, almost two years on and in an environment where even the rich nations of Europe are seeing an undeniable slide towards recession, there is no talk about Spain being ‘too-big-to-bail’ anymore.

Did somebody repeal the laws of mathematics?

I thought the answer to that was straightforward? Spain was considered too-big-to-bail in the absence of either of a) large-scale fiscal transfers from the core, ie. a big tax burden on Germany or b) all-out money-printing by the ECB, ie. large-scale monetary transfers from the core. Now Draghi is promising that he will implement b) as soon as Spain enters a bailout, so the size of the ESM/EFSF not nearly so important anymore.

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