Backed By Ink

4 Replies to “Backed By Ink”

1. Yes the bondholders took it in the neck.
   Two sides of this
   1) Government promises are just that, promises. If they look unkeepable they probably are
   2) The buyers of the bonds are individuals of free will and intelligence. Caveat emptor
   3) Also proof that the world continues even in default. Protecting bondholders at the cost of all else is folly, which is why GM should have gone bankrupt (it did) why Greece will go bankrupt. Maybe lenders will learn that they need to exercise their authority earlier rather than just hoping that their interest payments roll in, no matter what.
   Bottom line, the financial world will unfold in a way that doesnt change much from what you see, the timing may be different but the immutuable need to make 1+1=2 is what drives it all.

2. “I will gladly pay you Tuesday for a hamburger today.”

3. Yup, all debt is like that. Now the question is, who is the bigger fool, Wimpy for asking, or whoever lends Wimpy the money?
   And why should anyone bail out either of them if it all goes wrong, in other words a bad contract.

4. I read the original story at Zero Hedge last night. When the bonds were issued, the Hungarians had a reasonably functioning economy. In the interim, they were overrun twice, first by Nazis, and then by Commies, both of whom subverted the economy, first to a futile war, and then to a futile ideology.
   How does one conclude from this situation that “Government promises are just that, promises. If they look unkeepable they probably are”? Bonds that looked very “keepable” in the mid-30’s look very different when Panzers and T-34’s are running through your streets. And how one extrapolates from that situation to one where both Bush and Will Smith chose to bailout Goldman Sachs (which produces nothing but questionable securities which it talks up while selling and then trashes while shorting, front runs their customers, and trades against their own research and recommendations) while taking over GM (which produces something, even if it’s fashionable to deride their cars) is beyond me.