Germany's Decision to Punish Greece Triggered the Eurozone Systemic Crisis
James Aitken · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · Jun 25, 2018 · at 20:40
Aitken analyzes how German policy responses in late 2009 destabilized the Eurozone debt markets by puncturing the assumption of zero sovereign default risk.
0:00 / 0:47exact quote · 47.6s
720p mp4 · rendered on demand · StarZero watermark
“The key assumption Underpinning economic and monetary union. In fact, to this day, there's no default risk in peripheral credit of all kinds, whether it be sovereign or bank or whatever. And Ted, the Germans thought, here's an opportunity to teach everyone a lesson, and they hit a red button that took economic and monetary union to the brink. And you knew that as soon as they injected a risk premium into Greek sovereign bonds, And counterparty risk and haircuts and everything else. They would start a process that would cause tremendous distress and dislocation, not just across economic and monetary union, but across, as we saw from time to time, the entire financial system. What an error.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from James Aitken
Aitken: US administration is directly signaling global capital to leave
“We now have an administration sending a very direct message over and over again to global capital. And I paraphrase, please go away.”
Aitken: The right allocation to Chinese renminbi assets is zero
“I'll just say generally that the right size exposure to renminbi assets is zero, and perhaps that's something we should take up in another conversation ahead of the Taiwanese presidential elections.”
Aitken: Fixed Income ETF Liquidity Creation is Buy-Side Propaganda
“The idea that ETFs were ever a self-liquifying instrument, that is to say that ETFs create liquidity in their underlying reference securities was always just buy-side propaganda. Absolute garbage. And to see dozens and dozens and dozens and dozens Of credit an…”
Secular Stagnation Is a Policy Choice, Not an Inevitable Reality
“Secular stagnation is a euphemism for policy failure, meaning that secular stagnation is a choice.”
Aitken: Expect two horrible quarters of global growth, crushing US equities
“The reality is that we're going to have two quarters of global growth that are going to be absolutely horrible. And in that context, the market clearing price of earnings, and therefore the market clearing price of equities in general, in the US in particular,…”