John Ward Uncategorized

RATE-FIXING: Another reason why the playing field between Germany and the ClubMeds is uneven

How to put down $20 trillion on the table and make one helluva return.

This from three American sources, to varying degrees.

You are a derivatives trader or money broker circa 2005-2011. The Libor et al rate trends are theoretically unknown: they are floating, upping, downing and generally doing lots of ings that mean you, as an asshole, can’t make a cast-iron return for that gold-plated investment bank which employs you.

The banks writing the contracts are telling their clients that interest rates are going to head north….but then they don’t…because of LIBOR fixing.

So you (and other members of your syndicate) ring a big bank and say you’d like to swap this floating bollocks for something, as it were, rather more certain. No problem says banker-man…but to make this believable for the authorities, you’ll have to buy into very safe bonds. Very safe as in US, UK, German and Japanese.

And as any fool might expect, rates keep falling for the safer sovereign borrowers….especially in the EU: that’s normal, isn’t it? Of course it is.

The banks make money at both ends of this: they pocket not only the profit from writing and helping to broker the contract, but also make money on the bond purchase. While the soi-disant ‘risk takers’ actually take no risk at all.

Now you the banker have bought ‘safe’ bonds in order to execute the scam. What do you do with them? Simple really: you see another bout of UK/US/Euro overt or disguised QE coming (more erosion of currency = rising bond rates) and then you sell the bonds when the yields temporarily spike.
 
In this great little game, everyone who’s a member of the 3-7% informed elite does well. The people who don’t do well – let’s be real here, they catch f**king pneumonia – are the small investors, the mortgage owners, the small businesses looking for help to expand, and all the taxpayers who coughed up for the reckless sins of the bankers. (The traders are OK as, thanks to a fix, they’re clawing back any losses made).
 
Well, as the Friedmanite jerks are wont to say, the markets must decide. And because the markets will always decide in favour of the assholes who rig the markets, that imperative is 100% to their advantage.
 
But the social bottom line is that, in eurozone terms, the Germans win while the ClubMeds are doomed to lose.
 
Am I the only one who thinks this puts a whole new gloss on why investor ‘confidence’ in UK and German bonds is bound to rise, and that of the southern EU is doomed to decline, at an exponential rate?