http://www.nytimes.com/2011/06/23/business/global/23swaps.html?_r=1&ref=business

I hope one day we will meet so I can say a proper thank you.

you do a great job. My contribution is intended to watch your back, help fend off some of the attacks that you invite before they happen. You just keep on banging the drum, we're behind you! All the best!!

I have re-written the confusing part and I hope made things clearer. Thank you both. Please never hesitate to question my reasoning.

I don't write this blog to pose as an expert and insist on being right. I write it because I want to think things through for myself. If I get them wrong I need to to know so I can correct what I've written or take it down altogther.

I am very uncomfortable being taken for or read as an expert because I am not. I am very clear in my own mind that I am not. I am just trying to work out for myself what sems to me a truer story than the one I am fed daily by those with so much to lose – the financial class and their political employees.

It's why I called the blog GolemXIV – Thoughts. Everything on the blog I offer as thoughts, interpretations of what I read and discover. I do not think of them as facts or proven truths, I hope you don't either.

You and Lars and others on other sirtes where the article was reposted are all worrying over the same point. And so you should. Please remember, I am not an expert I am simply a citizen who reads widely and tries to think clearly about what he's read. That is all I am. Nothing more. So I could have got this wrong. I am not at all offended by people questioning my reasoning and welcome anyone who can set me right.

The one thing I do not want to do is add to the disinformation we are all assailed by every day.

The way you put it is correct.

All I was really trying to point out is that when a bad loan is finally written down, not only is there an increase in the banks 'bad loans' but a hole in its assets , which, as you point out, it will need to fill.

I think perhaps the way I put it was rather poor.

Most loans are underpinned by land.

Do you mean that the loan made by the bank (asset) becomes a minus when written off because suddenly the bank needs to find a new asset to meet its liquidity target? So therefore the double effect occurs in banks who only ever just about meet their liquidity ratios? So if that's it then the second effect wouldn't be so much increasing the amount of money owed by the bank as jeopardising the existence of the bank? Although in the Iirsh case the second effect would be to immediately increase the amount of money owed/guaranteed by the government.
Sorry, not trying to nit pick, but its the sort of thing that could be seized on by some to discredit all the other intelligent points

And seriously,

(I know its been covered before, but seeing as how they've all gotten so cocky again and hubris is still clearly a problem)

for long term loans to the general public to count as assets to be used in meeting liquidity targets is just inane. It works only if you believe that recessions are extinct and houseprices can only ever ever go up. Unless assets are revalued every year at market value then the whole minimum ratio concept is surely just a white wedding dress on a porn star.

Very interesting reading and I think this ties back to your report on Hays and especially what Vince Cable said. I even asked you for clarification as I think we both missed the true import of what he said. The decisions have been made and there will be no deviation from the plan…. Japan.

Japan has been trying to bail out its' banking and financial sector for over 20 years. If the plan is to make sure that the uber rich stay uber rich you cannot deny it has worked. Why should our elite take losses when the Japanese system has held up so well for so long? I'm not referring to ordinary Japanese people of course, like they count.

The flaw in this master plan is that Japan is almost unique in that its' population is not ethnically diverse and the adulation people in power are given without critisism.

In the UK our oh so very inteligent BoE committee has decised the problem is deflation. That is indeed the problem for bank assets, whilst the rest of us deal with double digit inflation in things we have to buy such as petrol,utilites and food.

The interests of the bankers and the people has totally diverged because we use different currencies. Our real money is debauched because the banks' currency of debt has crashed.

We are not Japan niether is Greece,the EU or the USA. I think it will end badly unless the debts of the uber rich are wiped out, along with them, on a voluntary and controlled basis.

The alternative does not bear thinking about.

bill40

I agree you can't count the same loss twice. What I meant was simply that the loss of the 6 billion has two effects. First you have to show a loss of 6 billion. Then the second effect of the same 6 billion loss is that your assets for underpinning other business are impacted and your leverage goes out the window. All effects of teh same single loss. All I meant to do was to dispell the notion that when a bank declares a loss, all other things remain equal and unaffected.

I was just trying to reflact the 'double' effect of having +6 turn not to zero but to -6. Its like moving players from one team to another. Only one player moves but the result is a two player gap betwen the two teams. One teram goes from 11 down to ten. The receiving team gores from 11 to 12. The gap is two players.

That is all I was meaning to point out. If I've had a brain fart and this really is misleading people please get back to me and I'll amend the argument as needed to make it clear and true.

Thanks Lars! It's always good to know you are around.

I agree with you, I think this whole thing is being used as an opportunity to establish Neoliberalism. What scares me, or one of the things, is if they succeed, it will take a lot of blood to get back what we have always taken for granted, if that's even possible. We might just end up with another form of tyranny installed by those who can take advantage of the situation by controlling the mob.

On various blogs etc I have been reading, there seems to be increasingly more people who cannot see beyond their own prejudice. They use this to blame everything on lazy Greeks etc. The other crowd, of the right, blame it all on the public sector & uncompetitiveness etc & because, it seems to me that the banks are part of their cherished belief in the, so called," Free Market" it's somehow nothing to do with the financial classes.

Even when the truth is laid out on these blogs etc, they do not, or prefer not ot see it, & yet unless they are of the chosen elite, & this applies to the scapegoaters too, they are going to get screwed also. Most people, my family for instance, just seem to be lost in a sea of apathy & disinformation. I think they will only know that the wolf was at the door, after he has been & gone.

Thankfully, hopefully with Golem & others fighting to get the truth out, enough people might suddenly see what's breathing down their necks, a sudden shock maybe, perhaps I shouldn't say this, but I was hoping the Greeks would default this week, it would I hope have at least enabled the outside world to be able to see into some very dark places, & maybe some of the rats would have started fighting amongst themselves.

Aera !!!