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Bionicturtle
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Greece @ 2120 hrs is suspicious (German FT labor force is 7X the Greek FT labor force. Smaller base, but still wouldn't explain). Tempted to treat with same credibility as the # of pools reported in their tax returns
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I agree with Martin: this is good first-pass theory but ignores the dangerous feedback loops. In particular, Yves Smith argues, about the senior/super senior CDO tranches, the regulatory arbitrage (negative basis trade) allowed or promoted the yield-seeking CDS sellers to leverage their bet many times over. This "over supply" of credit protection kept synthetic spreads artificially low for too long. In turn, feeding back to keep cash bond spreads low. On this theory, CDS instruments actually exacerbate the problem as the synthetic spread has feedback on the cash
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May 3, 2010