Wanna Chance to Double Your Money in 30 Days?

Why do large investors…hedge funds and others…like governments to get involved in financial affairs?

Because these investors can make lots of money from the actions of these governments. 

Ask George Soros about the behavior of the British government in the 1990s.

Now we have another possible piggy-bank on the horizon…thanks to the Greek government and the Eurozone.

“Under the deal Greece struck in July with its banks as part of Europe’s rescue plan, a substantial portion of its existing bonds are scheduled to be swapped into new longer-term securities that could be valued at more than 70 cents on the euro.” (http://www.nytimes.com/2011/09/29/business/global/hedge-funds-betting-on-lowly-greek-bonds.html?_r=1&scp=1&sq=greek%20bonds%20lure%20some,%20despite%20risk&st=Search)

Why is this “deal” important?

Many Greek government bonds “are changing hands for as little as 36 cents for each euro of face value.” 

Making money on this deal requires that the latest Greek bailout system is ratified by the parliaments of the 17 European Union countries that use the euro by late October. 

If the EU deal closes, “those who bought the bonds recently at distressed prices might in some cases come close to doubling their money.”  And, in only one or two months time!

Again, investors benefit…taxpayers suck it in…

“According to a person with direct knowledge of the debt swap, about 30 percent of the investors who are expected to participate in the (deal) bought their bonds after July 21.  They are not the original debt holders…”

What governmental “leaders” don’t seem to understand is that once they take a position, many other people in the world will change their positions to take advantage of the new position of the government.  Things just don’t stay the same.  And, if these “leaders” follow the same strategy over and over again…others will take advantage of the repeat strategy and use it against the “leaders”.

In the case of the European Union, the “leaders” of the EU have tried repeatedly to “kick the can” down the road.  By failing to take action in the past, these “leaders” have postponed the actions that must take place.  But, by postponing and postponing the day when the actions will take place, the “leaders” have just limited their options and created situations in which large investors can take advantage of the dislocations that have developed in financial markets. 

If the “leaders” had been leaders and had moved earlier when the dislocations in the financial markets were smaller, such possible large returns would not have been available.  By postponing action, these “leaders” allowed the situation to get further “out-of-line” and this results in the possibility of well-placed investors making lots and lots of money. 

Of course, the bailout must go through…and this is the risk that these investors face. 

And, the fate of the taxpayers?

“Defenders of the (deal) say that while it may not be ideal, it was the best deal that could be reached at the time.  If hedge funds make some money along the way, they say, that is a small price to pay for securing a contribution from the private sector.” 

An investment tip…look for dislocations created by government actions. 

Another place where lots of money was made recently was on French banks.  Why?  Well, because French banks…and other European banks…have been given special treatment in the past and the problems relating to European sovereign debt have been handled, well, inconsistently…at best.  And, then there were the “stress tests” given the European banks which proved to be a joke. 

The stock prices of French banks had to decline and with this decline the rating agencies lowered the ratings that were given to the banks exacerbating the decline in their stock prices.  The article cited above begins its discussion of hedge fund purchases of Greek bonds by stating, “After a number of investors struck gold by betting against French banks…”

Lots of money will be made from the European financial crisis.  Lots of money will also be lost.  The money made will tend to go to the better off who can “bet” against the governments.  Postponing actions to protect the “less well off” only seems to lead to situations where the benefactors of the ultimate actions of the government are not the ones the “leaders” of the government are trying to help.

As I have stated many times, Europe has gotten into the current situation by assuming that its sovereign debt problems were problems of liquidity and not solvency.  People tend to avoid as much as possible questions relating to solvency.  This is especially true of bankers and the assets that reside on their balance sheets. 

Solvency problems, however, cannot be postponed forever…they must eventually be dealt with.  But, this is where real leaders must step up.  Identifying solvency problems earlier rather than later is always a benefit.  Identifying solvency problems earlier let you deal with the issues surrounding the asset sooner when the problems are not so severe.  Dealing with solvency problems earlier rather than later allow one to make smaller, incremental adjustments that the institution…or country…can more easily absorb. 

People…especially politicians…don’t like to admit mistakes and so we declare that the problems we face are liquidity problems and not solvency problems and we postpone the day of dealing with them. 

Such postponements can only result in opportunities for others.  Wanna chance to double your money?        

Regulation Never Works As Planned

One constant seems to run through my whole professional career.  The regulators impose some new rules…and within a reasonable period of time, the private sector finds ways to get around the new rules.  Then the regulators impose further new rules…and within a reasonable period of time, the private sector finds ways to get around them.

Back in the 1960-1971 period, I was in the Federal Reserve System and one of the main new financial innovations that the Fed was dealing with at the time was the Eurodollar deposit.  The “time lag” then was about six months. 

That is, the Fed would see some activity it wanted to get greater control of and it would impose new rules or restrictions on the activity.  The banks would then respond to the new rules or regulations.  About six months later the Fed would discover what the banks were doing to get around these new rules or regulations.  Then, the Fed would move into action once again.

At that time, however, we did not refer to the commercial bankers as “greedy bastards.”

In fact, any void seemed to call forth the ingenuity of the financial community.

The credit inflation, begun in the early 1960s, provided the incentive for the financial community to engage in more financial innovation over the next fifty years than ever before in human history. 

Restrictions on the interest rates that financial institutions could pay on deposit—Regulation Q—could not stand up to the inflationary expectations that got built into interest rates.

The consequent volatility in interest rates made it worthwhile to develop interest rate futures and interest rate options.

The desire to drive more and more credit into the housing market resulted in the government creation of the mortgage-backed security and the validation of “slicing and dicing” of the cash flows generated by financial instruments.

This slicing and dicing spread to government issues and we got the Treasury “Strip” securities...and more.

And, the continued credit inflation resulted in greater and greater amounts of risk taking and things like credit default swaps to hedge against risk taking.  We got more and more financial leverage and this required new ways to “cut things up” or hide things “off-balance sheet” or make things “synthetic” or deal only in “nominal” values. 

And, the beat goes on.

To me, this comes out in the rant of JPMorgan’s Jamie Dimon the other day against Ben Bernanke.   His blast, I believe, was one of pure frustration.  We want to be bankers, Dimon said, but the Fed…and Congress…and the Administration…force us to be financial innovators, constantly creating ways to get around the ill-considered new rules and regulations that continuously flow out of the government. 

He could have said, “If you want us to stop the financial innovating do two things.  First, stop inflating credit as you have done for the last fifty years and are continuing to do at this very minute!  Second, let things settle down and stop trying to regulate the very things you are causing us to do because of your inflation of credit!”

Will the government do this?  Not likely, and that is why Dimon is so frustrated.

My prediction: the financial system, over the next five to ten years, will be different in major ways from what we now see in front of us. 

The reason is that bankers…and the public…will create a new and different financial system. 

For, example, what about the “shadow-banking system” that was created in the past twenty years or so?  Maybe this “system” will become the preferred lender to business.

It is still there, thank you, and it is “filling in the current void.”  See the front page New York Times article this morning: “Bank Said No? Hedge Funds Fill Loan Void.” (http://dealbook.nytimes.com/2011/06/08/bank-said-no-hedge-funds-fill-a-void-in-lending/?ref=business)  “With traditional lenders still avoiding risky borrowers in the wake of the financial crisis, hedge funds and other opportunistic investors are stepping into the void.  They are going after mid-size businesses that cannot easily raise money in the bond markets like their bigger brethren.”   No telling where hedge funds…and others…will be found these days.  

And, this doesn’t even include what might be done electronically.

What is money?  What is finance?

As I have argued many times in previous blog posts, money…finance…is just information…just 0’s and 1’s!

“Concerns about the integrity of money have also seen a fundamental shift…While fraud is still a concern, the financial collapse of 2008 has called into question the competence of the central banks that are supposed to manage national currencies.  In this week’s technology special we examine how the internet is allowing groups of people to set up means of exchange that are independent of both the banks and the state.”

Hold on there…

What about gold or silver?

“Private currencies are nothing new, but novel possibilities such as bitcoin now beckon.  Though bitcoins are magicked out of nothing, money is what money does, and many people are happy to accept bitcoins as payment for real goods and services.  The bitcoins in circulation are now worth around $50 million in conventional currency.”

“Governments may want to clamp down on what they see as a way to evade taxes…”

“But the future of money, as so much else, may be shaped by the internet’s ability to bring interested parties together outside the ambit of governments or big companies. “

“Under a scheme operating in the city of Macon, Georgia, special bonds are issued to residents—but each person receives only half a bond, and can only redeem it by locating the person with the matching half.  Participants must seek each other out through online social networks such as Twitter, then decide together how to spend the cash.  Attempts to set up such ‘local currencies’ have been tried many times before, but have usually proven too difficult to co-ordinate and organize.  Social media offer such schemes a new lease of life.” (New Scientist, June 4, 2011)

The point is that regulation never works as planned because humans are just too ingenious and improved information technology and the spread of information eventually winout over time.  As a consequence, regulators…and politicians…are always fighting the last war.  Another way to phrase this is that regulators…and politicians…are always out-of-date!

Are There Bubbles All Around?

One thing we learned in the 1990s and the 2000s is that there can be asset bubbles in the economy without growth in either money stock variables or increases in consumer (flow expenditure) price inflation. The financial system seems to be flexible enough so that it can leverage up where it wants to even though monetary policy and consumer spending seem to be “in control”. This is the lesson of modern “financial engineering.”

However, the monetary statistics are not benign for most of the time period from January 1961 up to September 2008. During this time period, the monetary base which is supposedly under the control of the Federal Reserve System rose at a compound annual rate of slightly more than 6%. Total credit during this time period rose much more rapidly. Consequently, the United States experienced a period if “credit inflation” that dominated everything going on during this 47 years or so. This secular inflation drove the financial innovation that took place as the whole financial system took on more-and-more leverage and more-and-more risk.

Since September 2008, the Federal Reserve has caused the Monetary Base to increase explosively by more than 130%. However, the banking system is not lending and much of these funds seem to have ended up on the balance sheets of the banking system. Excess reserves in the banking system went from about $2 billion in August 2008 to almost $1.2 trillion in February 2010. Excess reserves for September 2010 averaged slightly below $1 trillion.

Even with all of these excess reserves, the current concern is whether or not the economy will go into a period where prices actually decline. That is, might the United States be headed for a period of deflation?

Everything mentioned above is true. Yet, there is more going on in the economy than just what we see here. In some areas, a lot is going on and in these areas we are seeing lots of upward price movement which leads one to ask whether or not these price movements are bubbles or indications of something else taking place. Certainly, the “bubbles” are not increasing employment, or capacity utilization, or getting the economy going again.

I have written about this before: “Where the Action is: The Bond Market”, http://seekingalpha.com/article/230048-where-the-action-is-the-bond-market. I wrote in this post:

“There is a lot of money in the financial markets…in the shadow banking system…and worldwide.
Where is the action taking place?
Well, for one, in the bond market. We have major companies issuing bonds at ridiculously low interest rates.”

Of course we know that government bond prices are inordinately high causing yields to be excessively low. But, this is also true in the market for high-grade corporate debt and for junk bonds. One could certainly argue that there might be “asset bubble” in the bond markets.

Thank you shadow banking system!

And, the cash continues to build up on the balance sheets of “healthy” large corporations. It also appears as if many hedge funds and private equity funds are attracting “large bunches” of new money.

But, capital is almost perfectly mobile in the modern world: it can escape almost everywhere.

Because of this, writers like Martin Wolf have argued that one of the goals of American leadership is to “inflate the world” in order to get United States economic growth going again.

So, are we seeing the results of this?

Well, we might be seeing this flow of capital going into world commodity markets and also into emerging markets. There is the possibility that bubbles may be occurring here.
The movement in commodities seems to be worldwide but repercussions are being felt domestically in the United States. (See “Dilemma Over Pricing: From Cereal to Helicopters, Commodity Costs Exert Pressure”, http://professional.wsj.com/article/SB10001424052702304741404575564400940917746.html?mod=ITP_marketplace_0&mg=reno-wsj.) This article indicates that, year-over-year, corn prices are up by 34%, wheat prices are up 34%, milk is up 32%, copper is up 30%, and oil is up 14%. It is also the case that sugar is up about 50% year-over-year.

The question many companies are facing is, “How can we raise prices to cover these costs when the economy is so weak?” A real dilemma!

Funds are also flowing into emerging markets. All one has to do is watch the stock exchanges in those countries. And, all indications are that large companies are looking to locate in many of these markets or acquire firms in these markets. We are also seeing the hedge funds and private equity funds looking in this direction. (See for example, “Buy-outs set to divide private equity”, http://www.ft.com/cms/s/0/726ce11e-dc6d-11df-a0b9-00144feabdc0.html.)

In a world where there is a fluid movement of capital, money is not going to stay at home if the home economy is not strong, structurally. The American economy is having major problems in its economy. Why would “big” money want to invest here? (See, for example, “Globalized Finance: Advantage China”, http://seekingalpha.com/article/229600-globalized-finance-advantage-china.)

The Federal Reserve, and the federal government, may need to change their economic models to include the fact that organizations other than domestically chartered commercial banks can create credit and can cause bubbles to occur anywhere in the world where an opportunity exists.

Modern finance with internationally mobile capital does not seem to exist in the models the leaders of the United States are using. This is one reason for my skepticism of all the new financial reform systems that are being constructed. (See my post “Banking at the Speed of Light”, http://seekingalpha.com/article/208513-banking-at-the-speed-of-light.) Money is becoming more and more fluid and hence less and less controllable.

The American banking system may currently be dormant, but there seems to be plenty of money and plenty of action, elsewhere.

Yes, there are bubbles all around.

"Astonishing" Pricing Anomalies

I believe the article “Hedge Funds Reap Rewards from Treasuries” in the Financial Times is a good read for people interested in the financial markets. (See http://www.ft.com/cms/s/0/a5aa3c38-c111-11df-afe0-00144feab49a.html.)

The authors, Sam Jones and Izabella Kaminska, start right out talking about “Classic relative value arbitrage” the investment strategy which “involves betting that price discrepancies between securities that normally trade at similar values should correct over time.” The implosion of Long-Term Capital Management brought this strategy to public notice.

Hedge funds have been making a “pretty penny” recently by taking positions based upon this strategy. The reason why a strategy like this has been working is that there are “astonishing” pricing anomalies being observed in the financial markets ever since the collapse of Lehman Brothers in September 2008.

Why have these anomalies occurred?

Thank you Mr. Bernanke and the Federal Reserve System!

“Instruments that should normally track each other almost perfectly saw their prices diverge sharply as investors panicked and central banks, including the US Federal Reserve distorted bond demand by buying up huge amounts of debt as part of the emergency efforts to pump more money into the economy.”

“Thanks to continued distortions in bond supply and demand, as well as jittery investors and political intervention, funds…have been able to exploit a rich seam of arbitrage opportunities.”

These opportunities have been “less risky” than might have been expected because the promise Mr. Bernanke and the Federal Reserve have made that their interest rate policy will continue for “an extended period.” So far, that period has lasted for twenty-one months and most expect it to remain in place into next spring…at least.

I have been arguing for months now that the interest rate policy of the Federal Reserve has been accounting for the profit recovery of the biggest banks in the United States. This interest rate policy has been subsidizing the big banks and has been producing a counterpoint within the government to the attack on those banks that are considered “too big to fail.” The Fed’s policy has been underwriting the process in which the big banks will get bigger and control more and more of the assets in the banking system as a whole.

The material being reported by Jones and Kaminska is the first piece of information outside of the commercial banking industry of how the Federal Reserve (and other central banks) have been underwriting the success of participants in other areas of the capital market.

“If 2009 was an excellent year, then 2010 is still a very good year. The opportunities are huge in some cases,” says Bob Treue, founder of the hedge fund Barnegat.

My best guess is that we will be seeing more evidence pointing to exceptional returns being made on the financial market distortions created by the Federal Reserve. One can also surmise that many, many other representatives of the wealthy are making huge gains on these market situations and we will never know about them because they will not have to be reported.

I am not against people making money. Actually, I am very much in favor of this result.

What I am concerned about is that the money that is being made on these arbitrage transactions is a part of explicit government policy and that the consequences of this explicit government policy contradicts almost all of what the Obama administration is saying it is trying to achieve!

The only justification that I can give for why the government is engaged in this contradictory behavior is that it knows something we don’t and that something it knows would be tremendously scary to us if we knew it.

Hotshot Traders Leave Street

Jenny Strasburg captures the mood on Wall Street in her article in the Wall Street Journal this morning: http://online.wsj.com/article/SB20001424052748704515704575282982462922628.html#mod=todays_us_money_and_investing.
“The competition is on to scoop up Wall Street traders and portfolio managers increasingly unnerved by the likelihood of sweeping new financial regulation.

Since political momentum began building earlier this year to limit trading for profit at Wall Street firms, traders have been exploring their options, and some have already left. Outside the banks, private investment funds looking for traders have been gearing up for a hot talent market.”

Economics works!

You change the incentives and people change…people move.

With the situation being more mobile than ever, with the technology more available and adaptable than ever, with the future more uncertain than ever…people…and the system…can change more rapidly and in more different directions than ever before.

And, that is what is happening!

This is one thing that Congress (and others) can’t seem to understand. Even after observing fifty years of the most dramatic financial innovation that has ever taken place in the world, the members of Congress seem to believe that they can “freeze” things, return to the past, and prevent the recent financial crisis from ever occurring again.

They also seem to think that the government is blameless from creating any incentives that might have a derogatory impact on the future that they want to create.

People in the Obama administration, as well as members of Congress, seem oblivious to the fact that over the last fifty years the United States government, Republicans and Democrats alike, produced a fiscal environment that created the incentives that led to a burst of innovative activity in the financial sector that produced massive changes in the way people did business and in the composition of the American economy. A brief picture of the environment.

From January 1961 through January 2009, the Gross Federal Debt of the United States rose at a compound annual rate of 7.7%. The monetized portion of the federal debt, the monetary base, rose at a compound rate of about 6.5% from January 1961 through August 2008, just before the Federal Reserve’s balance sheet exploded in response to the financial crisis that took place in the fall of 2008. The M2 money stock grew by more than a compound rate of 7.0% during the time period under review.

Thus, money and credit variables grew relatively in line with one another. Real GDP growth during this time was about a 3.4% compound rate of increase every year.

Prices, as measured by the Consumer Price Index and the GDP implicit price deflator, increased at a compound rate of about 4% during this time period resulting in a decline in the purchasing power of the dollar by around 85%. A 1961 dollar bill could only buy 15 cents worth of goods in 2008!

Inflation breeds financial innovation and the late 20th century with its relatively moderate, yet steady increase in prices, was a perfect environment for financial innovation!

The leader in financial innovation was the federal government itself, confirming what Niall Ferguson argues in his wonderful book, “The Ascent of Money: A Financial History of the World.” Ferguson claims that governments, historically, have been the primary financial innovator because of the need to fight wars. This, he continues, spilled over into the 20th century as governments needed to expand deficit financing to incorporate spending on social programs.

My guess is that in the next five to ten years we will see the biggest change in finance that we have ever seen and this change will be worldwide. I have written a little on this in a recent blog: “Changes Continue to Shakeup the Banking System”. See http://seekingalpha.com/article/200475-changes-continue-to-shake-up-the-banking-system.

The largest twenty-five banks in the United States, who control about two-thirds of U. S. banking assets in the country, are already changing their business. Again, they have already moved beyond what Congress and the administration are doing to regulate the banking system.

More important, foreign banks are changing the banking picture in the United States. Currently, foreign branches control about 11% of the total banking assets in the country. I have already stated that this will increase to 15% to 20% over the next five years or so. We see this expansion taking place before our eyes. Yesterday “China Finds a New Market for Loans: U. S.” (See http://online.wsj.com/article/SB10001424052748703957604575273011917977450.html#mod=todays_us_money_and_investing.) Today, “China Bank IPO, Possibly Biggest Ever, Set for July.” (See http://online.wsj.com/article/SB20001424052748704875604575281690877047522.html#mod=todays_us_money_and_investing.) And, don’t forget the sovereign wealth funds, huge accumulators of money.

The world of finance is changing because the incentives affecting finance are changing all over the world. I can’t even imagine what this world will look like with instantaneous trading, further ‘slicing and dicing’ of cash flows and other financial information, greater use of information theory to detect trading patterns (see my book review of “The Quants”, http://seekingalpha.com/article/188342-model-misbehavior-the-quants-how-a-new-breed-of-math-whizzes-conquered-wall-street-and-nearly-destroyed-it-by-scott-patterson), and more and more information markets popping up around the world (see Robert Shiller’s book “The New Financial Order: Risk in the 21st Century”)!

In the field of Complexity Theory, researchers speak of times like this when systems go through the process they call “Emergence” and “Self-Organization.” It is during times like these that one structural system is transitioning into another structural system. The problem is that no one, before-the-fact, can predict how existing information systems combine with other information to produce the resulting system. Systems just “self-organize” and a new system “emerges” from what was formerly un-organized.

This appears to be what is happening now. The movement of “hotshot” traders is one piece of evidence of this. The restructuring of the big banks is another piece of evidence. The response of hedge funds to the Congressional threat to change how partners are paid is evidence of this. The changes in financial regulations around the world is evidence of this. The growth and increased aggressiveness of Chinese banks is evidence of this. And, so on and so forth.

Congress is just speeding this change along. However, they better be careful about what they wish for because my best guess is that what they get will be nothing like what they are planning for.

The "Next Greece" Again

The New York Times business section carries the headline, “Traders Turn Attention to the Next Greece”: http://www.nytimes.com/2010/03/04/business/global/04bets.html?ref=business.

“Is Spain the next Greece? Or Italy? Or Portugal?”

Sounds vaguely similar to another article on the topic, my post of March 1, “Where is the Next Greece?”: http://seekingalpha.com/article/191242-where-is-the-next-greece. But, the subject is in the air these days.

The New York Times article wades into the issue of whether or not the “banks and hedge funds” should be doing what they are doing.

“Indeed, some banks and hedge funds have already begun to turn their attention to other indebted nations, particularly Portugal, Spain, Italy and, to a lesser degree, Ireland.” Aha, the PIIGS, of course without the G.

“The role of such traders has become increasingly controversial in Europe and the United States. The Justice Department’s antitrust division is now examining whether at least four hedge funds colluded on a bet against the euro last month.”

The same concern has been expressed over short sales.

Little concern was expressed about the debt policy of nations, states, municipalities, businesses and consumers when they were piling on massive amounts of debt to their balance sheets.

Of course, nations, and others, have good reasons for loading up with debt. It stimulates the economy and everyone wants prosperity and full employment. Well, don’t they?

Everyone wants businesses to prosper. Everyone wants everyone else to own their own home.

All good reasons for piling on debt.

But, when do “good intentions” spill over into “foolish behavior”?

And, in an environment where excessive amounts of credit are being pumped into the economy (thank you again Federal Reserve)n to spur on housing or some other “good”, shouldn’t it be expected that “extra-legal” means will be used to “get the credit out”.

But, when does serving “societal goals” become fraudulent and hurtful?

The problem in both cases is that there is a very blurry line between the “good” and the “bad”. On the upside, of course, emphasis is placed on the “good” being done, and the “bad” is alluded to but quickly dismissed. A common theme in such periods is that “Things are different now!”

On the other side, however, great pain takes place. One can certainly sympathize with those who live in Ireland, and Spain, and these other countries.

This, however, is just where “moral hazard” raises its ugly head. There is a downside to the excessive behavior of nations, states, and so on! There is pain on the other side of the pinnacle.
And, eventually the pain must be paid for. Bailing out those that used excessive amounts of debt just postpones the situation and usually leads people to behave just the way they did before the crisis. That is, the lesson learned is the one can behave badly and, if there is the threat of sufficient societal pain, little or no cost will be carried forward because of the previous un-disciplined behavior.

The problem is that those in power get mad at the bankers and the hedge funds and try to prohibit them in some way from moving against those private or public organizations that are financially weak. But, in doing so they are taking away a tool that can be used to enforce discipline on those who have lived excessively. The same applies to short selling.

We have seen behavior like that exhibited by the “banks and hedge funds” in the past. The last time these predators were called “shadowy international bankers”, many of whom were pictured as living in Switzerland. In that time the “ bankers” attacked the currencies of profligate nations. France, under the leadership of François Mitterrand, is perhaps the best known example of such a situation. Mitterrand, the socialist, had to pull back from his grand plans and became a believer in fiscal discipline and an independent central bank. Similar cases are on record.

It is disconcerting to see the increased efforts to reduce or eliminate financial tools that help to bring discipline to the market place. If these investment vehicles get punished or face harsh controls and regulations then the world is so much the worse for it.

Yes, I agree, at this stage it looks like the strong are kicking the weak member of the party. But, in these cases we forget that many benefitted greatly on the upside, particularly the politicians that promoted goals and objectives that were underwritten by the undisciplined use of debt. And, the central banks were prodigal in underwriting this credit inflation.

And, now the piper is calling in the debt.

It is a rule of life: those in power that create a given situation are often the most vocal opponents of those that respond to the consequences of what the powerful have created. If you create an inflationary environment fueled by excessive credit expansion then, sooner or later, the price must be paid.
Greece, Spain, Italy, Ireland, Portugal, England, and others are now facing the downside of so many years of “good intentions.” Let’s not just blame, or punish, the “bankers and hedge funds” for creating the situation we now face