WATERFALL THREAD ON #RecoveryFund: Sit back, it's long.
Few people outside the finance world are familiar with CDO structures. bit.ly/2ZKcaTZ @jeuasommenulle @macrodesiac_ @DavidBCollum @amlivemon @nglinsman @Halsrethink @RobertMCutler @vtchakarova @chigrl (1/13)
Few people outside the finance world are familiar with CDO structures. bit.ly/2ZKcaTZ @jeuasommenulle @macrodesiac_ @DavidBCollum @amlivemon @nglinsman @Halsrethink @RobertMCutler @vtchakarova @chigrl (1/13)
And yet, the concept of "seniority" is pervasive in our daily lives. everyone prioritizes expenses, otherwise we'd see at least someone live a s a vagrant but driving sweet exotic cars. But we need a roof over our head and food on our table first. (2/13)
Institutions don't "Eat", but they have their own priorities betrayed by behavior: we are NOT what we say we are, we are what we DO under duress. In CDOs, this is expressed as a "waterfall", i.e. money falls into tubes filling containers in a predetermined order. (3/13)
My thought process has been to reverse engineer the process: I don't hear what you say, I look at how your waterfall is structured, and if you change its shape along the way. In the #recoveryFund negotiations, some people wanted to show that and others want to hide it. (4/13)
That hinges on a probable assumption which may prove false but It's my starting point: savers and taxpayers are not only not represented at the table, but are the new "Capite Censi", irrelevant at the political level so long as they do not openly rebel.(5/13)
through that lens, the discussion is NOT about helping Italian citizens at the expense of the Dutch: it is about maintaining the present Italian establishment through a self sacrifice of the Dutch one. That comes from that waterfall analysis. (6/13)
NO ONE of the political players has put ANY current expense program on the negotiating table, and not even the "frugal" have thought to propose as much. Remember that seminal paper about the waste of keeping a EU seat in Strasbourg? it's DOD (dead on departure). (7/13)
Same on #CAP, Pension rules, labour legislation, #Alitalia, Banks, #GreenNewDeal, etc. etc. Everyone has a lot of thingamabobs that they love and cherish, and that make absolutely no sense. So, Italy did NOT bring a reform program "in time". (8/13)
That's immaterial, because out of common piety and mutual love it won't point out that other programs make no sense either. BUT, the Italian program will never see the light of day, and it's easy to see why: (9/13)
Frugals can sell the Fund to domestic audiences if they can show one thing: the grant recipients are making "sacrifices". Now, even if Italy were so disposed, a problem arises: (10/13) 
the maximum extent of politically acceptable measures STILL lives the favourite italians BETTER OFF that other EU citizens are today. If you are driving a Trabant, you scarcely appreciate your neighbour asking for 5 grand and trading down from a Ferrari to a BMW. (11/13)
So, the only thing that would improve everyone's lives, a long hard look into every spending issue with the sole purpose to jog economic growth through productivity increases, is the only unanimous point: nobody wants it.(12/13)
That's why I am a pessimist: it's not my forecast of no agreement, it's my opinion that the whole premise is wrong. Garbage in, garbage out. (end)
