having me all right so with the eurozone crisis we've seen months of talk about solutions about haircuts increasing the size of the bailout fund leveraging the best creating entirely new institutions like some kind of european treasury and of course culminating in today so my question to you are we going to see any grand bargain do you think out of today's meeting that addresses the enormity of this problem i should be good you surprised if anything sensible emerges from these i think it's the most comes. after the commencement of the crisis. you was in denial come think of it you look all that a few weeks ago the guy came to europe in order to lecture the european union has by dragging on the importance of do something about our company sector and they something in a way on the basis that what i have does the united states a have to preach and the europeans are the good guys as well because the us that is worse than the european that what you can find today is and i think. the beginning of a program the europeans now are seeking the assistance of the i.m.f. and indeed of china perhaps i

now looking at something more brutal, a haircut more along the lines by way of a haircut. i think those holding greek debt would like to have. they're facing the reality of this rather than that. >> i think they'll go for a charles hodson. most investors have had this figure of 50% or 60 pfrs in the back of their minds and they have been planning of that even though unspoken up until now. >> okay. so what do seem to be the chances of delivering on all of this? even a radical haircut it seems in all seriousness is pleasing to the markets. the euro is way up from where it was at the start of the month, for example. >> this word haircut, people have been dancing around it for many months. now it's finally at the forefront. people are accepting it's what's going to happen. along with other measures, recapitalizing the bank, there is a feeling now that perhaps the eurozone ministers are ready to make an agreement so the crisis can once and for all be resolved. >> wouldn't that be nice, emily. meanwhile let's circle back to greece which is, if you like, one of the original parts

for your haircut.> yes, let's do it. >> reporter: we discovered just as with europe one size doesn't always fit all and that applies to wigs, as well. sorry. there you go. i think you're ready. for your haircut. with the economy shrinking and deficits widen greece can't pay back its 350 billion euros of debt and investors want to see some of their money back, it's likely they'll have to take a write-down of 10%, 21%, 50%, maybe even more. realistically speaking what does a 10% haircut need. >> i think 10% won't cut it for investors or for greece. if you think about what affects sustainability, it's a number of factors, economic growth, physical performance, the interest rate greece has to pay and greece has underperformed an/lot of these elms so far. >> we've had about a 21% haircut. that was largely voluntary. >> it still has to work itself out and remember those 21% are in terms of net present value so that's not something that will necessarily fit into the debt to gdp ratio. >> i think you need more

>> well, i think for the greek debt haircut, i think anyhow they will agree on 50% haircut, is my understanding. but, of course, going forward, they have to discuss about, you know, the necessity for them to engineer haircuts for other bonds, like italian bonds, spanish bonds and that should, of course, affect the amount of recapitalization. and the amount that the ebf has to provide the money. and i think the amount of haircut and esf side, and the guarantee scheme, two going on, but i think the sdf, sdv side, they need to borrow money from china, that will take time. >> and lastly, europe's sovereign debt issues have affected currency issues. yen reached a new record high, while the euro weaker. what is your outlook for the euro and dollar-yen? >> i think presumably, the ecb is -- is possibly cutting interest rates, you know, even though they cannot easily increase quantitative easing so i think that there are some risks for the euro to continue to slide from here. in that situation, i think the yen will continue to appreciate in effective terms, so i think the boj may need to do something in

you have contradictions for instance as you noted the voluntary haircut i walk up to you when you. give me fifty percent of all your money. is into involuntary you know just think about it the implications are even worst because almost all of it head for swap for some which is protection contracts for protection of. third party. the european leaders stating that this would not be a credit event that will. default swaps if that's the case then you could default swap market is a sham and there is no protection if there is no protection then you have lost some court left and right and we all know this is a very litigious country and on top of it anybody who supply these plans in the future system protection will price the restructuring sort of process that means they have just condemned already fragile market place shooting rates significantly higher and they did this by making a sham one of the c.d.s. market last summer was a show i made a very simple statement that statement still stands there is absolutely no way out of this without the destruction people have to lose money because

but the truth is there will be a haircut banks are going to have to cut back if banks cut back that's ultimately going to mean less credit than the economy looking at it from the best sound you pointed out at the worst sound point it could mean that banks actually go out of business although actually i would caution restraint here i don't think it's going to end up doing that but ultimately. what the european economy needs is growth and actually kevin in all of the months we've been talking we've never once addressed the growth question and that's the big worry for europe right now i because haircuts made less lending means less a couple economic growth so as far as your concern when it comes to greece whatever's on the table at the moment and we also hear some of the eurozone countries or a portably planning on tightening the financial supervision of athens well whatever you think it's slow going to dead horse here i mean you know we can supervise i mean certainly there dogs need to be improved supervision of the greek government but frankly we can all lift a thumb in the air we have

yeah i can do do we need a substantial maybe even fifty percent haircut yeah can greece develop have a primary surplus next year the numbers suggest they can of course the debt load is very big and has to be cut. radically but the idea of saying that they're going to cut their currency by fifty percent were two thirds and somehow they'll just bounce back because you guys are going to go visit them and spend money there is just. it's hard for a nice guy and i'm generally very soon. i go usually a very sensitive i miss kind but i do kind of anger and i do it and you on this i mean there's these there's the moral hazard issue here i mean nobody wants to see the greek people suffer i mean i think we'd all agree on that there but there is the moral hazard issue of you continue to throw money into greece to try to save an economy that most people leave is already bankrupt then you have the other pigs lining up and say will do the same for us i'm not trying to be insensitive fair to say does the system work or not you are so naive as you go ahead and jump in let me just add and i do if you

it nigh what's going to happen news we're going to have to take what we call in banking terms our haircut on the debt and ultimately it's not going to be cutting of the hair a lot of people are going to be left so what boss leslie put as ever ok just talk me through the next but i wanted to ask you about germany's pushing for banks isn't it to accept cuts of fifty to sixty percent on the greek bond older says twenty twenty one percent so enough do you think this disagreement is going to affect sunday's e.u. meeting where those final details about greece's second bailout are expected to be discussed where you see the problem here we have because it's a huge ripple effect not so the readers can understand the listeners to understand i mean give us a haircut is basically when you say well that asset we bought a year ago it's. oh dear bets off in his prime we just lost it just. we are as a lark a click this has already basically said that effectively greek debt is devalued by fifty percent however some governments particularly the french are trying to effectively defy financial gravity and sa

can kicking the can down the road here i mean why isn't it why is it we just they just take a huge haircut and just move on ok because after two years of watching this continue down the road everyone just has to pay more in more inmore go ahead. well it's like the emperor's new clothes new clothes isn't it someone's going to shout out the emperor is naked somebody has got a shout out greece is already in default it is absolute nonsense as you say that they continue to kick the can down the road greece is bust it's time for greece to leave the euro zone it's time for greece to be able to take back the track and devalue itself will then you know to use a cliche go on holiday there again and help them rebuild their economy but i mean as you say every man cat dog and the woman knows full well that greece is already finished greece has got to go for already good for could have been they in effect why are leaders returned residues i have to just don't grow some and realize that's the case and let's just get on and move on all right jeff in london juggling you want to jump in there you know. i'm

make more sensible decisions a couple of years ago i think it would have been possible to have a haircut for the greeks and then for the rest of the euro zone to have lent the money to keep them in the euro i just think that that's not really a possibility anymore and i think it's also important to understand what the difficulty is on putting up with some alternative solutions at this stage because you have to appreciate two things first is that the euro zone or thirty s. are terrified of the possibility of an unraveling of the whole euro zone project because if you go back to nine hundred ninety two and then there were you have found it was in a thing called the exchange rate mechanism a kind of fixed exchange rate regime in europe and as countries gradually started to drop out so the italians dropped out and the british and others eventually the whole thing came to bits so that even countries like france in the end which had been thought to be absolutely core and inviolable members in the end came under pressure and they fear that your father the whole euro zone unraveled if you starte

by two thousand and twenty with greek debt holders taking haircuts of up to fifty percent to four hundred forty billion euro will be used to provide risk insurance needing that after a second one hundred thirty billion greek bailout and other is for ireland and portugal it could provide up to one trillion in firepower to deal with future crises the plan was laid out by engel merkel head of wednesday's talks. well it's a given similar but the goal of tonight's discussion will be that the with its capacity will have a great effect on the prevention of contagion and mr terence impact must be great enough. to become global markets in the lead up to this week's eurozone summit could be interpreted as confidence that e.u. leaders would pull something off to save the day but after two years of failing to come to grips with greek contagion risk and other e.u. economies and banking system what is grossly under capitalized there's been a growing sense of impatience even beyond europe successful resolution of the current european crisis matters deeply to us here in the united states because our coun

there is no easy way out of this in the sense that a haircut which a lot of people think is inevitable will hurt the banks the most. so part of whatever solution they come up with has to be, call call it a bailout, call it a health package, whatever, for banks as well. otherwise we're talking about a very bad banking crisis as well. in europe. >> does greek avoid a default best-case scenario or controlled default best-case scenario. >> well, the hope, can't avoid a default. the hope is that it will be a controlled default. but a default by greece which we can call it something else. a restructuring, a repricing, repile pro piling, whatever we want to call it but a default is in a sense inevitable. greece is insolvent. >> tom: it certainly is and we've seen another $11 billion spent just this week hoping to put off the inevitable. our guest nariman behravesh, thank you. >> suzanne: one of the longest conflicts in u.s. history is about to come to an end. president obama announced today all u.s. troops will be home from iraq by year's end. the final phase of troop withdrawal, wraps up a w

they got the 50% hard haircut. they haven't worked out how it's actually going to occur. the general way to describe it is, you're going to have a person with a 100 euro bond, and i'm going to swap it way for a 50 euro bond. well that she looks very good on paper. but if i get the bond and i get 5%, 6%, 7% interest rate on that this year. that's that's actually worth mother the 100-year bond. what the heads of state wanted is the top-line money so they can go and say, look, we're tough on the banks. i met with the bankers this morning. they don't seem particularly upset by this, and they're actually rather happy with the way things go. they preserved their envelope is what they said. i think they're not all that upset with the way things are going. the other issue on the bailout fund, increased firepower, they talked about four to five times leveraging, so maybe we'll get to a trillion. those numbers are still up in the air. they still have no idea what the real leveraging is going to be. everyone says about a trillion euros, sounds like what it could be, but we have no i

what they were going through fundamentally the lenders clearly they didn't and they have to take a haircut and so long as the the private debt levels remain silent on the sun only individuals who oppose this out the consumer collapse we're seeing in america will continue and we could be talking about two decades worth of bliss so we have to shift politics from being in favor of the lenders to being in favor of the debtors to decades of what exactly are you protecting. well if you take a look at japan as the best possible model what's going on right now i had a debt finance kabul stock markets and real estate leading up to ninety ninety literally the very last day only do not in ninety nine and it did in good stead with us in japan in a two decade long slump because they thought i also address the behavior of the banks they found to shut down the zombie banks write the debt off cetera et cetera exhausted american politicians and problems including ben bernanke were getting them back then what are we doing now trying to keep the zombies a lot of now we're doing it from a position where in am

but i guess you know the argument is even if you have fifty percent haircut even more some people are saying might come out of this seems much more preferable doesn't it to a complete greek collapse the has made it this far i mean what's to stop them from roughing this out to the very end now do you think. well the problem is the response has been completely the wrong way around the the problem is fundamentally one of national sovereignty as you say the bonds are trading at very distressed levels because these countries are all perceived to be insolvent it's not just greece it'll move on to portugal italy spain and maybe ultimately france and germany so you have to first deal with the problem of national solvency and the way you do that is by creating a mechanism whereby all the bonds are deemed to be money good and you can only do that by involving the european central bank once you deal with the national solvency problem you won't have this issue of the these distressed bonds and therefore you won't be needing the safety substantial haircuts and you won't need the substantial bankin

it was only a 50% haircut. some were looking for much more than that. >> well, but at least it gives greece a fighting chance. if we manage to bring public debt in greece within the next few years -- it would put greece in the same bracket as belgium and italy which in the past have proved it's possible to bring back euro debt to much more sustainable level, provided you've got decent nominal growth. so the difference between now and where we were just before is that at least it looks doable. and to get the kind of support you need in the country itself to go through the adjustment, this is immensely important. i mean, how can you convince people to consent to the kind of sacrifices they have to consent to if any way it looks impossible to achieve. >> you mentioned bringing the debt down to 120% but that's by the end of the decade. is that really good enough? couldn't we have achieved this a little more effectively in a sooner time frame? >> well, if you look at the current trajectory of greek public debt, at l

. >> reporter: a "haircut" is what bankers call it when they take a small loss on a bad debt. douglas elliott, a former investment banker, says a 50% loss on greek debt is not a haircut; it's a huge hole in european bank balance sheets. >> that means that many banks which own greek debt have problems, and other banks which have, say, portuguese or italian or spanish debt-- where there is a concern the same thing could eventually happen-- they are dicier than they otherwise would be. >> reporter: the solution to that problem is more money. as a first step, the e.u. plans to pump $70 billion into greek banks to keep them afloat. the agreement also requires many of europe's other big banks to raise capital quickly. >> so they are given some time to come up with the money on their own. otherwise, it will be forced down their throat in some way not yet specified. >> reporter: hoping to end fears of a meltdown all at once, european leaders are also raising a huge pot of money. the european financial stability facility, or "efsf," will be expanded through additional leverage far beyo

they're arguing over how much this haircut is going to be. eventually when they do take this haircut the banks are going to suffer on that and they will go down. >> finally again volatility has been rising, no doubt and your last idea is an exchange traded note, s&p 500 midterm following medium term volatility which is actually less volatile than the other two. give a 15 second pitch on why volatility could increase. >> well, today is a perfect example. up 300 points, that's crazy. so expect tomorrow will probably go down. we have had huge swings. so rather than getting-- by this market moving up crazy, down crazy, make money on the move itself. >> gotcha. >> don't get jerked around, make money on the jerking around. >> do you own any of these funds, can you? >> i do not. >> you can read deborah's-- debra's article, a link on the web site. word on the street, debra borchardt. >> susie: here's what's on the calendar for tomorrow: the senate debates president obama's american jobs act. and the f.d.i.c. is expected to vote on the so-called volck