http://www.nytimes.com/2011/07/11/bu...euro-zone.html
http://www.businessinsider.com/how-i...-wreck-2011-7#
How much more of this can the European economy take before serious social unrest in some countries takes hold?
Is Italy the Latest Failed Euro State?
http://www.nytimes.com/2011/07/11/bu...euro-zone.html
http://www.businessinsider.com/how-i...-wreck-2011-7#
How much more of this can the European economy take before serious social unrest in some countries takes hold?
This is honestly a nightmare scenario. Greece, Ireland, Portugal - they're all pretty small fry and can conceivably be contained by harsh austerity and core eurozone countries taking a haircut on publicly held 'bailout' debt. But Italy or Spain? That would be disaster, utter disaster. Especially Italy.
The encouraging news is that the spread over German bonds is really not that crazy given Italy's pretty awful debt position (120% of GDP and likely to rise absent some serious structural reforms). The discouraging news is that the ECB keeps raising rates, which repeats the mistakes of the past, where they set rates that make sense for the well-off core and are utterly awful for low-growth countries on the periphery. Hell, a little bit of euro inflation wouldn't be such a bad idea anyways.
I think the biggest risk in Italy is not whether they can conceivably pay for their debt, but rather the political risk with clowns like Berlusconi running the show. I mean, I complain as much as anybody about the political shenanigans that go on in Washington, but they're nothing compared to the utter farce of governance in Italy.
Does anyone have a sense if Italian austerity measures will be met with the same violent rejection that it has met in Greece? I don't honestly have a good feel for that, and I don't want to get stuck in a reflexive "They're European, of course they'll stage major protests against austeriy" because it frankly isn't true of several eurozone countries.
(edit: One wrinkle with Italy is that I understand much of the public debt is held by Italians and not foreigners. If Japan is any indication, sometimes people are willing to own remarkable amounts of their own government debt, especially in a low inflation/low growth environment. That might shield them from some of the contagion.)
Well there is an additional issue that makes the Italian case a bit different. There is a huge difference between the north and the south, the north is very advanced and has dependencies of secession. If Italy really went forward riots and unrest, I assume that this conflict would rise into whole new level.
"Wer Visionen hat, sollte zum Arzt gehen." - Helmut Schmidt
Well, people who enjoy the EMU predicament can be divided in two groups; the biggest by far is the group of idiots who feel smug about the euro being 'proven a bad thing' and a much smaller group that is set to win billions if the project really stalls. George Soros will be but a footnote compared to those guys. And then we get the backlash of course, during a new Depression, courtesy (amongst other things) rating agencies making a bad situation worse.
Congratulations America
Yes, the ones who were proven right all along and are barely ever if at all heard to be saying "I told you so" are the idiots. You've not once admitted yet that they were right, you were wrong and that the euro has been proven to be a disastrous and unmitigated failure. Your only line now is that to break it up now it exists would be worse, just gloss over everything else and call everyone else an idiot.Originally Posted by Hazir
Maybe if we had a bit of honesty from the real idiots, those who were so blindsided by political faith and adherence that they glossed over any economic concerns, then we might have a bit more confidence that this crisis could be dealt with properly.
Instead we have a situation where the worst case scenario warned about the risks of the clear flaws of a half-arsed monetary but not economic union have come about and everything is getting brushed under the carpet. The only solution you propose to bad debts is more debts.
Its time to face the music. And the truth. Or alternatively stick your head back in the sand and just continue to call others idiots.
You know, I don't give a fuck about your opinion. What I see happening is something that could lead to a financial disaster on a scale of what brought about the Great Depression. Your smuggness is not going to save you from being dragged down if this ships sinks. The only financial institutions standing will be in countries outside whar is talked of as 'the West'. Good luck with your being right then, it will help you much keeping your job or house. From all the people in this forum I am the least likely to suffer, unlike you I will not be relishing in being part of the jackassery that brought it to us.
Congratulations America
I enjoy it because I have my income in CHF and I am seeing my buying power go up as USD and EURO come crashing down.
No you're not relishing in being part of the jackassery you're both glossing over the fact that you're part of the jackassery that brought it to us and yet still smugly condescending about it all. At least you no longer even pretend to claim that this isn't a man-made disaster that was warned about, that you said and I quote "I don't care about the economics of it" which is the attitude that created this Eurozone collapse - you just ignore it.
Don't worry I'm not holding my breath waiting for an apology from you or others of your kin who created this disaster.
Ships have already been sunk. Now we're just shooting more holes in order to try and fix it.
That's not very wise thinking, sonny. For one, the Swiss economy is deeply entangled with Europe's (and I don't doubt Swiss banks have a boatload of Italian debt - it's the 3rd largest bond market in the world behind the US and Japan). If the eurozone goes down, the Swiss won't be doing so hot. Secondly, high exchange rates are actually bad for Swiss exports. Third, the strength of a currency is not the best measure of the strength of an economy.
Oh i know long term it will have a negative effect on Switzerland, the remark was meant mostly as humorous short term approach.
Although even long term I am quite confident that Switzerland will pretty much benefit from any turmoil as it is still seen as a safe heaven and its currency will never drop like what we are seeing with USD and EURO. So yes their will be problems but the same there will be a rush of people trying to get their money out of their home country and in to Switzerland. Working in a bank I can tell you we already have a ton of clients from Ireland that do not even fit our target market and would not really benefit from the services we offer (our bank is very specialized) and they are practically begging us to open accounts for them to just put all their money in with 0 interest payable. I can only imagine what is going on in private banking sector. It is somewhat mitigated because at the same time the banks are scourging their books to get rid of any US clients not to have to deal with US government bullshit, and I can tell you US clients are fighting tooth an nail to imagine ways not to be counted US residents and keep their accounts. So no I do not think Switzerland would face the same level of difficulties as EU or US, and if get the government to stop trying to fuck banking secrecy up we could very well benefit from a global recession.
@Asmodian, despites Loki's cynical comments, the Swiss economy is only partly based on the banking sector. Most of the economy is actually export (Machinery, Electronics, Pharmacy ect.). And as I work in this field I can tell you the current situation is catastrophic. The only reason we are still doing well - and this is remarkable that we still can compete with this value of the CHF - is that the Germans economy is rock solid, and most of our exports are going there. Our own production line is fully occupied and this to a great part because of the German orders.
But if the Euro goes down, we are in deep shit, we are simply exporting too much into Euroland to handle a breakdown.
"Wer Visionen hat, sollte zum Arzt gehen." - Helmut Schmidt
Untill Swiss banks start feeling the crunch, which will be about the time that you'll find out that the Swiss banking industry is too big to save.
Congratulations America
Wow, one first step I can really appreciate was proposed today; reducing the crazy auto-pilot dealing with ratings by the rating agencies. One wonders why policy makers didn't come to that conclusion earlier; making their ratings relevant to the way the financial sector is regulated was what got us in this mess to start with, and now they all of a sudden found their vigilance making this mess even bigger. I'd gladly have them shut down alltogether tomorrow.
Congratulations America
With al-Beeb's hard-on for Murdoch, I can't find anything about that. Any link?
Italy collapsing, stock markets collapsing but look at the BBC and the only thing going on right now is News International.
EDIT: "Also on Monday, EU Internal Markets Commissioner Michel Barnier called for limits on credit rating agencies being able to rule on a nation's debt, if the country in question is gaining EU bail-out funds.
However, analysts questioned whether such a move would be possible.
EU leaders have criticised credit rating agencies for downgrading the debts of Portugal and Greece, which they say unfairly adds to those countries' financial woes."
Seriously WTF? This is what you're talking about? I'd like to know how they think that's remotely possible, credit ratings are private organisations and can do what they want. As for adding to those nations woes, given the serious inevitability of at the least some sort of "haircut" on Greek loans eventually then the agencies are not being unfair they're simply doing their job. What Barnier means is that there won't be a default if the EU bails out the nation - well that's not guaranteed. If that was what was believed, the agencies would reflect it. The EU is not god almighty, it can not just bend the whims of the market because it deems it so. The credit agencies provide ratings on the US, so the notion they shouldn't for Greece just because the EU says so is so pathetic it should not be taken seriously by anyone.
Last edited by RandBlade; 07-11-2011 at 11:01 PM.
Uhm, if I understand what you're saying correctly, there's multiple problems with this. First of all is that ratings agencies are private companies that provide a needed service for the market - they do due diligence on all sorts of debt so that individual investors don't have to. That's not to say they are foolproof - far from it, as this whole financial crisis has shown - but they clearly provide a needed service, and investors pay attention when the ratings guys speak. In some cases ratings agencies are the last people to the party - as in the case of the current sovereign debt crisis, when markets have clearly anticipated a haircut/default long before the really extreme downgrades in PIIGS debt. But rarely are they irresponsibly slashing credit ratings - they are reflective of real risks, albeit with a time delay.
If I understand your logic, then private credit scoring agencies shouldn't be allowed to lower the credit rating of deeply-indebted individuals on the verge of bankruptcy because that will raise their credit card rates and push them over the edge into bankruptcy. Why shouldn't they be allowed to rule on the creditworthiness of an individual - and even more so on nations?
I think it's also ridiculous that the rescue guys are trying to engineer a default without meeting the rating agency's definition of default - so-called 'voluntary' rolling over of debt at low interest rates, lowering bailout interest rates, etc. That might be what's needed to get Greece on its feet again (certainly I think a default is all-but-certain for Greece, at least) but to try dressing it up as anything other than creditors losing some of their money is ridiculous.
Funny, I wasn't being literal when I used "Euro" in the thread title or trying to make a particular statement on the Euro itself. But I do agree with Wiggin that this political ranting against credit agencies makes no sense. It's also reminiscent of tin-pot dictatorships that have no problem with a particular private entity/news organization/business until they do something the state doesn't like.
So what should the rating agencies do when a country can't pay its debt without outside help?
I agree with Hazir on the credit ratings agencies. They're politically infected; they're paid by the very companies they're rating, they're so slow and shallow with their ratings they might as well just rate investor confidence with polls, they were totally useless and only reactionary by the time Lehman fell, they would "rate a cow if it came across their desk".
Hard to believe you guys have forgotten the events of '07-'08, when Lehman, Bear Stearns, Merrill Lynch and AIG were rated AAA one day, and the next day they were toast. Our legislators have tied "investment grade" ratings from just these three groups for publicly held pensions and municipal holdings. So, when something is downgraded below "investment level" they're required to sell. And it's not a slow transition but sometimes AAA to basically junk.
I'm sorry, but if anyone thinks the US should still be a AAA-rated sovereign wealth nation, they've had too much power punch.
It's in the very interest of American rating agencies (and there are only those), to have the focus on Greece and Portugal and not on the US.
Most countries can't pay their debts, you probably mean interests.So what should the rating agencies do when a country can't pay its debt without outside help?
"Wer Visionen hat, sollte zum Arzt gehen." - Helmut Schmidt
Fitch is a French company.
"Fitch rating" is US/UK based but French owned, so well it's a question of definition.
"Wer Visionen hat, sollte zum Arzt gehen." - Helmut Schmidt
http://247wallst.com/2011/07/11/an-o...ting-agencies/
This is on front page of marketwatch/WSJ digital network.
It's always perplexed me why europe doesn't have (or hasn't developed) its own ratings agencies to compete with S & P, Moody's, and Fitch.
I'm not saying that these rating agencies shouldn't be able to continue operating, what I am saying is that we should remove the influence they have over the way the financial sector is regulated. The rating agencies have proven that they don't do a very good job at rating risks, it is sheer madness to then still continue basing your entire regulatory system on their work. The automatism between a downgrade and a financial institution no longer meeting liquidity requirements should be removed.
What we're doing now is letting the automatic pilot decide on a flight path on the basis of what we know are faulty height meters.
BECAUSE and let's not forget this, if those rating agencies would have done a job any good we wouldn't be having this crisis in the first place, as we wouldn't have had Greek/Irish/Portugese bonds being priced as cheap as German bonds. People talk too easily about the shortcomings of the EMU, but they entirely overlook that the holy markets did not function AT ALL in setting realistic prices for sovereign debt of EMU countries. Rating agencies played a big role in that disfunctional market.
Congratulations America
You obviously have no idea of how those ratings have achieved a status in regulations. What I am saying, and what regulators are saying; the tool used is crappy, let's not rely on it making the right decisions for us.
Congratulations America
And they somehow gained enough power and credibility that they can yell "FIRE" in a crowded theatre, causing a stampede for the exits, and undermining the very purpose of public fire safety.
For all the talk of bond vigilantes being powerful enough to move markets, there isn't enough talk about the self-fulfilling prophecy of panic selling (margin calls, defaults, etc.) the ratings agencies can cause with their downgrades....
That isn't the relevant question. The relevant question is: why should we take their word for it that if country A is in a bad state there is a solid reason to downgrade country B.
And why should we take tnem serious at all when it describes country C as a safe haven while country C is making actual moves that it simply will not pay?
Congratulations America
How about instead of A, B and C you name the countries you're thinking about? A and B seems to make a lot of sense because of the fact that when A hits the rocks, B is being required to get into worse shape to "help" out.
Those are political prognostications, Rand.
Saying that when the ratings start going sour is, once again, a hallmark of a tin-pot dictatorship. I'm obviously not saying they are. But it's pretty silly that no one has a problem with the ratings when they are good, but criticizes them the ratings don't fall fast enough (US mortgages) or when they fall faster (US and European debt).
The debt rating agencies seem to be doing a good job in this case. The problem is the market's immature inability to see creditors (IE national champion banks) take a haircut on their investment like everyone else does every day.
But it's more than just Hazir and I who've expressed that the ratings were NOT accurate, even when they were giving "good" ratings. They haven't been doing a good job at all, not for rating sovereign debt or credit (because of the political considerations), nor rating individual companies as "investment grade" (because they didn't or couldn't investigate their many counter-parties at risk to "contagion").
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