Game Theory Over: Bank Of France's Noyer Says Britain Should Be Downgraded, Not France

Tyler Durden's picture

To anyone who doubted that the gloves are now fully off between France and Britain, we bring you exhibit A: Speaking in an interview with local newspaper Le Telegramme de Brest to be published later on Thursday, Bank of France head and ECB member Christian Noyer said that a downgrade of France's AAA credit rating would not be justified and ratings agencies are making decisions based more on politics than economics and questioned whether the use of ratings agencies to guide investors was still valid. "In the arguments they (ratings agencies) present, there are more political arguments than economic ones," said Noyer, the head of the Bank of France and a member of the ECB's governing council. "The downgrade does not appear to me to be justified when considering economic fundamentals," Noyer said. "Otherwise, they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and where credit is slumping." The bolded sentence confirms two things: i) that the Nash equilibrium in Europe is now fatally broken, because when you have the head of one central bank doing all he can to throw another central bank under the bus, that's pretty much game (theory) over; and ii) when he said that "the agencies have become incomprehensible and irrational. They threaten even when states have taken strong and positive decisions. One could think that the use of agencies to guide investors is no longer valid." it proves that this amateur has no more understanding of basic finance than your generic Reuters blogger, both of whom apparently fail to comprehend that there are several hundred thousand bond and loan indentures in the real world, not the world of "S&P has no credibility so ignore it", which are loaded with covenants discussing springing liens, rating indexed interest levels and collateral thresholds, all of which are based on a sovereign and corporate rating, and all come into play in a completely unpredictable way (hint AIG - the reason why AIG imploded was because a rating agency downgrade unleashed a terminal margin call) when there is a rating downgrade. Such as that of France in a few hours to days top.

So, please, spare us: let us at least assume you are a bunch of finance hacks who have no idea what is going on when it comes to corporate credit ratings and keep your mouth shut, than open it, and prove us right. That goes double for members of the ECB who are apparently so blinded with chauvinistic rage that they have forgotten the most elementary things about modern corporate finance. Or perhaps, far morely likely, they never really knew it...

Which, incidentally, explains why we are all about to enter the latest and greatest global cataclysm (to borrow a word from Alain Juppe).

And lastly, if it is indeed Britain who ends up being downgraded, and suddenly every bond vigilante in the whole world comes sniffing and asking questions about those trillions and trillions of rehypothecated "assets" sloshing around within the terminally unregulated and abysmally lax framework of the isles, only to find just how shockingly deep the rabbit hole goes, who does France think will be nuked from financial orbit first?

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voshnishki's picture

All ma bitchez love me.

Real Money Wins's picture

The short version of this article is " Le Whine , Le Snivel, Le Whaaa, Why didn't they down grade the other guys, I hate you and I hate them, Le Whine, Le Snivel, Le Whaaa"!

sitenine's picture

Whining aside, they will both be downgraded, with good reason.

HoofHearted's picture

I know Christian Noyer, have been around him several times. And this doesn't surprise me at all.

CrazyCooter's picture

Whoa whoa whoa ...

I only read as far as "de breast" ... and expected RoboTraders's rights to post pics had been restored.

I mean, this is bullish, right?



Ahmeexnal's picture

Exactly the kind of response the UK expected to elicit from the eurozone.

Yes, France is toast.

It aint called FRENCH TOAST for nothing!

Had an argument earlier today with someone. I knew I'd be stared at like a lunatic if I started going through the hassle of informing about global economic collapse, how it will be worse than when the house of Bardi went bankrupt, about the NDAA just passed and so on.  I got the expected stare, and couldn't figure why people just plain won't listen.

Then I recalled reading about economic collapse in Europe prior to WW2.  About how some people, specifically in Germany, tried to warn whom they considered friends and colleagues of what was about to happen. They also suggested to them to keep their wealth in PMs. They were brushed of as paranoids, lunatics. Their "friends" would reply that such an "end of the world" scenario could NEVER happen in Europe. And much less in Germany, since the German Imperial elite would NEVER allow such madness (hyperinflation of the Mark) to their beloved German people. 

When the shit eventually did hit the fan, those who had tried to warn in vain their "friends and colleagues" were swiftly trained to concentration camps.  Their PMs confiscated.  Their homes and assets sold at bargain prices to those who had refused to listen to them.   And yes, it was mostly their "friends and colleagues" who denounced them.


MayIMommaDogFace2theBananaPatch's picture

It aint called FRENCH TOAST for nothing!

Soon to be renamed, FREEDOM TOAST!  We don't have congress for nothing.



tooktheredpill's picture

this is awesome. who said that economics was boring. wife swapping parties at the last eu meeting, sarkozy apparently unleashing on cameron and now this. Its been quite a year.

BigJim's picture

You're saying that there were concentration camps in the Weimar period, where goldbugs got sent? References, please.

Ahmeexnal's picture

No, those came later as we all know, but it had probably been planed long in advace.

The new mark solved nothing, as the underlying issues had not been addressed. To further worsen the situation, Germany loaded up on MORE debt.

Rather than face reality and experience a revolution like the one which literally toppled Louis XVI's head, the german Imperial elite, under the advise of the Vatican, instructed the newly elected chancellor to tighten the nooze on the goldbugs by fully discharging onto them full blame for all of Germany's ailments.

Kristallnacht was followed by further economic and political persecution of Jews.

The 500,000 Jews in Germany, who accounted for only 0.76% of the overall population, were singled out by the Nazi propaganda machine as an enemy within who were responsible for Germany's defeat in the First World War and for her subsequent economic difficulties, such as the 1920s hyperinflation and Great Depression

The German historian Hans Mommsen in a 1997 interview claimed that a major motive for the pogrom was the desire of the Gauleiters of the NSDAP to seize Jewish property and businesses.[14] Mommsen was quoted as saying: "The need for money by the party organization stemmed from the fact that Franz Xaver Schwarz, the party treasurer, kept the local and regional organizations of the party short of money. In the fall of 1938, the increased pressure on Jewish property nourished the party's ambition, especially since Hjalmar Schacht had been ousted as Reich minister for economics.

Kristallnacht changed the nature of persecution from economic, political, and social to the physical with beatings, incarceration, and murder.

WhiteNight123129's picture

Is he the arrogant, political animal prick he appears to be? This one looks like a ~courtisan~ ready to do anything to attrack the favors of the Prince. I am curious to know if this psychological profile is close to reality? Trichet despite all his shortcomings looked like he still had a human side, this Noyer guy looks like he has none on top of everything.


johny2's picture

He may be all that and more, but he is right about rating agencies and about UK. 

WhiteNight123129's picture

I am not arguing about that, we all know that, rating agencies are never telling us anything that we really do not know already. Usually when rating agencies are announcing anything.... well it is way too late.  Fitch is a bit better, Fitch was warning about China back in 2010 and again in June this year while base metals bulls were sleeping at the wheel.

johny2's picture

Fitch are owned by the French company, but they are all compliant in a big pyramid scheme involving fiat currency and fractional banking.

markmotive's picture

Pot, meet kettle.

BTW, please take the 2012 best investment poll:

MiddleageThinninghair's picture

I think this commentary is much more serious that someone whining.  To me the mentality is even more childish because he is contesting that since now the rating agencies are not in favour of his personal agenda / opinion that it is to be discredited.  It is highly concerning that someone in this position would chose to openly display such childish sandbox mentality as to degrade the foundation of human credibility.


TK7936's picture

Mr Noyer has correctly identified that rating agencies are rather nonsensical if you compare there ratings between Nations in this case France and Britain. The Author seems to think that because a British downgrade could fire the Death Stars primary weapon on earth it is best that rating agencies simply ignore facts and play bully with the ones who actually wouldn't take the planet down with them so it appears like there doing there job. A very perverted thought chain. The justification for this strategy is dripping from the authors Ho Ho like Cream from a Twinkie. Makes me want to call the bluff and say go ahead, shoot yourself. Millions of people already have nothing to loose thanks to these parasitic bullshitters so it would just be good karma to level the field.

vast-dom's picture

M.A.D. is no way to live................

TK7936's picture

I guess all is well then. Carry on.

fourchan's picture

have they learned nothing?


ratings are bought not earned.

The Fonz's picture

This may be relevant. The person that reworked the SP rating system to increase the political aspect of ratings has just left SP.  I think its interesting this person is no longer with them. Was he ousted by political pressure, is this to keep the downgrades from coming?

He_Who Carried The Sun's picture

...and ratings agencies are making decisions based more on politics than economics and questioned whether the use of ratings agencies to guide investors was still valid.

Thinking of Fanny and Freddie and others I must say he has a point there...

twotraps's picture

I agree with you but where in any corportate finance or ANY financial entity rules/bylaws is there a QE or TARP provision?  Sorry, the ratings agencies are as full of shit as ever, conveniently coming out now 'just doing their job' so forget a reasonable arguement there.....but politics, at the country level might be factored in because they are the wild card.  So much so that if you ever thought politics would play such a day to day role in the bond market----------would you Ever have invested in Munis??  Less likely or in much smaller amounts due to uncertainty.  They are all full of shit and just pissed that there is a bright light on their game.

Vampyroteuthis infernalis's picture

It is like the kettle calling the pot black.

Saro's picture

Well zen have a nap . . . zen fire ze missiles!

LawsofPhysics's picture

Fuck all the paper-pushing fucknuts.  Time to find out precisely what everyone's labor (and "wealth" for the matter) is really worth.  About bloody time.

Mikehy's picture

Oh God I hope I don't ever have to find out what my labor is really worth!

navy62802's picture

Perhaps it's worth the same as the Chinese. The Walmart employees over there live in animal cages. Perhaps that's the true value of the labor of Walmart employees.

The ultimate goal of globalization is the equalization of living standards across the globe. The wealthy nations' workers will suffer a severe reduction in living standards while those of the poorer nations will see a steep increase in theirs. That's the way globalization works. It seeks equilibrium. What we call this is karma, coming back to bite the American voter in the balls ... because that's where this all began, with the American voter.

Mr Lennon Hendrix's picture

American Voter....

You must be referring to Diebold Machines

CrazyCooter's picture


I moved to Alaska not a year ago.

Everyone I know thinks I am crazy.

I see it coming. I did my homework. I am quite happy with my fox hole.

I worry more about my extended family these days ...



DormRoom's picture

A Chinese village of 20K has openly revolted against the Chinese Communist Party.  For the first time the Party has lost control of a village.

Mr Lennon Hendrix's picture

The Chinese revolt often.

Are you buying PM at these prices?  I am

navy62802's picture

Just bought another Krugerand myself ... I will be buying all the way to the bottom.

Mr Lennon Hendrix's picture

a toast to my brethren:

we will have our day

for we have fought for it

here is to us and ours

CrazyCooter's picture

I bought bulk rice this last go around. Am I missing out on something?



topcallingtroll's picture


Lots of it. Generic.

WhiteNight123129's picture

As long as wages progress faster than inflation do not bet on that. Plus if the external environment of China is wayworse than Chinese internals that plays very favorably for internal politics, they can put the blame on America and Europe. So far so good for China (yes property crash and banking crisis in China but no external debt/sovereign/currency crisis)


navy62802's picture

You know the funny part? While revolution is considered an essential element in the communist system, our own Founding Fathers in the USA believed that there should be a revolution once per generation so that we maintain the values necessary for an effective democracy. You won't hear that inconvenient fact mentioned at any of the stupid-ass Republican debates ... and most likely not at the Democrat debates either (if such a thing even materializes).

CrazyCooter's picture

This is not within the nature of our species.

If it was, we wouldn't be in this situation. I doubt it will be. I am concerned with getting over the next 10 to 20 years with a society intact. I can breathe a deep sigh of relief if we do and its up to future generations at that point to pull the cart of liberty.

Most human critters are simple minded, have predictable behavior, and don't think crazy stuff unless their resources are stressed. They just want to screw, eat, imbibe, and stay comfortable. It is sort of the same way with the socio-path class, they just like power as gravy over it all.

In my mind, the greatest genius of our nation (assuming the US here) is that we all get guns. Because, in the end, if someone is really going to fuck the public over, there is a fat price tag for the rape. There are a lot of guns in the US, so picking this piece of meat apart is going to be very tricky. In the city, they are weak, but the city feeds on the nations resources.

In the rural, they produce. And they like to hunt a lot. I would love to see a mexican drug gang try to bust up rural iowa. I bet you could measure the casualties in deaths per mile on pretty much any road. Once the gloves come off, it is going to be ugly for gangs in rural areas if they can not compromise the population first.

I don't think it will be this dark, I am just having a bad day.

Vote for Ron Paul. Let us set our feet, as a nation, back on the path of liberty.



Schmoo's picture


"In my mind, the greatest genius of our nation (assuming the US here) is that we all get guns. Because, in the end, if someone is really going to fuck the public over, there is a fat price tag for the rape. There are a lot of guns in the US, so picking this piece of meat apart is going to be very tricky."

I suspect predator drones and NDAA (if signed) will unfortunately alter that equation.

Milton Waddams's picture

Correct.  However the objective, to avoid unrest, is to slowly lower the living standards in wealthy nations while rapidly increasing those in emerging economies.  In many respects what the 2007-2009 crisis represented was a hastening of that process, especially for the so-called wealthy nations.  A sort of glance into the end scenario.  The frightening thing to consider is what happens when the American consumer (and profligate spending of the government) is no longer considered the golden goose by the international capitalists, replaced instead by a burgeoning global consumer base / middle class?  Will the plug be pulled on America altogether?  Will the American worker's spirit be so broken that he will beg for work for what was once called 'coolie wages'?

navy62802's picture

Unfortunately, I think there will be a second civil war in the US by the time this happens.

economics1996's picture

A lot of payback coming to the elites and privilege classes.  Affirmative Action, diversity is good, Hollywood...Just saying folks this will not go down as everyone envisions.

CrazyCooter's picture


I used to drink beer with a retired air force officer (years ago) and he always said the same thing; we were heading for civil war/break up. I told him he was crazy, and debated why, for many years.

Today, I kind of feel maybe I was hasty and assumed too much. I am not so confident in my assumptions anymore. I don't think in those terms yet, but I appreciate the possibility now.

The system has a great deal of conflicting stress in it, wealth/vs/poverty, power/vs/minority, and so on. I also think the average volenteer is on the side of the people, which makes this more complicated.

I do know the monetary system is going to blow up, but I struggle to reach beyond that mentally. I am still coming to terms with it. I am not sure how things comes unglued past that when/if it does.

This is a hell of a shit show. Mercy on us all.



WhiteNight123129's picture

Agreed, if China continues its mad printing of GDP it could have a sovereign/ currency crisis instead of just a property/banking crisis. The Empoperor is far and the mountains are high as they say in China, there is real power struggle between local officials doing their stuff away from the eye of beijing, there is an old tradition in China , when nothing works, go see the Emperor directly. In somecases expropriated people were barred by local police to go take train to Beijing. I guess the central gov is going to sacrifice the few local corrupt officials (they are all systemically corrupt) and "save" the people from their local ruler.