Guest Post: ParaNoyer

Tyler Durden's picture

Submitted by Clive Hale from View From The Bridge


The gloves are off! As the French prepare for the loss of their AAA status, the governor of the Bank of France, Christian Noyer, suggests that the UK should be first in the firing line as the data for inflation, real GDP growth and government deficit to GDP are worse across la Manche from where he sits. A month ago French 10 year yields were 3.8%. Today they are just above 3%, so maybe the markets are giving him the benefit of the doubt, but let us not forget that the maturity timeline of French bonds is considerably shorter than the UK. They are about to have a funding problem and that is one of the many issues that the much maligned ratings agencies are concerned about.

This is a problem that they share with Italy and Spain, two struggling euro nations, whose debt, along with a toxic pile of “lesser” Club Med paper, is well represented on the balance sheets of French banks, although almost certainly at highly unrealistic valuations. Eurozone bond yields have had some pressure taken off them by the ECB that is now offering 3 year money, at 1%, to eurobanks, who can then buy Spitalian debt at yields of around 6% (for now...), locking in a very decent return, unless those debt instruments become subject to a proper Grecian haircut down the road. In that case the banks would find themselves in exactly the same situation they now find themselves in, ie insolvent, only more so.

The other factor that Noyer has chosen to ignore is that the UK banks have been through a recapitalisation process, which the French and eurozone banks have avoided so far, ex Dexia and shortly, one assumes, Commerzbank. Let’s not kid ourselves that UK Banking plc is a totally robust picture of health, but it has to be said, so I will, that France has significantly greater problems. On Friday the Basel Committee on Banking Supervision confirmed that French banks such as Soc Gen and Credit Agricole could not double count assets in their insurance company subsidiaries for Tier 1 capital purposes. This less than gallant Gallic attempt, to dilute the rules requiring the banks to hold more capital against “unexpected” losses, was thwarted by the Mexican representatives, who know a thing or two about a good currency crisis. Even more damning was the following statement, on the same day, by the rating agency, Fitch.

“Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis. It has a larger structural budget deficit and higher government debt burden relative to Euro Area 'AAA' peers. Moreover, relative to non-Euro Area 'AAA' peers, notably the US ('AAA'/Negative Outlook) and the UK ('AAA'/Stable Outlook), the risk from contingent liabilities from an intensification of the Eurozone crisis is greater in light of its commitments to the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), as well as indirectly from French banks that are less strong than previously assessed as reflected in recent negative rating actions by Fitch.

“Para Noyer” might like to reflect on the “stable outlook” for the UK’s AAA rating and the fact that Fitch’s parent company Fimalac is, would you believe it, French, before he next thinks about calling the kettle black.

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nope-1004's picture

How do you spell IOU in french?  DOA?  POS?


JoeSexPack's picture

I fart in your general direction...

JoeSexPack's picture

The French knight in the above Monty Python link says these words, FYI.


I still laugh at their comic genius.

Schmuck Raker's picture


AMF? <=oops, that's Spanish

WhiteNight123129's picture

Well the current form of IOU should probably be called "Assignats"

terryfuckwit's picture

french have gold??


GeneMarchbanks's picture

Sure do Mr.fuckwit. Maybe the Brits can start buying theirs back now, I mean, after it 'crashed'...

LookingWithAmazement's picture

GEAB N°60 is available! Global systemic crisis – USA 2012/2016: An insolvent and ungovernable country

So then. A pro-euro argument, anti-UK/US/money printing/euroscepticism. The Angelsaksian world is doomed, it appears. The euro will survive, as I said many times before. Merry Christmas, happy 2012 and ... buy some euros :)

lolmao500's picture

I like LEAP, but really they have a big blind spot... they think the euro will survive... which is total fail.

LookingWithAmazement's picture

Yep, they're turning more and more pro-Europe.

Use of Weapons's picture

What the fuck happened to: "Crisis? What Crisis?" or "Boring World we live in" ??

I used to look forward to your posts as the voice of true British "KEEP CALM and CARRY ON". Now, I can only imagine the apocalypse is happening.


The voice of 'reason' when moving from calm stoicism to mentioning words such as "DOOOM" becomes the canary in the mineshaft. 




p.s. How's that Xmas Bonus?

Atomizer's picture

GEAB N°60 is available! Global systemic crisis

I was once a paying member, those loons are completely in denial. LEAP news reporting is comparable to watching the STRATFOR video channel. We all live and learn from our mistakes... I did.

StychoKiller's picture

Before the end, the forces of darkness that you work for, will desert you and all their promises to you will be abandoned.

Soon everyone will have to choose between what is easy, and what is Right.  You have been warned.

gangland's picture

ot, meanhile back in iowa rick perry says he wants herman cain for secdef ftw!

terryfuckwit's picture

British banks recapped or rehypo'ed

GeneMarchbanks's picture

'They are about to have a funding problem and that is one of the many issues that the much maligned ratings agencies are concerned about.'

Right. Nice cover for the completely irrelevant, backwarding looking rating agencies...

I stand corrected after visiting your site. Clive are you covering for the banking shills in the City of London? What a fucking ponce you are old Clive.

Lets Hang Parliament's picture


I meant to put "much maligned" in quotes ie sarc on.

They got castigated for the MBS "AAA" debacle - quite rightly - but now when they dare to suggest that France is a bucket of merde the "drowning" governor of the "Bonk" de France makes the following comment

"Frankly, the agencies have become incomprehensible and irrational. They threaten even when states have taken strong and positive decisions," Noyer said. "One could think that the use of agencies to guide investors is no longer valid."

Yes of course they have lost any credibility they ever had (the square root of "f" all...) but at least they are closer to the truth than la Noyer et all who are living in a state of total "Cognitive Dissonance"

As I said in an earlier "View" - final para

"not least of all the possible loss of French triple AAA sovereign debt status; assuming any of the ratings agencies are feeling that brave. If you live anywhere near S&P’s or Moody’s offices in Paris do make sure your fire insurance is up to date…"

I didnt think for a minute that Fitch would put themselves on the top of the bonfire!

"Covering for the City banking shills?" "Ponce?" Pas moi mon brave

Azannoth's picture

.. so let's skip to the chase, who's the fastest Horse at the Glue Factory?

bank guy in Brussels's picture

From Ambrose Evans-Pritchard in the UK Telegraph, arguing that the one sense in which the UK is 'better off' is the ability to print its own currency to avoid default:

« Mr Noyer is very confused if he thinks that Britain should be downgraded because of its higher inflation rate. The rating agencies evaluate default risk consisting of contractual non-payment.

Countries that pursue stealth default through inflation devalue the real burden of their debt and therefore reduce the risk of technical default. This is well understood by the markets. They actually improve their rating potential – so long as they don't push their luck and go
too far.

(The looming danger in Europe is in any case deflation. The EMU money supply is contracting. That really does raise default risk.)

The deeper point is that Britain has the shock absorber of its own central bank, acting as lender of last resort.

In other words, there is an implicit rating discount on EMU membership. Neither Noyer or Baroin, or Fillon for that matter, seem to understand this. Perhaps they cannot do so, given what it implies about the nature of monetary union. ...

All in all, I would say that French and British debt burdens and public finances are just about as bad as each other. »

GeneMarchbanks's picture

Remind me now where is Pritchard from? Nice to see him being 'objective' though.

Who has more gold?

onebir's picture

France, by quite a bit (& maybe the ECB has some too?).

But (untramelled money-printing ability - which I think should be an obvious tie-breaker on it's own - and previous recap of banks aside) Britain won't be on the hook to bail out Euro area countries, the banking system is somewhat less exposed to them, and the duration of govt debt is quite a bit longer.

johny2's picture

Ambrose Evans PRickard is as bad as Noyer. In fact, I can not understand that anyone with a serious interest in economy can read that pricks collumns. His main line is that having your own currency is more important than anything, including manifacturing industry, commodities or at least a healthy low level of debt. 

Rating agencies are a bunch of overpayed crony expensive restaurant dwellers. How else could countries like UK and France have ratings higher than for example Brazil : 

Brazil: Commodities, Agriculture, Young population, Interest rates 10% inflation 6% aproximatelly, Industry protected, debt of 55-65% to GDP, under 6% unemployment and a investment rating of BBB

UK & France : Few commodities, Subsidied Agriculture, Ageing population. Interest rates close to 0 inflation around 4%, Industry left to die, debt above Brazils, unemployment above Brazils and investment rating of AAA

Boeing Boy's picture

You have clearly never been to Brazil

johny2's picture

I have been many times to Brazil, UK and France. But even if I havent been there, it would be easy to see that UK and France are actually Bankrupt, while with all this "Crises", Brazil has managed to grow with interest rates 0f 11% ( far above the 6% inflation rate) and unemployment of 6%. Yeah, I know many of Brazils problems, and it is far from a perfect society, but it has much sounder economy and perspective than UK and France. Therefore the ratings are all wrong, result of the crony failed model of rating agencies.

You obviously jump to conclusions too easy, may have a future in banking if it survives.

disabledvet's picture

i don't disagree with a word you have said. so tell me: "where is this reflected in the market place?" i see where it's reflected in The Street as people protest massively something that I imagine could not possibly happen in Belgium (and i am being serious.) Just asking of course. Also "wouldn't you like an explanation as to how Greek yields can get so high" as opposed to this article? To me i still havn't heard a single logical explanation as to why Greece is "off the scales" when it comes to a debt catastrophe. I simply don't get it. Maybe they pissed the wrong people off "at the dinner party." Ooooo. Welll...naughty naughty!

Shylockracy's picture

Now tell me, how ironic is that, that the French central bank honcho's name means "to drown"?

La France va se "noyer" dans ses dettes et ses mensonges...

gangland's picture

Il est démontré, disait-il, que les choses ne peuvent être autrement; car tout étant fait pour une fin, tout est nécessairement pour la meilleure fin.

Shylockracy's picture


Sauf erreur de ma part, cet extrait ressort du Candide de Voltaire, n'est-ce pas?

gangland's picture

yup ; )

je tiens à le sortir de temps en temps.

falak pema's picture

vous citez le meilleur polémiste de la France, c'est déja ça! 

If I had to quote one american poet-writer it would be Tennessee Williams : a street-car named desire...Just that title is a poem in itself. Or 'cat on a hot tin roof'...He also wrote...sweet bird of youth and Night of the Iguana...all made into superb movies.

BTW : Noyer, like in ronce de noyer means...walnut. So you have a choice : he drowns or he is a nutty burr.

gangland's picture

williams is excellent, i have him tied for first with albee.,_Who_Is_Sylvia%3F


philipat's picture

The bond markets will decide, presumably based on duration, fiscal actions and ability to control same. Meanwhile, it's tragic that senior officials in ANY country resort to such childish rhetoric to obfuscate problems closer to home. Where is the quality of leadership these days?

disabledvet's picture

Where indeed! Now let's start taking orders for the bubbly for a Zero Hedge Commentariat bash!

ThrivingAdmistCollapse's picture

The rivalry between England and France continues.  The form changes, but I would never expect these 2 countries to have really friendly relations with eachother.

Economic Collapse

Misean's picture

When two people are falling sans parachute from several thousand feet, it doesn't really matter who hits the jagged rocks below first.

ebworthen's picture

I'm guessing that French 10 year will hit 5% by March.

The flight to U.S. 10 year is a harbinger; when Bundesbank and ECB and IMF run out of cash to buy Spanish, Italian, and then French bonds the SHTF.

FED may step in to purchase, but under the covers.

PulauHantu29's picture

Demise of another Welfare State.

Banksters's picture

I hate when people write shit about things they don't know anything about.  I guess it made sense to you when you wrote it.  Contrary to your statement, the biggest welfare state involves the banksters who get guarantees while everyone else gets the shaft.   Immunity from prosecution is bad, either.



disabledvet's picture

this is the critical point. when you go down the road to "debt hell" you have to get your savings from somewhere else. look at Reagan as your example: they obliterated the bulk of the Cold War active duty miltary and created a "business as tax collector" system. All government became Federal Government as the 50 states and just as obviously all are formerly great cities have been left to wither on the vine of Federal largesse. My guess would be a similar thing will happen in Europe as a "Federal financial capital" is created (apparently in Brussels interestingly enough) that will..."do what it can" to maintain the generous payout systems currently in place. What's the media like in Brussels? Is it about to "suddenly become mega-massive"? I wonder.

falak pema's picture

I gave you my spiel on the french version of liquidity crunch. If the ECB back room bazooka works, there will be no liquidity crunch in 2012.  Its the insolvency which is the bitch in Euroland as Merkel will NOT let the banks fire wall and will NOT let Eurobonds to form. 2013 onwards will stay a bitch. 

Pas de "credit crunch" en vue, selon Frédéric Oudéa

according to french murmurings, the notational write downs of all and sundry makes triple A loss relatively painless for France according to official circles...just saying. France becomes like the others, where AAA is now AA+...


The 100 Trillion Dollar Man's picture

There's a joke doing the rounds in the UK:

Q: What's the capital of France?

A: €2.50


midgetrannyporn's picture

France thinks their shit doesn't stink and that their champagne is worth 3X more than anyone elses. Whatever.