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The Real Dark Horse - S&P's Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market
All your questions about the historic European downgrade should be answered after reading the following FAQ. Or so S&P believes. Ironically, it does an admirable job, because the following presentation successfully manages to negate years of endless lies and propaganda by Europe's incompetent and corrupt klepocrarts, and lays out the true terrifying perspective currently splayed out before the eurozone better than most analyses we have seen to date. Namely that the failed experiment is coming to an end. And since the Eurozone's idiotic foundation was laid out by the same breed of central planning academic wizards who thought that Keynesianism was a great idea (and continue to determine the fate of the world out of their small corner office in the Marriner Eccles building), the imminent downfall of Europe will only precipitate the final unraveling of the shaman "economic" religion that has taken the world to the brink of utter financial collapse and, gradually, world war.
Here are the key take home messages from the FAQ (source):
- We believe that as long as uncertainty about the bond buyers at primary auctions remains, the risk of a deepening of the crisis remains a real one. These risks could be exacerbated should renewed policy disagreements among European policymakers emerge or the Greek debt restructuring lead to an outcome that further discourages financial investors to add to their positions in peripheral sovereign securities.
- The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers, lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems. According to our assessment, the political agreement reached at the summit did not contain significant new initiatives to address the near-term funding challenges that have engulfed the eurozone.
- Instead, it focuses on what we consider to be a one-sided approach by emphasizing fiscal austerity without a strong and consistent program to raise the growth potential of the economies in the eurozone.
- Financial solidarity among member states appears to us to be insufficient to prevent prolonged funding uncertainties. Specifically, we believe that the current crisis management tools may not be adequate to restore lasting confidence in the creditworthiness of large eurozone members such as Italy and Spain. Nor do we think they are likely to instill sufficient confidence in these sovereigns' ability to address potential financial system stresses in their jurisdiction. In such a setting, the prospects of effectively intervening in the feedback loop between sovereign and financial sector risk are in our opinion weak.
- Despite these encouraging developments on domestic policy, we downgraded both sovereigns by two notches. This is due to our opinion that Italy and Spain are particularly prone to the risk of a sudden deterioration in market conditions.
- While we see a lack of fiscal prudence as having been a major contributing factor to high public debt levels in some countries, such as Greece, we believe that the key underlying issue for the eurozone as a whole is one of a growing divergence in competitiveness between the core and the so-called "periphery."
- We believe that the risk of a credit crunch remains real in a number of countries as economic conditions weaken and banks continue to consolidate their balance sheets in light of tighter capital requirements and poor market conditions in which to raise additional equity
- We estimate a 40% probability that a deeper and more prolonged recession could hit the eurozone, with a likely reduction of economic activity of 1.5% in 2012.
- We believe an even deeper and more prolonged slump cannot be entirely excluded. We expect this weak macroeconomic outlook if realized would complicate the implementation of budget plans, with slippages to be expected, which would likely further dampen confidence and potentially deepen the recession, as funding and credit is curtailed and the private sector increases precautionary savings.
- Reports indicate that many investors had hoped that a breakthrough at the December summit would have enticed the ECB to step up its direct government bond purchases in the secondary market through its Security Market Program (SMP). However, these hopes were quickly deflated as it became clearer that the ECB would prefer to provide banks with unlimited funding, partly with the expectation that those liquid funds in banks' balance sheets would find their way into primary sovereign bond auctions. This indirect way of supporting the sovereign bond market may yet be successful, but we believe that banks may remain cautious when being faced with primary sovereign offerings, as most financial institutions have aimed at shrinking their balance sheets by running down security portfolios in order to comply with higher capital requirements, which become effective in 2012.
Shockingly, S&P dares to challenge not only the status quo, but "powerful national interest groups" - easily the first time we have seen something like this out of a "status quo" organization, let alone a rating agency.
- Governments are also aiming to put greater focus on growth-enhancing structural measures. While these may contribute positively to a lasting solution of the current crisis, we believe they could also run counter to powerful national interest groups, whose resistance could potentially jeopardize the reform momentum and impede the recovery of market confidence.
Why it is all a Catch 22 and why the LTRO "carry trade" has failed:
- Recent Italian and other primary auctions suggest to us, however, that banks and other investors may still only be willing to lend longer term to governments facing market pressure if they are offered interest rates that, all other things being equal, will make fiscal consolidation harder to achieve.
Let's not forget the EFSF:
- We are currently assessing the credit implications of today's eurozone sovereign downgrades on those institutions and will publish our updated credit view in the coming days.
And probably the most important observation of the night:
- As we noted previously, we expect eurozone policymakers will accord ESM de-facto preferred creditor status in the event of a eurozone sovereign default. We believe that the prospect of subordination to a large creditor, which would have a key role in any future debt rescheduling, would make a lasting contribution to the rise in long-term government bond yields of lower-rated eurozone sovereigns and may reduce their future market access.
The S&P itself warns that the entire basis of the European bailout will create a split market in sovereign bonds, in which pari passu treatment will be a thing of the past, and in which buyers will have no clue what treatment awaits them in a worst case scenario. If anyone thought that ISDA's idiotic attempt to kill the CDS market caused a collapse in demand for sovereign paper, just wait until potential buyers comprehend they could be primed every step of the way and the market is effectively two tier.
S&P may have just killed the European sovereign market by saying out loud what only "fringe bloggers" dared suggest in the past.
From S&P
FRANKFURT (Standard & Poor's) Jan. 13, 2012--Standard & Poor's Ratings Services today completed its review of its ratings on 16 eurozone sovereigns, resulting in downgrades for nine eurozone sovereigns and affirmations of the ratings on seven others.
We have lowered the long-term ratings on Cyprus, Italy, Portugal, and Spain by two notches; lowered the long-term ratings on Austria, France, Malta, the Slovak Republic, and Slovenia, by one notch; and affirmed the long-term ratings on Belgium, Estonia, Finland, Germany, Ireland, Luxembourg, and the Netherlands. All ratings on the 16 sovereigns have been removed from CreditWatch where they were placed with negative implications on Dec. 5, 2011 (except for Cyprus, which was first placed on CreditWatch on Aug. 12, 2011).
The outlooks on our long-term ratings on all but two of the 16 eurozone sovereigns are negative; the outlooks on the long-term ratings on Germany and Slovakia are stable. See "Standard & Poor's Takes Various Rating Actions On 16 Eurozone Sovereign Governments," published today for full details.
This report addresses questions that we anticipate market participants might ask in connection with our rating actions today.
WHAT HAS PROMPTED THE DOWNGRADES?
Today's rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone. In our view, these stresses include: (1) tightening credit conditions, (2) an increase in risk premiums for a widening group of eurozone issuers, (3) a simultaneous attempt to delever by governments and households, (4) weakening economic growth prospects, and (5) an open and prolonged dispute among European policymakers over the proper approach to address challenges.
The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems. In our opinion, the political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those eurozone sovereigns subjected to heightened market pressures.
We also believe that the agreement is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone. In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the EMU's core and the so-called "periphery". As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers' rising concerns about job security and disposable incomes, eroding national tax revenues.
Accordingly, in line with our published sovereign criteria, we have adjusted downward our political scores (one of the five key factors in our criteria) for those eurozone sovereigns we had previously scored in our two highest categories. This reflects our view that the effectiveness, stability, and predictability of European policymaking and political institutions have not been as strong as we believe are called for by the severity of a broadening and deepening financial crisis in the eurozone.
In addition to our assessment of the policy response to the crisis, downgrades in some countries have also been triggered by external risks. In our view, it is increasingly likely that refinancing costs for certain countries may remain elevated, that credit availability and economic growth may further decelerate, and that pressure on financing conditions may persist. Accordingly, for those sovereigns we consider most at risk of an economic downturn and deteriorating funding conditions, for example due to their large cross-border financing needs, we have adjusted our external score downward.
WHY WERE SOME EUROZONE SOVEREIGNS DOWNGRADED BY TWO NOTCHES AND OTHERS BY ONE NOTCH?
We believe that not all sovereigns are equally vulnerable to the possible extension and intensification of the financial crisis. Those we consider most at risk of an economic downturn and deteriorating funding conditions, for example due to the large cross-border financing needs of its governments or financial sectors, have been downgraded by two notches, as we lowered the political score and/or the external score reflecting our view of the risk of a marked deterioration in the country's external financing.
On the other hand, we affirmed the ratings of sovereigns which we believe are likely to be more resilient at their current rating level in light of their relatively strong external positions and less leveraged public and private sectors. These credit strengths remain robust enough, in our opinion, to neutralize the potential ratings impact from the lowering of our political score.
In this context, we would note that the ratings on the eurozone sovereigns remain at comparatively high levels, with only three below investment grade (Portugal, Cyprus, and Greece). Historically, investment-grade rated sovereigns have experienced very low default rates. From 1975 to 2010, the 15-year cumulative default rate for sovereigns rated in investment grades was 1.02%, and 0.00% for sovereigns rated in the 'A' category or higher.
WHY DO THE RATINGS ON MOST OF THESE SOVEREIGNS HAVE NEGATIVE OUTLOOKS?
For those sovereigns with negative outlooks, we believe that downside risks persist and that a more adverse economic and financial environment could erode their relative strengths within the next year or two to a degree that in our view could warrant a further downward revision of their long-term ratings. We believe that the main downside risks that could affect eurozone sovereigns to various degrees are related to the possibility of further significant fiscal deterioration as a consequence of a more recessionary macroeconomic environment and/or vulnerabilities to further intensification and broadening of risk aversion among investors, jeopardizing funding access at sustainable rates. A more severe financial and economic downturn than we currently envisage (see "Sovereign Risk Indicators," published Dec. 28, 2011) could also lead to rising stress levels in the European banking system, potentially leading to additional fiscal costs for the sovereigns through various bank workout or recapitalization programs. Furthermore, we believe that there is a risk that reform fatigue could be mounting, especially in those countries that have experienced deep recessions and where growth prospects remain bleak, which could eventually lead to lower levels of predictability of policy orientation, potentially leading to another downward adjustment of the political score, which might lead to lower ratings.
We believe that important risks related to potential near-term deterioration of credit conditions remain for a number of sovereigns. This belief is based on what we see as the sovereigns' very substantial financing needs in early 2012, the risk of further downward revisions of economic growth expectations, and the challenge to maintain political support for unpopular and possibly more severe austerity measures, as fiscal targets are endangered by macroeconomic headwinds. Governments are also aiming to put greater focus on growth-enhancing structural measures. While these may contribute positively to a lasting solution of the current crisis, we believe they could also run counter to powerful national interest groups, whose resistance could potentially jeopardize the reform momentum and impede the recovery of market confidence. In our view, it also remains to be seen whether European banks will indeed use the ample term funding provided by the ECB (see below) to purchase newly issued sovereign bonds of governments under financial stress. We believe that as long as uncertainty about the bond buyers at primary auctions remains, the risk of a deepening of the crisis remains a real one. These risks could be exacerbated should renewed policy disagreements among European policymakers emerge or the Greek debt restructuring lead to an outcome that further discourages financial investors to add to their positions in peripheral sovereign securities.
For two sovereigns, Germany and Slovakia, we concluded that downside scenarios that could lead to a lowering of the relevant credit scores and the sovereign ratings carry a likelihood of less than one-in-three during 2012 or 2013. Accordingly we have assigned a stable outlook.
HOW DO WE INTERPRET THE CONCLUSIONS OF THE DECEMBER EUROPEAN SUMMIT?
We have previously stated our belief that an effective strategy that would buoy confidence and lower the currently elevated borrowing costs for European sovereigns could include, for example, a greater pooling of fiscal resources and obligations as well as enhanced mutual budgetary oversight. We have also stated that we believe that a reform process based on a pillar of fiscal austerity alone would risk becoming self-defeating, as domestic demand falls in line with consumer's rising concerns about job security and disposable incomes, eroding national tax revenues.
The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers, lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems. In our opinion, the political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those eurozone sovereigns subjected to heightened market pressures. Instead, it focuses on what we consider to be a one-sided approach by emphasizing fiscal austerity without a strong and consistent program to raise the growth potential of the economies in the eurozone. While some member states have implemented measures on the national level to deregulate internal labor markets, and improve the flexibility of domestic services sectors, these reforms do not appear to us to be coordinated at the supra-national level; as evidence, we would note large and widening discrepancies in activity and unemployment levels among the 17 eurozone member states.
Regarding additional resources, the main enhancement we see has been to bring forward to mid-2012 the start date of the European Stability Mechanism (ESM), the successor vehicle to the European Financial Stability Fund (EFSF). This will marginally increase these official sources' lending capacity from currently €440bn to €500bn. As we noted previously, we expect eurozone policymakers will accord ESM de-facto preferred creditor status in the event of a eurozone sovereign default. We believe that the prospect of subordination to a large creditor, which would have a key role in any future debt rescheduling, would make a lasting contribution to the rise in long-term government bond yields of lower-rated eurozone sovereigns and may reduce their future market access.
We also believe that the agreement is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone. In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the EMU's core and the so-called "periphery." In our opinion, the eurozone periphery has only been able to bear its underperformance on competitiveness (manifest in sizeable external deficits) because of funding by the banking systems of the more competitive northern eurozone economies. According to our assessment, the political agreement reached at the summit did not contain significant new initiatives to address the near-term funding challenges that have engulfed the eurozone.
The summit focused primarily on a long-term plan to reverse fiscal imbalances. It proposed to enshrine into national legislation requirements for structurally balanced budgets. Certain institutional enhancements have been introduced to strengthen the enforceability of the fiscal rules compared to the Stability and Growth Pact, such as reverse qualified majority voting required to overturn sanctions proposed by the European Commission in case of violations of the broadly balanced budget rules. Notwithstanding this progress, we believe that the enforcement of these measures is far from certain, even if all member states eventually passed respective legislation by parliaments (and by referendum, where this is required). Our assessment is based on several factors, including:
- The difficulty of forecasting reliably and precisely structural deficits, which we expect will likely be at the center of any decision on whether to impose sanctions;
- The ability of individual member states' elected governments to extricate themselves from the external control of the European Commission by withdrawing from the intergovernmental agreement, which will not be part of an EU-wide Treaty; and
- The possibility that the appropriateness of these fiscal rules may come under scrutiny when a recession may, in the eyes of policymakers, call for fiscal stimulus in order to stabilize demand, which could be precluded by the need to adhere to the requirement to balance budgets.
Details on the exact content and operational procedures of the rules are still to emerge and -- depending on the stringency of the rules -- the process of passing national legislation may run into opposition in some signatory states, which in turn could lower the confidence of investors and the credibility of the agreed policies.
More fundamentally, we believe that the proposed measures do not directly address the core underlying factors that have contributed to the market stress. It is our view that the currently experienced financial stress does not in the first instance result from fiscal mismanagement. This to us is supported by the examples of Spain and Ireland, which ran an average fiscal deficit of 0.4% of GDP and a surplus of 1.6% of GDP, respectively, during the period 1999-2007 (versus a deficit of 2.3% of GDP in the case of Germany), while reducing significantly their public debt ratio during that period. The policies and rules agreed at the summit would not have indicated that the boom-time developments in those countries contained the seeds of the current market turmoil.
While we see a lack of fiscal prudence as having been a major contributing factor to high public debt levels in some countries, such as Greece, we believe that the key underlying issue for the eurozone as a whole is one of a growing divergence in competitiveness between the core and the so-called "periphery." Exacerbated by the rapid expansion of European banks' balance sheets, this has led to large and growing external imbalances, evident in the size of financial sector claims of net capital-exporting banking systems on net importing countries. When the financial markets deteriorated and risk aversion increased, the financing needs of both the public and financial sectors in the "periphery" had to be covered to varying degrees by official funding, including European Central Bank (ECB) liquidity as well as intergovernmental, EFSF, and IMF loans.
HOW HAS THE EUROPEAN POLICY RESPONSE AFFECTED THE RATINGS?
We have generally adjusted downward our political scores (one of the five key factors in our published sovereign ratings criteria) for those eurozone sovereigns we had previously scored in our two highest categories. This score change has been a contributing factor to the rating actions on the relevant sovereigns cited above. Under the political score, we assess how a government's institutions and policymaking affect a sovereign's credit fundamentals by delivering sustainable public finances, promoting balanced growth, and responding to economic or political shocks. Our political score also captures the potential effect of external organizations on policy settings.
It is our view that the limitations on monetary flexibility imposed by membership in the eurozone are not adequately counterbalanced by other eurozone economic policies to avoid the negative impact on creditworthiness that the eurozone members are in opinion view currently facing. Financial solidarity among member states appears to us to be insufficient to prevent prolonged funding uncertainties. Specifically, we believe that the current crisis management tools may not be adequate to restore lasting confidence in the creditworthiness of large eurozone members such as Italy and Spain. Nor do we think they are likely to instill sufficient confidence in these sovereigns' ability to address potential financial system stresses in their jurisdiction. In such a setting, the prospects of effectively intervening in the feedback loop between sovereign and financial sector risk are in our opinion weak.
HOW DO YOU EXPECT MACROECONOMIC DEVELOPMENTS WILL AFFECT THE REFORM AGENDA?
We believe that the elusiveness of an effective policy response is likely to add to caution among households and investors alike, weighing on the growth outlook for all eurozone members. Our base case still assumes that the eurozone will record moderate growth in 2012 and 2013, i.e. 0.2% and 1%, respectively -- down from 0.4% and 1.2% according to our early December forecast, with a relatively mild recession in the first half of 2012. Nevertheless, we estimate a 40% probability that a deeper and more prolonged recession could hit the eurozone, with a likely reduction of economic activity of 1.5% in 2012. Furthermore, we believe an even deeper and more prolonged slump cannot be entirely excluded. We expect this weak macroeconomic outlook if realized would complicate the implementation of budget plans, with slippages to be expected, which would likely further dampen confidence and potentially deepen the recession, as funding and credit is curtailed and the private sector increases precautionary savings.
WHAT IS YOUR VIEW OF THE LATEST DEVELOPMENTS IN GREECE AND WHAT IMPACT DO THEY HAVE YOUR ANALYSIS?
We did not change the rating on Greece, which had been downgraded to 'CC' in July 2011, indicating our view of the risk of imminent default. Negotiations with bondholders have taken longer than originally anticipated and we believe may now run close to a large redemption of €14.5 billion on March 20, 2012, raising the specter of a disorderly default. Such an event would in our view further complicate the restoration of affordable market access for other sovereigns experiencing market stress. We understand that the main unresolved issues are related to the treatment of holdouts, the participation of official creditors, and the coupon of the new bonds that will be offered (which partly determine the effective recovery, which we continue to expect to lie between 30% and 50%). We do not believe that private-sector involvement will necessarily be a one-off event in the case of the Greek restructuring and would not be sought in possible future bail-out packages in a future case of sovereign insolvency or prolonged loss of market access. All the more so as official lenders are less likely to bear any future losses as their lending will be channeled through the ESM, a privileged creditor that is expected to be senior to bondholders in any future restructuring.
HOW DOES STANDARD & POOR'S VIEW THE ECB's RESPONSE TO DATE?
In our view, the actions of the ECB have been instrumental in averting a collapse of market confidence. We see that the ECB has eased its eligibility criteria, allowing an ever-expanding pool of assets to be used as collateral for its funding operations, and has lowered the fixed rate on its main refinancing operation to 1%, an all-time low. Most importantly in our view, it has engaged in unprecedented repurchase operations for financial institutions. In December 2011, it lent financial institutions almost €500 billion over three years and announced further unlimited long-term funding auctions for early 2012. This has greatly relieved the funding pressure for banks, which will have to redeem over €200 billion of bonded debt (excluding in some jurisdictions sizeable private placements) in the first quarter alone. By lowering the ECB deposit rate to 0.25%, we believe that the central bank has implicitly tried to encourage financial institutions to engage in a carry trade of borrowing up to three-year funds cheaply from the central bank and purchasing high-yielding government bonds. Recent Italian and other primary auctions suggest to us, however, that banks and other investors may still only be willing to lend longer term to governments facing market pressure if they are offered interest rates that, all other things being equal, will make fiscal consolidation harder to achieve.
Reports indicate that many investors had hoped that a breakthrough at the December summit would have enticed the ECB to step up its direct government bond purchases in the secondary market through its Security Market Program (SMP). However, these hopes were quickly deflated as it became clearer that the ECB would prefer to provide banks with unlimited funding, partly with the expectation that those liquid funds in banks' balance sheets would find their way into primary sovereign bond auctions. This indirect way of supporting the sovereign bond market may yet be successful, but we believe that banks may remain cautious when being faced with primary sovereign offerings, as most financial institutions have aimed at shrinking their balance sheets by running down security portfolios in order to comply with higher capital requirements, which become effective in 2012. We believe that the ECB has not entirely closed the door to expanding its involvement in the sovereign bond market but remains reluctant to do so except in more dramatic circumstances. In our view, this reluctance is likely prompted by concerns about moral hazard, the ECB's own credibility (particularly should losses mount), and potential inflation pressures in the longer term. We think it may also be the case that the ECB (as well as some eurozone governments) is concerned that governments' reform efforts would falter prematurely if market pressure subsides.
We believe that the risk of a credit crunch remains real in a number of countries as economic conditions weaken and banks continue to consolidate their balance sheets in light of tighter capital requirements and poor market conditions in which to raise additional equity. However, the monetary policy actions described above may mitigate the risk of a more extreme tightening of credit conditions, which, if it were to come to pass, could put further pressure on economic activity and employment.
In summary, while the monetary policy reaction has not been as accommodating as many investors may have anticipated or hoped for, we believe that it has nevertheless provided significant breathing space during which progress on policy reform can be made. Furthermore, the ECB may yet engage in additional supporting steps should the sovereign and bank funding crises intensify further. Therefore, we have not changed our monetary score on eurozone sovereigns.
HOW DOES STANDARD & POOR'S ASSESS THE REFORM EFFORTS OF THE NEW GOVERNMENTS IN ITALY AND SPAIN?
In our view, the governments of Mario Monti and Mariano Rajoy have stepped up initiatives to modernize their economies and secure the sustainability of public finances over the long term. We consider that the domestic political management of the crisis has improved markedly in Italy. Therefore, we have not changed our political risk score for Italy because we are of the opinion that the weakening policy environment at the European level is to a sufficient degree offset by Italy's stronger domestic capacity to formulate and implement crisis-mitigating economic policies.
Despite these encouraging developments on domestic policy, we downgraded both sovereigns by two notches. This is due to our opinion that Italy and Spain are particularly prone to the risk of a sudden deterioration in market conditions. Thus, we believe that, as far as sovereign creditworthiness is concerned, the deepening of the crisis and the risks of further market dislocation that could accompany an inconclusive European crisis management strategy more than offset our view of the enhanced national policy orientation.
WHY WAS IRELAND THE ONLY SOVEREIGN AMONG THE SO-CALLED "PERIPHERY" NOT
DOWNGRADED?
We have not adjusted our political score backing the rating on Ireland. This reflects our view that the Irish government's response to the significant deterioration in its public finances and the recent crisis in the Irish financial sector has been proactive and substantive. This offsets our view that the effectiveness, stability, and predictability of European policymaking as a whole remains insufficient in addressing the deepening financial crisis in the eurozone. Excluding government-funded banking sector recapitalization payments, the authorities have adjusted Ireland's budget by almost 13% of estimated 2012 GDP since 2008 and plan additional fiscal savings of close to 8% of GDP for 2012-2015. All other things being equal, we view the government's fiscal consolidation plan as sufficient to achieve a general government deficit of about 3% of GDP in 2015. In our view, there is currently a strong political consensus behind the fiscal consolidation program and policy implementation so far has been extremely strong.
In our view, Ireland has the most flexible and open economy among the "periphery" sovereigns. We believe that Ireland's economic adjustment process is further advanced than in the other sovereigns currently experiencing market pressures. This is illustrated by the 25% depreciation in the trade-weighted exchange rate since May 2008 and Irish exports growth contributed positively to the muted Irish economic recovery in 2011. However, in our view this also leaves the Irish economy and, ultimately, the Irish government's fiscal consolidation program susceptible to worsening external economic conditions, which is reflected in our negative outlook on the rating.
WHAT ARE THE IMPLICATIONS FOR THE EFSF AND OTHER EUROPEAN MULTILATERAL LENDING INSTITUTIONS?
Following our placement of the ratings on the eurozone sovereigns on CreditWatch in December, we also placed a number of supranational entities on CreditWatch with negative implications. These included, among others, the European Financial Stability Fund (EFSF), the European Investment Bank (EIB), and the European Union's own funding program. We are currently assessing the credit implications of today's eurozone sovereign downgrades on those institutions and will publish our updated credit view in the coming days.
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The downgrade of France has claimed its first victim: Sarkozy can not get it up. No matter what Sarkozy tries (oysters, Viagra, etc.), he is as limp as a Euro.
Oh, well if he's having problems, I can stand in for him with Carla.
Trooper ;-)
~//~
Here for a good time (not a long time)
http://www.youtube.com/watch?v=3qFIaI1M5kU (3:33)
Watch for squeezes, to the topside. They can get " VIOLENT" when the trade is this short. The CoT charts are even shorter of EURO this week.
hm
looks like a "coup d'état" as in ITA with Monti but wonder who is planned to take the job in FRA in 6 months then ??? who's the lucky goldmanite ???
Comprend e Senore. Need to set the linguistics.
Taxpayer,
Word is Sarkozy co-authored a new book called, Funny trail's in the sand with Peter Dragin.
I don't think S&P ratings matter. We all know the probem and the mystery was why did it take S&P so long to downgrade France, Italy, etc. The are laggers, not leaders.
The ECB's stacking the bank portfolios with sovereign debt has seeming worked in the short run. [I just gave a presentation in DC on that subject].
Here are some charts from earlier today on the ECB's short-term effecitveness and why it won't last.
https://confoundedinterest.wordpress.com/
And it is exactly that short term thinking that brought us the crisis circa 2008.
I know this is an odd thought but isn't it exactly the banks being stacked with sovereign debt that brought us this crisis?
And 3 years (when LTRO expires) may seem like a long time, but the whole greece crisis started about 26 months ago. So 36 months from now, tell me how will things have improved (spanish unemployment going from 20% to 18%)?
And they are ahead of the other bozos
you mean we won't get through to March when the new, new, new, new, new Euro Constitution replaces the old, old, old, old, old failed (torn to bits) ones???
I was soooo looking forward to Merkozy reviving the Euro Zombie only to flog and tear him to death again ..it seems Euro agreements and rules, laws, regulations, bdget disciplines etc don't last 10 minuts nowadays
One wonders what the problem is? Let's ask the lunatics running the asylum, the politicians
At least all is well in the US:
http://www.reuters.com/article/2012/01/13/us-bankofamerica-idUSTRE80C2HV...
Complex analyses, what does it mean..... when I need to know who is going to win WWIII? Just tell me about post-WWIII.
Post WW3 will be a great buying opportunity -if you're not dead, sick from massive amounts of radiation which the gulf stream carried our way after we nuked China, and if you have hordes of gold and silver and the ammo to protect it from the mad max mobs that will be descending upon the cities that have not been totally destroyed. Bunker robbers will be the rage -angry mobs looking for the rich as they come out of their bunkers and shelters. They'll be looking for them -not so much to get their wealth or take revenge -but because their non-radioactive meat will pay a premium on the human flesh market -kind of tastes like chicken- Boston market Chicken -of the Harvard variety.
Stop. You're making me want to write the script.
Well you're view is interesting.... but I heard a Heavenly King might rule. Oh well .. guess I'll have to wait and see.
History has all the answers. Some lessons from the black plague effects on economy in europe.
- lord and peasant were adjusting to the Black Death's principal economic consequence: a much smaller agricultural labor pool. Before the plague, rising population had kept wages low and rents and prices high, an economic reality advantageous to the lord in dealing with the peasant and inclining many a peasant to cleave to demeaning yet secure dependent tenure.
- the rural worker indeed demanded and received higher payments in cash (nominal wages) in the plague's aftermath. Wages in England rose from twelve to twenty—eight percent from the 1340s to the 1350s and twenty to forty percent from the 1340s to the 1360s.
- The Black Death, moreover, profoundly altered the contours of settlement in the countryside. Catastrophic loss of population led to abandonment of less attractive fields, contraction of existing settlements, and even wholesale desertion of villages (ghost towns).
They didn't see any mad max type scenario, but there were a lot of village attacks by small armed man. The equivalent would be gangs and organized crime which are seen right now. Italy is under control of the mafia. Central America and Mexico is under control of gangs (zetas, golfito, salvatrucha, etc). Many cities in the us are already seen an increase in gang activity in the US. It will scare many people to know that if a high enough gang member in EL Salvador wanted you dead, then you are dead my friend.
http://eh.net/encyclopedia/article/Routt.Black.Death
Via con dios, amigo
lol Yeah I have been watching too much gangland in the History channel.
http://www.history.com/shows/gangland
As posted before: "Bankers. It's whats for dinner."
OT but does anyone know what this means,
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Subject: Congratulations! You have joined a new role
Dapper Dan, Congratulations! You have met the minimum required points for joining a new role. As a new member of this role, you now join a select few in having access to more areas and privileges on the web site. Role: Gold Member Points Required: 300 We extend our warmest welcome.
Dinner with Marla would be nice, I think.
Or even a nice fiat watch.
It means you can submit stories.
Your old avatar was much better. (but the man behind it is still cool by me). :)
The new one is the Invisible Man, right?
maybe a white collar criminal?
who dat? dick tracy?
I think it means you can use gestapo tactics to abuse, rob and suppress the rest of us here at ZH.
Also you can get a tiny tiger tattooed on your heinie.
Congratulations you got a Bankster/Bammy license, your license to kill and imprison citizens indefinitely is in the mail..
Yeah, I got that, too. I was all excited. Then I got another from Sacrilidge that they were just kidding. Some e-mailng snafu, or something, and I immediately went into deep depression.
I always wanted to be able to post an occasional jpg or something. Thought I had arrived. No such luck.
And me, a ZH old-timer...
If Obama gets re-elected, the price of gold and silver will soar.
Since I am totally invested in physical, I would become very rich.
So why am I still hoping and praying that Ron Paul wins?
When you know that hell is coming, make money on the antichrist....
maybe just preserve some purchasing power.
Because he will audit the Fed and Fort Knox, and then we will find out some/most of the gold was lent in Gold Swaps to help backstop the start of the Euro (and/or other currencies). ......This shortage will cause a panic and make it rise too. :-) .... WIN WIN
Obama will make you rich.
Same as RP.
But RP is far less likely not to make your possessions illegal or confiscate them :-)
As far as what has prompted the downgrades, the underlying cause might ultimately be what the Hubbert Curve implies about forward looking credit, debt, surplus, and real economic activity. Banks and credit agencies might finally be letting on that they are "getting it".
From : http://www.zerohedge.com/news/observations-engineer
Do home loans (or any long term loans of any type) make good business sense under a 2 percent decrease (year after year after year) in oil production which is the worlds most critical natural resource? Would they make good business sense under a 5 percent decrease (year after year after year)? The banks may finally be starting to "get it", and long term credit may be tightening as a result.
I think Kudlow is hitting the " magic dust" , again! SPX 1450? I'm already partially hedged. Kudlow should explore a thing called volume! Welcome to 1-1-2012!
Unfortunately volume has become meaningless as the float upward and onward continues...this action feels like 2010 where every dip was bought by the algorithms regardless of news flow and deteriorating fundamentals.
Volume is "Meaningless"? Am I correct? So a trade like that, 'lack of liquidity and all?... Translates on a rational scale) into crude @ 120 bbl/ or the dxy @ 83-85? Take your pick!
Kudlow also just said ( in not so many words), on his show ... a Romney win puts Bain Capitol in charge of the Government " Most Bullish thing of all "
His guests were all giddy, and down with it.
ETF WTF WTF WTF?
Kudlow needs to be checked for a flask, before he hit's his podium!
Kudlow is still alive? And people still watch him on TV?
All you need to know about larry is that his "mentor" supply side economist Art Laffer, is being sued in a $3M (yes with an M, so basically huge for these Reagan dudes and a rounding error in current terms) PONZI SCHEME.
It is about time Larry and his era of supply side economists are put out to pasture.
how about a Camel instead of a cow?
http://www.youtube.com/watch?v=AQK5A3rnb7g&feature=player_detailpage
gives it more of an...Arabian flair. Says "hey...we got oil. whach you got?"
(Cue "we got Art Laffer.")
Hey , Larry is a hoot! I like his "supply side ideas" , when there is demand. Quantitative infinity is classic supply side "paper milling" . I'll slant to the side of contribution/ creation/ innovation, every day. Printing more money just detracts from creativity!
Larry! Larry Kudlow!
I like Larry, but his endless talk of "Free Market Capitalism" in the face of rampant crony capitalism hand-in-hand with a socialist bent without absolutely slamming the bailouts, Romney, the CONgress, the status quo, is really frustrating.
He did have Ron Paul on tonight and gave him a good five minutes or more to talk about his policies and what he could contribute to fix the country and Austrian economics and the benefits of not acting Imperialist with our military in all corners of the globe.
More attention than most of the media has given Dr. Paul.
Since when does the "GLoBe" have corners?
Don't you know that we actually live on a 4-dimensional tesseract, with 16 corners?
What are you, some whacko member of the Round Earth Society?
I;m trying to laugh my way out of the "WORM HOLE"<
The new standard is poor.
From the company that AAA stamped half the liar loan cauldrons of dog shit CDOs that put us in this mess in the first place.
lmfao, are we down to "lender of last blame" now? Keynesians just can't take it now that the kitchen is getting hot can they?
Wake up, mad scientist printing has destoyed what you and I call an economy and home bud.
And how long will the greedy assholes keep running the show?
and if ALL of the financial markets disappeared, we'd still have the primary economy-Nature. The secondary economy-farming. The third economy-Main Street.
Pension funds? they could be managed by MBAs with NO prior connection to Wall Street. There's a great new invention that does modeling--it's called a spreadsheet. Andn if pension funds have complaints, they can damn well sue the hedge funds.
Ron Kirby encapsulattes how the FED uses derivatives, Wall Street's "Magnificent 5", and the US Treasury's secret ESF to artificially keep interest rates low to allow the government to continue to run up more debt unchecked by bond vigilantes like Bill Gross, who are left bumfuzzled trying to fight the Fed.
The $U.S. Dollar Centric Derivatives Complex: Progenitor of Parasitic, Ponzi Price-Fixing
he is into the whole eric deCarbonnel thesis, which tyler presented in 5 parts, starting NY Day
did you see the smack-down, gwar?
ronKirby introduces annBarnhardt's blog & quote/pastes her: “It is absolutely amazing to me, and frankly awful, that these interviews I do are so popular. Most interviews or radio programs I do wind up being the most popular (or top-three) for their respective program or host. And we talked about my "Going Galt" letter being #6 for ZeroHedge yesterday..."
then he responds to her: All I can say is, “Ms. Barnhardt, welcome to our ‘systemically polluted’ capital markets. As a staunch supporter of GATA I’ve been writing about it for at least 8 years. The folks at GATA are very familiar with and have been documenting the systemic abuse of our capital markets since 1998 - LONG before ANYONE ever heard of Kyle Bass and years before the world ever heard of ZeroHedge.”
bring it, ron!
Just waiting to see te zion bonds
I,m sure the fucker will start having t bonds on the ideology.. They did it with land.
First off the Debt Inspection was pretty straightforward:
http://www.youtube.com/watch?v=9-zf2UBp7fY&feature=player_detailpage
Second...and this is just a first impression of course...this only benefits France and France's exit from the EU as their downgrade will result in interest rates going down for them thus allowing them greater flexiblity. The rest of the EU...dependent upon German bank(s?) and trade as they are... i think are in a far more difficult position. Certainly the last they all have come out in defense of the euro...which of course makes total sense. Was it Morgan Stanley who had all the exposure to France? That sounds like a good thing right now. I imagine JP Morgan is not so well positioned...as with Goldman Sachs of course.
We shall see next week. Watch for credit spreads to widen. Nice piece of work. Thanks.
The EFSF was drawn down by 150B.
Rates are going....down....because of the....downgrade? Huh?
If a major collapse were underway, gold and silver would stand on record levels. This downgrade will make no difference, PMs lower on Friday. Nothing happens. Boring world we live in.
WARNING: JUNK collector sighted
Is Greece collapsing?
Greece is fine!
Yank bullshit but it is so typical for them...the Standards are Poor. If Italy is BBB, USA should deserve DDDD, spanking in the ass and should stand in the corner.
Quiet ya Limey! I'm catching a falling knife! I love me'Sterling!
FUCK YOU ! ..... there obvioulsy again is some US DEBT which needs to be sold
and the US CAVALRY has been ordered into action ..now when it looks like the US DEBT MOUNT EVEREST doesnt have sufficient buyers
Considering its track reckord ..WHO GIVES A SHIT about S & P ????
... Nobody !!!!
Aren't you the Thespian. Got any ideas,/ sans anger? For the Sunday open I'm asking matey! ya bloke?
The rating agencies are the banks.
This whole European markdown is just like the whole subprime meltup and meltdown.
The ratings agencies, are the antithesis of "BANKS"" , right now . It's all about credibility! Hence the the sub-par European write downs!!!
ECB buys all European debt vs Fed buying all US debts.
There's a match for the ages.
The winner is that group who gets the most sympathies and has most credibility.
Not looking good for the Fed, the isolated US and her debt.
Euro emerging as the next reserve currency, bitchez.
I would go long Yuan before Euro! Do some "sovereign liquidity", info/tell , first.
The FX Swap means the Fed bought the debt. They are being repaid soon, in USD, and what has the USD done lately? It appreciated. The Fed made money there.
It's like a favor from the Mafia. Europe got what they needed, but the Fed got what they wanted. Some cash, and some bargaining chips.
The ECB is over its head. I've never been an apologist for the Fed, but this is their game. If the ECB tries to play they will be in violation of their treaty. The Fed has no treaty. They print. That is what they do.
So it goes like this....the ECB begins to monetize. Everything looks fine. Then one country decides to leave the Zone due to violation of the treaty.
Let's set the "SWAP"record straight. The ECB and the Fed exchanged currencies @ a fixed rate for ( 90 ) days!
At the end of ( 90) days the currencies are re-exchanged for ! the 50BP boworowing cost ( OIS + servicing fees)...
There is NO spread! Hense the SWAP! That is why the FED carries the trade ( POSITIVE)! End of Story!
TO EUREKA : You are absolutely right !
I agree ..TYLER is an ULTRA NATIONALIST AMERICAN ... and AS DOCUMENTED BY HIS RELENTLESS AND MISLEADING CAMPAIGN AGAINST EUROPE HE HAS BRANDED HIMSELF AS COMPLETELY UNRELIABLE
BUT EURAKA ... take it easy .. before this is over ...the US RATING AGENCIES will be HISTORY and the USA will be DEMASKED in all its PERVETED HYPOCRACY ...BANCRUPT AS IT IS ..STEALING OTHER COUNTRIES MONEY ..SO THE AMERICANS CAN CONTINUE THEIR CONSUMPTION ORGY
Most Americans are FAT , UNEDUCATED ..and UGGLY .... physically as well as mentally !
PINE Yard? Is that correct?
thank you, needed that, rough week...
pineyard = "access denied" = L0L!!!
And Europeans are lazy and they smell bad! All of them!
Except French women....and Italian women....
That's a new thread!
when everybody smells bad all of the time you do not notice any longer.
And regarding (young, pretty) French / Italian women.. no idea how they smell, I am an ugly German, I have no acess to such.
Drink ya another dark brew bro, you be alright by noon. It's all good.
Hey Pineyard dickhead. We have Ron Paul. Who do you have? At least we are trying.
Tick tock tick tock (and no, they are not telling us what is happening on the water in real time...try a whole week later...they could be shooting any time)
http://news.yahoo.com/tensions-high-us-warns-iran-not-block-shipping-214939289.html
Tensions high, US warns Iran not to block shippingWASHINGTON (AP) — Tensions rising by the day, the Obama administration said Friday it is warning Iran through public and private channels against any action that threatens the flow of oil from the Persian Gulf. The Navy revealed that two U.S. ships in and near the Gulf were harassed by Iranian speedboats last week.
Navy officials said that in separate incidents Jan. 6, three Iranian speedboats — each armed with a mounted gun — briefly chased after a U.S. Navy ship just outside the Gulf near the Strait of Hormuz and a U.S. Coast Guard cutter in the northern Gulf. No shots were fired and the speedboats backed off.
Ahem, A US COAST GUARD CUTTER?? WTF is a US COAST GUARD CUTTER doing in the straight of HORfuckinmuz?? Do we have some coast line over there? I used to think the MI complex was on balance a neutral thing, not anymore..
Did they have to do this so they can downgrade the gool old US of A (again) in a few weeks?
That squeeze is beautifull. 96 Q?
So many questions for you. Is English your 1st language? I've wondered for a long time. You only show up at night but, I figured that, like me, you have to work for a living? You seem to have disdain for anyone who doesn't want to talk FX. Don't know much about it and have never claimed that I do. Do you have your own blog? No - you've never advertised it anyway that I can recall.
You can always tell a ( abater)... They show up late @ night, with ( real ) TORCHES!
R the ( ME's still rinse washing? Petro $'s?) Yes they are every "EURO session", Sterilized/ through the BIS/ & other silent bank!
Look @ the AUD being used as a Proxie! That melt down is coming!
And the fifth horseman was called S&P, and downgrades followed him.
The S & P downgrade was totally expected and a LOGICAL STEP in the US FINANCIAL SWINDLE TOWARDS THE WORLD
The US needs to BORROW MOUNTAINS of MONEY from Overseas
The US TREASURY SALES have been hit by dwindling Buyers ..
The European Bond Sales went excellent ... and the ECB Rescue Package has worked far better than expected
THe EURO AREA has just posted a BIG SURPLUSS on its TRADE BALANCE for the MONTH + 6 BILLION
THIS was more than the US ECONOMY can weather.... so ... SOMETHING HAD TO BE DONE :
In comes the US CAVALRY , the US RATING AGENCIES to the RESCUE of US TREASURY SALES ....
( the same US RATING AGENCIES who by their ratings of SUBPRIME US MORTGAGE DERIVATIVES succeeded in SWINDLING European banks to invest their Capital in worthless US JUNK )
THE US MANIPULATIONS SHOULD BY NOW BE OBVIOUS FOR ANYONE WHO HAS SOME GRAMS OF BRAIN TISSUE LEFT
The BILL awaiting the US for these SWINFLE MANEUVERS jut keep GROWING !
Interesting conclusion Pineyard...This obviously puts the US and the EU at odds (fighting for bond purchasers)...Always assumed a master plan with both...Where do the similarities and oppositions clash...Coulden't they just swap BS back and forth...What does it even matter if the Fed just buys it's own bonds?...Didn't the Fed cross that bridge in 2009?
off topic, but i must throw this out. ron paul isn't getting tele time because he effectively is a threat to the mass media infrastructure. to explain, printed news is in ashes. what's next? this pretells the next wave of obsolesence in terms of info brokerage.think marshall mcluhan .albiet televised news, RP is a revolution in many ways but most importantly, in terms of the origin of how he gained support . think about it for a second, glenn beck left fox news to create the internet sensation called the blaze. a nexus point for prog/con dichotomy which in my opinion speaks to the inability to use the republican/democrat representation lie. and a lot of people want to think that he cares about the future of america, but in the mean time can i interest you in a disaster capitalism product like a year of storable food. soo, i guess ui stepped out of the fear cataplyxy, if you want to stockpile something, get people who want to boost their circumsatances.and i think that is exactly where the rp movement lies, in an idea of tightening the belt instead of the noose, especially when the govt force feed will end up choking you. i am utterly confident we will rise to help and not destroy our rising siblings. i know there is a rersource grab and the us has 11 fingers but instead of hoarding, can't we find a way to stop the waste of brute force? is that isolationist thought?
Break it down, and I'll read it! Enunciation is alive and well!
The MSM is ignoring Ron Paul because they're catering to a dying demographic. Notice that the younger generations don't watch Faux/CNN/CNBS? First, it was newspapers being outrun by television, now it's Television that's being outrun by the internet. Evolve or die.
Also, I think the demographic doesn't make sense to the talking heads all over the television landscape. Ron Paul attracts people from across the traditional political spectrum: left, independant and right, young, middle-aged and old. That isn't supposed to happen in the world they live in, where no one candidate can do that (hope & change promises excluded).
Pineyard, your EU borrow and spend Socialist policies have gotten you in trouble, but unlike you, the US Dollar IS the reserve currency of the world-even though it is a piece of shit too.
I personally think the whole world should burnt down economicaly and start over after trying all the bankers and politicians and anyone who supported their Ponzi for treason and crimes against Humanity.
P.S. I think that S&P needs to sniff out the stench coming from England and the Pound Sterling next...
the US Dollar IS the reserve currency of the world
as was the Pound Sterling and for far longer. but US Investment Banks have made sure the US Dollar will cease to be a clipped coin when resource-based economies cease trading
You design a monetary system designed to run optimally on the basis that people continue to get into debt and borrow money into existence in order to pay for things/grow businesses.
Then you complain that there's too much debt.
In order to have money in this system, you must borrow it into existence.
Complaining about too much debt , is like complaining about too much money.
What needs to happen is , the banks need to realize that they are not lenders, that they are not private institutions for profit.... that they are public servants and that they do not lend money, that people CREATE money WHEN THEY NEEDED IT, and the banks are not there to LEND but to REGULATE the CREATION of money BY PRIVATE INDIVIDUALS.
There's no such thing as a borrower or lender in this system, because quite frankly, there's no money in circulation ANYWHRE in the world.... what we spend and save is not MONEY it is simply PRIVATE CREDIT (the credit of individual "borrowers" created and put into circulation in bad faith (because no one in this system intends to actually ever pay off anything that they pretend to borrow).
Banks are there to help customers counterfeit FIAT currency.... they don't lend jack shit and they are not entitled to any repayment by anyone, and you can't even argue against that statement its impossible presuming your are restricted to making reasonable logical assertions.
The world does not have a debt problem, the debt "problem" is simply a manifstation of:
1) Growth slacking
2) Energy contracting
3) Resources getting tighter
4) Poor Human Resources management
5) Poor health standards due to bad food/poor diet of the general population creating a larger health burdon on our system
6) Financial fraud and corruption within Govt and our Private Banks
7) The fact that banks commit fraud legally because they pay to have the laws changed prior to commiting the fraud.
"If I make murder legal and then I go out and kill people, is it any less wrong?" this is the logic our banking system is following and they are getting away with it because the judges, bankers, politicians are all bought and paid for (with the exception of Ron Paul).
Then you go around a demonize what they do and they say "you are a communist who demonizes success !" hahaha
Im sorry but I have to agree with Tony Montana on t his one, if this is truly what capitalism is, then "you know what capitalism is?.... it's getting fucked".
Capitalism used to mean, the average person was free to compete.
Now go ahead and try and compete, before you know it 1000 permit requirements and regulations and copyright claims will be on your desk and you will be put out of business before you even started.... all because the special interests have aquired monopolies in all the industries and paid to have all these rules and regulations passed which make it impossible for anyone to start a legit business in this country.
Fuck the system, next business I start , its going to be all cash and im going to hide money and declare bankruptcy when im done, then go retire on some small middle eastern island (maybe crete).
This is what everyone who knows wtf they are doing .... ARE doing.
Because you can't make a legal buck anymore, the only way to turn a profit is to turn a blind eye.
It's more like power bases in the commercial structure are trying to choke each other with debt. If they think the last one out pays the tab, they will be sorely mistaken.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
Who pays the tab?
We know this already. The snooty & decaying corpses, that hobble about, never pay anything. They merely decide when and where we will pay. They're the greatest parasite class upon the back of any civilization.
They merely adorn themselves with the fruits of labor of the delusional workers of society; when they war, they fight vicariously. It won't be them fighting and dying and being mass murdered, no. They're only there to reaffirm their own "power" over their conditioned dogs.
And that's all we are when it comes down to it. We're nothing but dogs and our leash is credit, money, and the promise of profit. All scraps from the dinner table.
C'mon, hasn't the philosophy of fight club shown us anything? We have to break ourselves in order to become truly free. What we consider "us" is nothing more than generic identities that only want and need and can only exist in a corporate farm ecosystem. We have to shatter the identities that have been shaped for us in order to truly become alive. "We" shouldn't be the end product of what any business, or politician says we should be.
Freedom, individuality is scary as fuck, but that's what the world NEEDS at this moment.
I said . I was catching a falling knife!
Too much debt.
What I love about the S&P statement is that it finds austerity alone unsustainable--meaning that debt writedown/restructuring must accompany fiscal policy. But that is precisely the credit risk in naked form.
Thus the only cure for credit risk is credit impairment! The worm eating its own tail.
I sort of snorted at that 'austerity alone' bit as well...Big haircuts coming for some banks (bagholders) in the EU and elsewhere...Doesn't seem to be a way out that doesn't involve 'printing presses'...
You are very correct in that the disease may be better than the cure as it relates to credit downgrades...The agencies must atleast pass the smell test to remain viable...Although, I'm pretty sure we're 'beyond the point of no return'...
meaning that debt writedown/restructuring must accompany fiscal policy.
The past 3 years proves there won't be any debt writedown / restructuring / writeoff ...except in rare cases where some bank (or brokerage firm) is allowed to bankrupt ...arranged to bankrupt more like.
Sad truth is the sovereign debt ponzi will keep going, fueled by more and more printed currency, until said currency is worthless.
That's it. That's the game plan.
Fed and ECB will print and print and print, one way or another. Call it TARP, QE, LSAP, Op-Twist, currency swaps, LTRO, whatever, or don't call it anything at all, just quietly do it in the background out of public view.
Of course it means any savings you have in dollars or dollar-based assets, euros or euro-based assets, is gonna slowly become worthless too.
THAT is the main reason smart people are getting their savings out of dollars, dollar-based assets, euros, and euro-based assets, putting it in something the Fed and ECB can't print till it's worthless.
Gold and silver are good choices, but it can be other things too.
I believe Germany will eventually say "enough" and leave the EU, returning to the Deutschmark.
Unfortunately none of the states in America will do something like that. They'll all go down with the ship.
S&P is stating its "bias" but i did not read it the same way, jim
you're probably correct abt what it will take, ultimately, for (paste) a strong and consistent program to raise the growth potential of the economies in the eurozone, but i think you may be putting words into what is left of S&P's mouth
but, at least we're in a familiar grotto of cool, clear water pooling under chirping birds in mottled sunlight as the nymphs of centralPlanning cavort about, debating Ultimate Causes where no innocent cherub will be held responsible for missing trillions of various colored paper coupons in fervent hopes devising new & better ponzi schemes by which their "subjects" can support them even more handsomely than at present, with Time of the essence as the present edifice of "trust and promise, without verification of where the debt-destroying gold actually is and who owns it" teeters & totters toward a fabulously fuked future for all concerned under the NW0 popery of the paper ponzi
That is kind of soothing imagery, ahhhhh....
I left out the other major option--stealing more money from US taxpayers for shipment to Euroville. Cuz I don't like that.
I don't think the Swiss Bank is going to defend the Eur/Chf barrier. I'm going flat and selling 121!
I'll take my medicine early in the year, I'll treat it like MINI Yen! Tight stops, and grind it down!
There is something very strange about this article. Over and over there is reference to "banks and other investors" or some cognate, always placed in a position of deciding the fate of nations. In doing so, Mr. Durden appears to exhibit an aristocratic presupposition, perceiving unelected financial aristocrats to be rightfully in the position of deciding the fate of millions. Unacknowledged is insofar as these "banks and other investors" hold billions or trillions of euros in national bonds, the states involved hold in their grip the "banks and other investors" as much as the "banks and other investors" hold the states involved in their grip. That Mr. Durden perceives this relationship as rightfully one way is indicative of his anti-democratic aristocratic bias. Colored as well is his perception of his anti-Keynesianism. It is not so much whether Keynes "was right or wrong," but that Keynes perceived government as the agency of last resort to provide employment. Although Mr. Durden does appear to acknowledge need for, "greater focus on growth-enhancing structural measures," this is undermined by mysterious, "powerful national interest groups, whose resistance could potentially jeopardize the reform momentum and impede the recovery of market confidence." Even here, though, rather than concern for the lives of millions, of what is of concern is "the recovery of market confidence." Unexplained, however, of what purpose is "recovery of market confidence?" This appears simply assumed as "good" for some unexplained reason. Is it to lend to governments? If so, is this not the condition Mr. Durden so consistently criticizes, public debt being what it seems is his perception as the source of all economic evil? At best, it would seem the only justification for public debt in Mr. Durdin's conception is to return benefits to financial investors. On this conception, governments merely exist to act as sources of subsidizing financial investors, not as serving their own populations. Effectively, economics is literally no more than a financial game which, relative to the number of human beings, only an extremely small proportion (the 1%?) can play. All other humans (the 99%?) exist to do no more than subsidize this small proportion (the 1%?) of humanity. If this analysis is correct--acknowledging I may be misunderstanding of Mr. Durden's values--could Mr. Durden please explain his justification for valuing narrow aristocratic financial interests over broad national democratic public interests? Sorry Mr. Durden, if I understand you correctly, ethically your values are wanting. Politically they are devastating. Likelihood of the vast bulk of humanity accepting this position of effective servitude to an incredibly small number is highly doubtful. Being so, for all your apparent glorification of this apparent circumstance, it is internally unstable, which defeats your very apparent defence of it as, in paraphrase of Margaret Thatcher, "the only solution."
Have you heard of Windows "Note Pad"?
Your point being?
Have you heard of "paragraph break"?
Nobody wants to read all that run-together shit.
It is not so much whether Keynes "was right or wrong," but that Keynes perceived government as the agency of last resort to provide employment
Not in the Keynes I read. Keynes was a Mathematician interested in Probability and stunned by the stupidity of Reparations imposed on Germany at Versailles. He saw the collapse in Demand caused by unbalanced financial flows after the First War as leading to political extremes - either Stalin or Hitler - and looked for some other path modelled losely on the Swedish Experiment. The fact that Keynes simply wanted The Government to act as Purchaser of its usual Goods And Services but accelerate procurement schedules is forgotten. Chamberlain did just that after 1935 funding Shadow Factories and taking on the costs of Rolls-Royce in a new factory in Crewe and taxpayer-funding development of the Merlin engine and Supermarine Spitfire.......and accelerating the funding for Radar and 4-engined bombers. This was all Keynes really intended. The Second War was the "Keynesian Solution" Keynes never proposed. Faced with Stalinist Russia and the Berlin Blockade, Korean War and plans for European War in 1954, Western Governments continued a policy of Guns & Butter and called it "Keynesian" because they did not want to tax to pay for guns - the Korean War was the last where spending cuts accompanied weapons expenditures.
Vietnam was waged as Colleges and Universities expanded rapidly throughout the West on the back of a debasing US Dollar and so it has been ever since. It was not Keynes long dead who suggested unsustainable living standards built on low tax and high spending; it was politicians Right and Left. Reagan ran huge deficits as did Thatcher, masked by North Sea Oil. When was the last time the US ran a trade surplus ? 1975. The UK ? 1983. If both countries had to run an economy based on equilibrium in Traded Goods there would be a huge collapse in incomes and living standards which are predicated on excessive Government Spending/Undertaxation and these fundamentals are not part of the Auction Process for Public Office laughingly called "Elections"
With you, Sandmann, I've no problem. for you acknowledge the conundrum, even if tangentially. Confronting economics is a political problem, a population perceiving reward for obeying authority being a better life. A better life not forthcoming, there is no justification for obedience. Thus, the state must improve the condition of life of its population.
Economically, this is perceived achieved by efficiency. Efficiency, however, is inconsistent. Optimal production requires minimal compensation for labor. Minimal compensation for labor reduces demand. Reduced demand renders productive efficiencies redundant. Redundancy of productive efficiencies decreases labor, further reducing demand, etc.
Obediance in this Malthusian circumstance is no longer ethically justified. An exchange of the benefit of obedience is only justified if receiving a reciprocal benefit in condition of life. When this exchange is not forthcoming, obedience is no longer duty bound. Potential now is a war of all against all.
Irrational in the aggregate for the citizen/worker, it is equally irrational in the aggregate for the ruler/employer. Thus it is, the ruler/employer seeks to improve the life of the citizen/worker, while restraining income in order to maximize productivity, with borrowing. Service to interest invariably ultimately surpassing the ability to consume, an economic collapse follows.
To cavalierly pronounce the public need "take a haircut" at this point, as often asserted in the popular economic media, is childishly naive. Obedience is no longer justified, being a sacrifice without reciprocal compensation. At least not unjustified is social collapse. Simply abandon social intercourse with those demanding one's uncompensated self-sacrifice to the other's benefit. An economy being a social institution, which commentators on this site often appear to forget, concurrent is economic collapse. Georges Sorel investigates this more benign alternative in "Reflections on Violence."
Recourse to force to sustain the socio/economic system, without compensatory benefit, ethically justifies reciprocal force on the ground of self-defence. Now there is a "war of all against all." It is because this flaw is intrinsic to what has become "mainstream" economics, a fundamental reconstitution of the "discipline" is in serious need. Indicated is why required is a return to the classical designation, "political economy."
Oh, by the way "knukles," this is the point, along with Mr. Durden's apparent failure to recognize the purpose of economics is to serve the interests of the public, not a socio/economic elite. As for "cranky-old-geezer," whose symbol is a feminine g-string, I have paragraphed. Finally, "Yen Cross, I understand not your comment. An attempt at cleverness is successful only insofar as it occurs in a comprehensible manner.
Speaking of swindles:
Americans Pay Wall St. $20B for Bad Swaps Government overseers often didn’t understand that the market was controlled by the banks that sold the derivatives they claimed would minimize risk, and that could impose penalties when deals unraveled.
http://www.bloomberg.com/news/2012-01-13/americans-clueless-paying-wall-...
Schizophrenic Europe
Only a playwright like Luigi Pirandello, who lived with a schizophrenic wife and wrote plays like Henry IV with its multiple levels of reality, could cope with the financial landscape in today’s Europe.
More:
http://www.mmnews.de/index.php/english-news/5743-schizophrenic-europe
I knew there was a reason I just re-read the "Maltese falcon"!
is it a dead horse or hobbled horse?
Hey, I thought it was a dead hobbled horse!!!
ha ha, yeah
And in related news, an astonishing number of American citizens,(and a perplexing number of alleged ZH 'readers') appear to believe that the problems plaguing the worlds' largest forced collective zone are entirely due to the presence of unwashed savage Muslims, who have invaded the sub-continent for the exclusive purpose of dragging civilization back into the 'stone age.'
Apparently, in the view of these sophisticated geo-political game theory analysts, if not for the polluting effect of third world people with the desire to improve their lives and support their families by doing jobs that Europeans have given up in order to fuel their fanatasies of living in a Jetsons utopia of seamless automated modernism, the whole of Europe would be currently enjoying a nouveau renaissance , in which millions of contented middle class leisure enthusiasts would look out benevolently from the terraces of their country houses onto an pastoral idyll of flocks and waving barleycorn, whilst sipping aperitifs & grazing on Escargots Bourguignons.
Filthy immigrants!
My date actually showed up...I'm not saying I'm going to get laid but I'm definitely saying you should get the fuck out of here.
Look at this:
,(and a perplexing number of alleged ZH 'readers') appear to believe that the problems plaguing the worlds' largest forced collective zone are entirely due to the presence of unwashed savage Muslims, who have invaded the sub-continent for the exclusive purpose of dragging civilization back into the 'stone age.'
Not really. No tnx for your nonsense. And yet you are only about one of a thousand user ID's posting useless shit on this site.
Wait a minute! Your 'date' showed up, and you're still typing away at your keyboard? Lord, I fear we may have finally drilled too deep into the profile of the archetypical ZH Friday nite Tough Guy....what have you got there Vicster, a tethered sheep?!?!?!?
BTW, not sure exactly what your complaint is exactly, but if it perchance has to do with information-dense commentary, don't worry, I have a solution....just sign up now for my forthcoming subscribers-only newsletter, STUFF FOR DUMMIES, and you gonna be able to pass yourself off as bein acquainted with all the top news of the day PLUS be able to maintain your tough guy macho image at the same time! Every hosers wet dream....hope to see you aboard Vic old buddy!!!!!!!!!!!!
Common. Admit it. You didn't read this article at all, did you?
I'll admit to counting on your ability to extrapolate just a tiny bit. It may have been a 'bridge too far,' I agree. But what the heck, it was worth a try!
perhaps he'll admit to expecting a simple answer to his simple Q
at least he tried!
https://aadivaahan.wordpress.com/2012/01/13/my-first-en-sign-vishwakarma...
Nadall permalink
January 13, 2012 8:04 pm
Mouth agape. Wow. This is WAY above MY head (ha…unintentional). I want one. OK. Seriously …. It’s kinda daunting. Probably the sacredness of it, the sheer power. I would approach it cautiously and with reverence/awe, but there’s a part of me that wants to run down those ramps full speed just to be inside/under. I’d like to explore it’s spaces and just sit/feel/listen. It feels healing/restorative and protective. On the other hand, I know I don’t get it, don’t understand (see first sentence) Are they to be planted around the earth? Floated on the sea?
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OFFICE OF NAVAL INTELLIGENCE
ONI.
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All I know is the gap down this weekend will (probably) not be filled (without intervention).
The charts show me EUR/JPY has scope to 86. Draw your lines from the March 2011 Fukushima tragedy low and high and you'll see what I mean.
Good luck and happy trading!
The real dark horse for the markets is a 76 year old Representative from Texas who happens to be polling strong in the US presidential election. It's not about the printing presses, the lies, the delays, the cheating. That the world's current superpower has the opportunity to choose an honest, peaceful man as its leader is mind-boggllng. The planet just can't get it's head around it. The warmongers are shitting razor blades. The "end" of Western culture, as we know it, is looming.
Ron Paul is the Real Dark Horse.
He bears the torch of liberty.
Do not underestimate its power to awaken peoples hearts.
Look into the eyes of the young people at RP rallies. There is hope inside for the first time in decades.
Ideas are more powerful than gold or guns.
As it's a Saturday :
A quote from :
Francisco's 'Money' Speech
from "Atlas Shrugged"
“When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing — when you see that money is flowing to those who deal, not in goods, but in favors — when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed.”
http://www.working-minds.com/money.htm
but but but there are green shoots everywhere, and recovery summer 3 is on it's way!
Great post, ZH provides such good analysis compared to mainstream sources.
I'm not a total newbie around here and YES Tyler (typical American name?) has become FAR MORE US-centric in the time I've been reading Zero Hedge. So much so that I believe Zero Hedge was taken over by the CIA about 6 months ago. To be publishing as much US propaganda (by relentlessly sledging Europe), it had to be.
USA wants to be last man standing and to even think these latest downgrades are not political, is an absurd notion.
Funky-O-G...Even if that were true (which I seriously doubt)...What would it matter...Would it not be better to just 'observe' ZH at this point than to 'take it over'?...The average ZHer is most likely beyond the point of 'infiltration'...Mind, Soul, and body...
My observation is that Tylers publish about what is moving or about to move the markets. Europe is center stage now, but the US will have its moment in the spotlight soon enough.
Way Correct Wakanda...Take today for instance...Streamlining Bloomberg or clicking on ZeroHedge for pertinent economic info...Not even close...Tyler was putting out articles about France atleast a half an hour before the MSM's were there...Hey timing is everything!...NO!!!
Relax DeLuuuD, it's Saturday - the markets are closed.
Oh Ya...
You need to get out more... CIA take-over of a 'fringe' blog? Possible but not likely.
Highly unlikely when you consider the QUALITY of Tyler's posts... Show me a single bureaucrat in DC capable of Tyler's level of critical thinking and analysis. Yup... thought not. Tough shoes to fill but nearly impossible by a government employee -- especially a wanker from the CIA.
Consider this:
The Dollar will crumble.
The Yuan will crumble.
The Yen will crumble.
The Euro will crumble.
BUT the EURO is IN THE PROCESS OF CRUMBLING at the moment. Naturally, it will get a little more attention, no?
Probably...But in slow motion...As we've seen before...
Good logical thinking Bones! Too bad the Kleptocrats in Washington can't do the same.
...calling TDs...
I am convinced that the actions of the GS cabal is a political strategy by certain powerful, schizophrenic elements of the US financial scene. HFs and PDs playing beggar thy neighbour in the race to bottom.
I have said it, not to apologise for the impossible Euro construct, nor the Crony capitalism that it incarnates, but the systemic rape of Euro zone by the "market" which imposes >7% interest on sovereigns whereas it pays negative yields to FED bonds and 2% to BOE bonds. This is totally skewed as level table reasoning.
There is something rotten in 'the kingdom of Denmark'. GS/ Lehman's ghost not far away. I have said this before many times so its not new. It's a recurrent theme here.
That doesn't mean that ZH is a mouthpiece for US jingoistic financial play. But it is true that it privileges the incoherencies of Euro zone, too numerous and too obvious to be restated, rather than pointing out that the market is stilted in allocating 7% to Italian bonds and 0% to FED ones, and 2% to debt infested UK economy. There is no logic other than politically manipulated play in this market; sign of the BIG STICK that bends the rules.
It's my take on this. I am not a financial insider. So I have no way of substantiating it except on ad hoc, post event basis, by looking back into the rear mirror of events as they unfurl.
Anyone remember CIA vacancy for Investment Bankers in the peek of the 2008 crisis? Uncle Sam needs you! The country that produce nothing(exc.iphone toy) has under hat 3 top ratings agency! They downgraded the EU countries because the dont want to print money?Thats what I am reading from the posted text ZH web.
Take it over and you take over what gets published. Plus you get the email addresses, sensitive computer data and the real names of plenty of people who you may wish to eventually silence.
We all know the USA is in deeper doggy dos than any nation on earth and yet on here, only Europe is daily in the news as being an inch away from the cliff's edge and as noted by others, the language is openly more hostile towards Europe than the USA.
A conspiracy theory only needs a few basic truths to be questioned.
I'm pretty sure that ZH user's info can be hacked regardless...I agree with you 'Old-Timer'...Things aren't always as they seem...But it matters not...Where else are you going to go to get millisecond updates on these issues...ZH still reigns in that department...Besides, can you even stomach the BS spewing out of CNBC-Bloomberg-Faux-etc...God Lord!! That was so 5 years ago...
I always said...If the PTB were smart...They would make ZH a Think Tank...It would save them a lot of trouble!!!
Any computer can be hacked... eventually.
FOG, more useful to get us ranting on the site and then when NDAA is implemented and the black transport hood is pulled off in the interrogation cell, the guy with the truncheon and I will have something to discuss..
Locks only keep honest people honest.
The EU is in deeper doo than the US only because they lack the military might of the dark empire.
They deserve the attention.
Is S&P competent? http://goo.gl/N2jSP
Tyler you write "the following presnetation lays out the true terrifying perspective currently splaye out before the eurozone better than most analyses we have seen o date. Namely that the failed experiment is coming to an end"
Please consider an even more terrifying perspctive which comes through the lens of bible prophecy.
The Sovereign Lord God, Psalm 2:4-5, is acting to bring forth a revived Roman Empire, that is a German led Europe.
At the appointed time, He will open the curtains, and out onto the world’s stage will step the most credible leader. This Little Horn, or Little Authority, Daniel 7:25, will work behind the scenes in regional framework agreements to change our times and laws. Yes, the rule of law will be replaced by his word, will and way, Revelation 13:5-10. In the supranational New Europe, national sovereignty will be seen as a relic of a bygone era. The people will be amazed by this, and place their faith and trust in him; they will give their allegiance to his diktat, Revelation 13:3-4.
The Banker regime of Neoliberalism came via the Free To Choose floating currency script of Milton Friedman; but these are now sinking, causing global disinvestment out of stocks and deleveraging out of commodities. The natural result of destructionism is the rise of despotism.
The Beast regime of Neoauthoritarianism, Revelation 13:1-4, is rising in its place. It comes via the 1974 Club of Rome’s Clarion Club for regional global governance. This monster of statism and collectivism is rising from the profligate Mediterranean countries of Italy and Greece. The Beast’s seven heads are rising to occupy in all mankind’s institutions, and its ten horns are rising to govern in all of the world’s ten regions. The Beast system is coming like a terminator that can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever until mankind is totally dominated and subdued.
Banks will be nationalized in 2012; perhaps better said banks will be regionalized as Bloomberg reports Too-Big-to-Fail Definition May Be Expanded. Global regulators may expand the definition of a too-big-to-fail financial firm, signing up domestic lenders, clearing houses and insurers to capital rules designed for the world’s biggest banks. The “framework should be in place for domestically systemically important banks by the end of the year,” Mark Carney, chairman of the Financial Stability Board, said yesterday after a meeting of the group in Basel, Switzerland. Deutsche Bank AG (DBK), BNP Paribas SA (BNP) and Goldman Sachs Group Inc. (GS) were among 29 banks subject to the so-called capital surcharge on globally systemic financial institutions drawn up by the FSB in November. Banks will have to boost reserves by 1 to 2.5 percentage points above minimum levels agreed on by international regulators. The new banks will be known as government banks.
In a bank insolvent and sovereign insolvent world, regional stakeholders will be appointed to Stakeholder Committees, that is regional public private partnerships, PPPs. Public private partnerships, such as Macquarie Infrastructure, MIC, will take the lead in managing the factors of production. Canadian Energy Income Companies, ENY, and Canadian Oil and Pipeline Companies such as Enbridge, ENB, will for all practical purposes, be regionalized, that is something akin to being nationalized. There will be New Credit for the New Europe, it will be Stakeholder Credit coming from the Stakeholder Committee, as it meets in working group conference. This Stakeholder Credit will complement regional global governance to provide funding for the operations of industry critical to the EU’s security and stability. As for the people, the residents of the New Europe, the prevailing concept will be, let them eat diktat.
n a bank insolvent and sovereign insolvent world,
You really are like the two students in a room with a suitcase of cash and a gun asked to choose one item. When Sovereign States face insolvency they trump Banks - always ! The history of Sovereign Default is long in the 20th Century and is usually matched by the kind of regime where Bankers - even Central Bankers like Hjalmar Schacht - can end up in Concentration Camps. You are too obsessed with Institutionalism and too little focused on Naked Power. Banks are nationalised in Britain - RBS, Lloyds, and the major Chinese Banks are all nationalised, as most French Banks used to be. German Landesbanken and KfW and HRE are nationalised. Dexia is nationalised. Just who owns GMAC now trading as Ally Financial ? US Treasury.
Like France the US even had State-owned Car Companies - first Chrysler then GM. I mean Germany had State-owned Volkswagen; France had State-owned Renault; Britian had British Leyland; and the US caught up with State-owned GM.
So now you have Socialised Banking at AIG, Goldman Sachs, Morgan Stanley, BofA, Fannie, Freddie, you are getting like Switzerland with UBS.......and Deutsche had a nice little subsidy bundle delivered in the form of the payment terms for Postbank. Allianz SE was rescued when Commerzbank took Dresdner off its books and the Berlin Government bought into Commerzbank. When Merkel proposed a forced recapitalisation of Deutsche Bank Sckermann hung up the phone and decided to retire to Switzerland so Paul Achleitner, Master Genius who dreamed up the EFSF/ESM joke could escape the impeding disaster at Allianz and take a Goldman-alumnus job as Head of Deutsche Bank Supervisory Board in May 2012.
There will be no regional solutions, there will be civil resistance and bankruptcy of State Treasuries as people opt-out of the Credit-Consumerist hamster cage