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Eu Shocked By Irish Debt Downgrade

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8210527/EU-shocked-by-Irish-debt-downgrade.html

European leaders received a nasty shock as the credit agency Moody's downgraded Ireland's debt, even as the politicians closed a summit intended to prop up confidence in the eurozone.

The dramatic downgrading of Irish debt by five levels sent the cost of the country's borrowing up, as yields - the returns demanded by wary investors - on 10-year government bonds rose more than 24 basis points to pass 8.6pc.

If Ireland cannot stabilise its debt then further revisions may follow, warned Moody's, which has also told Greece and Spain their ratings could fall.

"I don't understand what they do," Nicolas Sarkozy, the French president, said of the agency's latest move. "This decision – I simply call it stunning."

However, the International Monetary Fund (IMF) warned that Ireland is not on track to hit its target of achieving a budget deficit of 3pc of GDP by 2015. The beleaguered nation faces significant risks that could affect its ability to repay the IMF's share of the €85bn (£72bn) international bail-out it received, the fund said.

The European Central Bank (ECB) on Friday said it has arranged to borrow up to £10bn from the Bank of England in a temporary swap to ease liquidity at Irish banks.

It would appear our political elites live in a bubble.

Still at least our political masters have contained the problem it's not like we will get any more nasty surprises.

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Its truly scary if they're actually shocked by this.

Doesn't matter which way you look at it. Bailing out the tapeworm by means of redirecting more and more resources to feed it, is just going to kill the host... and the tapeworm.

Edited by worst time buyer

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The European political elite has an abysmal grasp of international money markets.

They have done such a good job at convincing themselves, they cannot grasp how anyone would decline to buy their falsity just because their say so doesn't make it true.

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> I don't understand what they do," Nicolas Sarkozy, the French president, said of the agency's latest move

of course he doesn't, he has a law degree but only practised for a couple of years before entering politics, he probably doesn't even know how to change a lightbulb.

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Well I don't know what the credit agencies do. I think they are f1cking waste of time. These are the ones that signed off trillions of MBS as quality investments? Bad science and voodoo at work. Time their analysis was opened up to wider peer review.

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Well I don't know what the credit agencies do. I think they are f1cking waste of time. These are the ones that signed off trillions of MBS as quality investments? Bad science and voodoo at work. Time their analysis was opened up to wider peer review.

+1 I can't help but feel that this bond vigilante stuff, with the complicity of the ratings agencies, isn't just another example of private investment world gaming the state(s). I wonder if we can find out who is making huge gains from climbing bond prices - and then find how if they are in any way related to the major clients of the ratings agencies? :huh:

Doesn't change the fact the Ireland (and the UK and most of the Eurozone) are sinking into the debt mire quicker than (insert appropriate metaphor)...

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It's even more profitable if you are actually instructing the governments what to do and placing your bets accordingly.

Of course the politicos have needed a slice of the action hence the expenses fiddles helping to fund MPs property portfolios.

Edited by billybong

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"...all completely predictable. If you are a banker named José, and your bank is insolvent but you have a large trading operation, you can simply have your amigos on the fixed income desk short the govies of your own country, say, España, against the govies of another solvent country, e.g. Deutschland. Then when the rates are high enough, your government demands a bailout of its banking system, and you then use the resulting monies to buy the govies that you had been shorting, while advising El Jefe to begin an austerity program that results in lower rates via deflation. A year later you pocket the profits and announce that you have successfully replenished your Tier 1 assets and recapitalized. Your fixed income boys get a big bonus. Meanwhile, in another country, a banker named Giorgio is shorting the govies of.....

Repeat, serially, around the world."

http://macro-man.blogspot.com/

Thanks! I'm not sure if the satisfaction of maybe being right about something for once outweighs the wretchedness of facing up to what's going on in our world :(

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They seem to be edging closer to indentifying the real problem of the eurozone periphery. Growth and job creation.

The can cut their public services / spending back to the stone age, without sustainable growth and job creation these countries debts and deficits will continue to grow and they will default eventually. Expect more downgraded as the ratings agency's wake up.

The Eurozone leadership seem to think that consumption (debt) can return as a driver of growth in these countries.

They have not yet realised that the growth paths of Spain, Ireland etc have been unsustainable for about 10 years. The growth generated was nothing but a debt, construction fuelled mirage. All that is left is unoccupied homes and €1 Trillion of bad debt.

Wages / Prices have run riot compared to Germany, France. They are now ridiculously uncompetitive and need deflation of 20-50% to return to a competitive position against the core. This is obviously impossible. No wonder Germany and France are booming..

How long to wait for a real solution?

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+1 I can't help but feel that this bond vigilante stuff, with the complicity of the ratings agencies, isn't just another example of private investment world gaming the state(s). I wonder if we can find out who is making huge gains from climbing bond prices - and then find how if they are in any way related to the major clients of the ratings agencies? :huh:

Doesn't change the fact the Ireland (and the UK and most of the Eurozone) are sinking into the debt mire quicker than (insert appropriate metaphor)...

The actions of the credit agencies does not mask the fundamentals of these economies ( just in case we get the "shoot the messenger" posters) but not really clear to me why these agencies haven't been sued into oblivion. I think they are part of the gaming process, with a lot of psuedo scientific "analysis" employed to make them look respectable organisations. Basically they are guns for hire.

Edited by Sir John Steed

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The short interest on Moody's would seem to agree with you,

http://www.bloomberg.com/apps/quote?ticker=MCO:US

Although the same cannot be said for Dun & Bradstreet,

http://www.bloomberg.com/apps/quote?ticker=DNB:US

As for Fitch, funnily they seem to be a subsidiary of the "French" group Fimalac, which means ..... well ....... whatever the fark you want it to ....

http://www.fimalac.com/strategic-focus.html

But almost certainly that a PE of c. 32 is only justified by the peculiar realities of the Paris Bourse,

http://www.bloomberg.com/apps/quote?ticker=FIM:FP

And quite why anyone would hold shares in Fimalac, in euros, just now, when Dun and Crapstreet gives you a P/E, in dollars, at half the level, with a manageable short interest, accountants that could theoretically be held accountable and some heft behind the capitalisation, is beyond me.

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The European political elite has an abysmal grasp of international money markets.

They have done such a good job at convincing themselves, they cannot grasp how anyone would decline to buy their falsity just because their say so doesn't make it true.

If Ireland defaults it will take the rest of the EU banking system with it, including the Euro and the UK. US is also a possibility.

So there is no way they will allow it to happen, they will keep moving the bank debt to sovereigns until there is no where else for investors to invest and the problem goes away via inflation.

The Germans are going to be ultimately liable for the PIIGS debts, whether they like it or not.

IT may eventually get to the point where capital controls are introduced within the EU. Investors will be forced to invest in state bonds whether they like it or not.

Everyone claims its been great for Iceland, so maybe the Eurozone will be next.

Edited by Peter Hun

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Well that is worth some serious thinking about.

And I can certainly see that appealing to the French left.

But I don't think those cashed Bavarians and Swabians, the ones that call the shots will put up with it.

How about a new Anschlus, with the Netherlands tacked on this time and the bad euro debt deflated away against a resurgent Reischmark?

OK, Jerman exporters won't like that but maybe (seriously "maybe") it's the course of least resistance.

That also allows the Jerman to buy up the med at knock down prices, which is what they have wanted to do since Frederick Barbarossa.

Edited by indirectapproach

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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