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Namaste

German 5-Year Credit Default Swaps Rise Above Uk Cds

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http://ftalphaville.ft.com/blog/2011/08/09/648021/grosdeutschland-cds-edition/

Go Go UK

Edit: In other news, S&P say no "downgrade on horizon for UK". Pound for new reserve currency. :)

I think QE will be back very soon and then the markets will remember we cannot pay our bills either. There is no hiding from this crisis and the markets will have theri way.

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http://ftalphaville.ft.com/blog/2011/08/09/648021/grosdeutschland-cds-edition/

Go Go UK

Edit: In other news, S&P say no "downgrade on horizon for UK". Pound for new reserve currency. :)

Not surprised.. if the ECB is buying Italian and Spanish debt and Germany is the main contributor to the ECB.. at the end of the day Germany is on the hook for the whole of Europe.

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Not surprised.. if the ECB is buying Italian and Spanish debt and Germany is the main contributor to the ECB.. at the end of the day Germany is on the hook for the whole of Europe.

. . . even if it agrees to be on the hook . . .

No it isn't surprising at all. How safe is a safe haven when all around it is crumbling.

ECB policy of loading up Germany also assumes that Germany will continue to be a growing economy for however many years these debts need to be underwritten. Well, that's a long shot. Current data suggests the German economy is slowing.

Talk about unintended consequences. The ECB intervention is actually hurting Switzerland and Germany.

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Investors have begun to question whether France and Germany can credibly underwrite the debts of southern Europe without losing their AAA ratings and succumbing to the crisis themselves.

Credit Default Swaps measuring risk on German bonds have doubled since early July to 85 basis points, rising above British CDS contracts for the first time despite the London riots.

Non-EMU Sweden enjoys lower borrowing costs than Germany. This has not been seen for half a century.

"What is happening is momentous," said Andrew Roberts, credit chief at RBS (LSE: RBS.L - news) . "The more Europe steps in to buy Italian and Spanish debt, the more Germany shifts towards the group of countries that could be attacked."

French CDS have surged 161 and are now by far the highest of the AAA club. Yields on French 10-year bonds decoupled from core EMU states such as the Netherlands, Austria, and Finland.

"France is now on the radar of investors. It is expected to be a back-stop for the bail-out fund but according to the IMF (Berlin: MXG1.BE - news) it has to do almost twice as much fiscal tightening to keep its economy on an even keel," said Mr Roberts. The IMF said last month that France had the highest debt ratio of any AAA state this year at 85pc of GDP.

The decision by EU leaders two weeks ago to empower the bail-out fund (EFSF) to buy the bonds of Italy and Spain has profoundly changed the European Project, ushering in a 'Transferunion' and debt pool. This has big implications for the paymaster states.

RBS has warned that France may have to accept a rise in its debt-to-GDP ratio to 112pc, and Germany to 110pc, if they ultimately have to raise the EFSF's firepower to €2 trillion (£1.75 trillion).

Stephen Jen, head of SLJ Macro Partners and a former IMF official, said Europe is replicating mistakes made by financial authorities after the Lehman crisis when good banks were merged with bad banks - as with Lloyds and HBOS. This time the destructive "fission" is taking place between solvent and insolvent states. Investors are taking flight before the fission turns "explosive".

Mr Jen said Standard & Poor's downgrade of the US will have knock-on effects for Europe since the rating agency will have to apply the same logic.

"On virtually all debt measures, France looks much worse than the US. If S&P includes America's unfunded Social Security liabilities, which it did, it should also include France's contingent liabilities in all of the mega-bailouts. Even Germany's AAA rating may not be assured if Europe remains on its current policy path," he said.

Mr Jen said the ECB itself may pay a high price as it is forced to soak up South Europe's debts. "Italian and Spanish bonds are weakening for very natural reasons. One day, the ECB will need to be recapitalised (bailed out) by governments," he said.

Jean-Claude Trichet, the ECB's president, gave an emotional defence of the ECB's actions yesterday. "It is the worst crisis since the Second World War (SNP: ^WARY - news) , and it might have been the worst since the First World War if those in charge had not taken very robust decisions," he told Europe-1.

Professor Volker Grossmann from Fribourg University said the ECB was the only institution that could take on the task. "The EFSF rescue fund cannot bail out Italy and Spain because politicians will never agree to pay these huge sums. They know it would be political suicide. It is a pretence," he said.

"The debt crisis will be resolved through higher inflation. That will hurt everybody and raise borrowing costs for Germany," he said.

Criticism is mounting in Germany over the authoritarian creep of the Europe's crisis measures. Otmar Issing, the ECB's former chief economist and the country's most authoritative voice on the euro, said the EMU project was spinning out of control.

Far from evolving into an authentic fiscal union with "a European government controlled by a European Parliament, elected according to democratic principles", it is turning into a deformed creature where moral hazard is unchecked and the EU is intruding on sovereign matters.

By subverting the 'no bail-out' clause of the Maastricht Treaty the eurozone is "on a slippery road to a regime of fiscal indiscipline drowning hitherto solid countries in the morass of over-indebtedness."

Implicit transfers are taking place without parliamentary approval. "This type of political union would not survive. Its (Paris: FR0010370163 - news) collapse would be brought by resistance from the people. In the past, cries of 'no taxation without representation' have brought war," he said.

Italy's leader Silvio Berlusconi lashed out at Europe yesterday after a leaked letter showed that the ECB had dictated the exact details of Rome's new austerity policies as a condition for ECB bond purchases.

"They made us look like an occupied government. They bought the bonds to save themselves, not Italy," he said, according to Il Messaggero.

"We're a long way from collective governance capable of scaring speculators. If it's our turn today, it can be Paris's turn tomorrow."

http://uk.finance.yahoo.com/news/Bail-outs-chips-away-France-tele-3153639782.html

That's because they are an occupied government! :lol:

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No it isn't surprising at all. How safe is a safe haven when all around it is crumbling.

Some people used to call HPCers nutters (doom monger was a particular favourite) for saying things like that.

Yesterday's TFH "lunacy" is now tonight's evening headlines.

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Not surprised.. if the ECB is buying Italian and Spanish debt and Germany is the main contributor to the ECB.. at the end of the day Germany is on the hook for the whole of Europe.

Surely sooner or later it's got to be reflected in the German Bund yield as well

I seriously think it's time everyone liquidated every surplus asset and bought gold if they haven't already done so

I haven't

Where is the best place get some?...One of those vending machines?...Or have they been looted?

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Surely sooner or later it's got to be reflected in the German Bund yield as well

I seriously think it's time everyone liquidated every surplus asset and bought gold if they haven't already done so

I haven't

Where is the best place get some?...One of those vending machines?...Or have they been looted?

shoeshine moment?

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shoeshine moment?

Absolutely - fiat currency backed by crumbling debt-choked economies and churned out as fast as the presses (computers) can run is clearly going to just shoot up in value..... :lol:

With all the time you spend on here, will you ever actually learn anything?

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Absolutely - fiat currency backed by crumbling debt-choked economies and churned out as fast as the presses (computers) can run is clearly going to just shoot up in value..... :lol:

With all the time you spend on here, will you ever actually learn anything?

+1700

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Absolutely - fiat currency backed by crumbling debt-choked economies and churned out as fast as the presses (computers) can run is clearly going to just shoot up in value..... :lol:

With all the time you spend on here, will you ever actually learn anything?

Check out the 'where has the QE money gone' thread sourpuss.

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  • 284 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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