Friday, 15 July 2011

Greek and Italy Downgrades

Amongst the carnage of the media-political mudfest that has been the News Internatioanl story, unnoticed by many the Euro crisis has entered a new phase.

With Ireland and Italy heading either deeply into junk bond status or hovering precipitously over it, the Euro is finally doomed.

Now, this has been said before and I fully expect a healthy amount of QE to be unleashed to settle the markets before the year is out (this is the only way to save the ECB too, so watch out those feeling bearish and think through the logic of those in charge!).

However, it's over. The PIIGS cannot survive in the Euro and need to devalue into either euro-lite or their old currencies.

After the whole News International stories die away, I don't have much doubt predicting what is going to dominate the news for the rest for 2011.

15 comments:

Dick the Prick said...

I want to know how someone goes about getting a job with these rating agencies. I reckon i've got all the right skills to get wankered all day and make it up as I go along without ever drawing reference to facts or consequences. Only 6 months late but better late than never I guess. Bunch of knobheads, the lot of them.

measured said...

The ratings agencies can see the crunch coming in August. Doesn't the US interest date fall on the 15th August? The ratings agencies are yet again far too late at trying to cover themselves as it could be messy. If I was Norwegian, I'd fetch popcorn.

Blue Eyes said...

Can't the Euro simply convert itself into a soft currency? Obviously, German voters would not be impressed, but...

chris said...

Haven't we got the ratings agencies we deserve? We give them elevated status, allow them to proffer opinions, protected by free-speech laws, and then force the entire financial ecosystem to build their models and structures on top. How can we go crying to the politicians now? There's no going back - make the ratings more conservative and everbody is revealed to be insolvent. Remove them entirely, and we'll just have to start guessing blindly who's going to be next like we did with Lehman.

Timbo614 said...

Are you suggesting CU that we buy this now fantasy market that relies on QE hope to keep it anywhere near bouyant?

Fundamentals and figures is what a the market should be about not future-gazing money press opportunism.

I think that a shake-out of sorts is on the cards and imminent so I'll be keeping my bear suit on at the moment.

Anonymous said...

is it wrong to ask: "how best to capitalise on the rapidly unwinding project"....?

andrew said...

So, if you are right and PIGS (not italy) drift out of the euro, what then?

I am sure that in the short term, the markets will call the end of the world. PIGS will have some nasty transition costs.

In the longer term, doesn't that leave the EUR representing a smaller bunch of 'fitter' countries?

I have half a feeling this is a case of 'Fog in Channel, Continent Cut Off'

Sean said...

So what is going to happen with all the junk that the ECB thinks it does not hold?

Scan said...

Afternoon CU,

Your resident dullard at your service. :)

Do you not think that the EU apperatchiks will go all the way into fiscal union before they drop the Euro? If you think they'll give up on the Euro before they all do a Budd Dwyer, then I think you're kidding yourself.

SumoKing said...

I'm not being funny but you've been posting every 6 weeks for the last 4 years

"HAHA! THE EURO IS DOOMED THIS TIME!"

It's like you're the Hooded Claw and the euro is Penelope Pitstop, a pretty rank, no tread left on the tie Penelope Pitstop but Penelope Pitstop all the same

Budgie said...

I (reluctantly) think like Scan. As with CAGW, the EU has too much at stake to capitulate gracefully. I'm not saying a euro collapse won't happen - just that the EU elite will make the transistion as painful to us as possible.

Botogol said...

'euro-lite' .. (scratches head) so how would that work then?

Anonymous said...

There two big problems affecting facing our treasury with the Euro, the first directly is Ireland (or Eire) all those direct loans by the UK, RBS & Lloyd/HBOS have high amounts lent in Ireland, secondly the UK banks have bought some sort of loan agreements (guarantees I think) to cover the French and German Banks, sounds very similar to the big US bank swindle off setting dodgy loans. It seems as if we are in it whether we like it or not, oh I forgot there was something of an extra contribution to the IMF

Electro-Kevin said...

The News Int furore won't be allowed to die away. The Left (including many Tories) are fizzing with delight over the prospect of the Daily Mail being tamed.

It's the final part of the Left-Wing putsch.

CityUnslicker said...

Sumo, to be fair I wrote my MBA dissertation of the failure of the eea to be a single currency area and that was fifteen years ago, so accusing me of six months is not really going far enough.

We also said for 2 years there was going to be a credit crunch and people said it will all get sorted somehow...sadly this is the same mess. As budd
Gie and others say the eu elites are going to going to go all out to save things, but then end is the same.

Why all the blame for the ratings agencies, in the credit crunch they were lying about aaa loans, this time they are telling everyone countries are broke when they are. If anything the pendulum has swung too far, but probably not.