Global Debt Time Bomb explodes soon

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Re: Global Debt Time Bomb explodes soon

Post by raptor » Fri Jan 13, 2012 2:04 pm

CaptBrainFreeze wrote:France, protesters gathering in front of S & P offices chanting "We are not sheep!"
Sounds about right...shoot the messenger. :wink:

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Re: Global Debt Time Bomb explodes soon

Post by Kommander » Fri Jan 13, 2012 2:11 pm

CaptBrainFreeze wrote:France, protesters gathering in front of S & P offices chanting "We are not sheep!"
Does this have some meaning that is lost in translation?
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Why must all the hoops be on fire?

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Re: Global Debt Time Bomb explodes soon

Post by raptor » Sat Jan 14, 2012 3:45 pm

S&P cut the ratings of 8 EU countries.
Standard & Poor's Ratings Services stripped triple-A ratings from France and Austria and downgraded seven others, including Spain, Italy and Portugal. It retained the triple-A rating on Europe's No. 1 economy, Germany.
This is the list of EU countries with their new credit ratings and the amounts pledged to EU rescue fund.

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source:
http://online.wsj.com/article/SB1000142 ... &mg=id-wsj" onclick="window.open(this.href);return false;

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Re: Global Debt Time Bomb explodes soon

Post by J.C. » Sat Jan 14, 2012 6:35 pm

I've read the critical point for Italy is the cost of borrowing going above 8%, but that leaves them no room to lose tax revenues which could happen as the European economy cools further. France is really not the one to watch at this point.
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Re: Global Debt Time Bomb explodes soon

Post by phil_in_cs » Mon Jan 16, 2012 9:19 am

German CEO's start to discuss the end of the Euro
http://in.reuters.com/article/2012/01/1 ... 7Z20120115" onclick="window.open(this.href);return false;
Germany should consider leaving the euro if efforts to impose fiscal discipline upon indebted euro zone countries fail, the head of industrial gases firm Linde (LING.DE) told German weekly paper Der Spiegel.

"I fear the willingness of crisis countries to reform themselves is abating if, in the end, the European Central Bank steps in," Linde's chief executive Wolfgang Reitzle was quoted as saying.

"If we do not succeed in disciplining crisis countries, Germany needs to exit," said Reitzle who was previously a board member at carmaker BMW (BMWG.DE) and head of Jaguar and Land Rover.

Asking Germans to pay more than 50 percent taxes to help fund other euro zone countries will erode the will of the German electorate to support rescue measures, Reitzle said.

via: http://www.zerohedge.com/news/german-an ... ve-arrived" onclick="window.open(this.href);return false;
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Re: Global Debt Time Bomb explodes soon

Post by TC » Mon Jan 16, 2012 5:38 pm

BBC wrote: Standard & Poor's downgrades EU bailout fund EFSF

The credit ratings agency Standard & Poor's has downgraded the EU bailout fund to AA+ from AAA.

The European Financial Stability Facility's (EFSF) rating is based on the ratings of the countries that guarantee it.

S&P's downgrade of France and Austria on Friday meant there were not enough AAA rated guarantors for the fund to maintain its top rating.

The downgrade could affect the EFSF's ability to raise money cheaply.

S&P said the EFSF could regain its AAA rating if it obtained additional guarantees.

Alternatively, the fund could be endowed with less money, which would be better guaranteed.

The BBC's business editor Robert Peston says that, following the S&P downgrades, the bailout funds are endowed with what looks like a puddle or pond, rather than a great sea of money stretching beyond the horizon...(continued at link)
Reuters wrote: Greek creditors bridle at demands, default fears grow

(Reuters) - Greece's private sector creditors warned on Monday that the Athens government must urgently break a deadlock in debt swap talks triggered by "unreasonable" demands from international lenders if is to avoid a disorderly default.

Barely a month after an injection of bailout funds helped to avert bankruptcy, Greece is back at the centre of the euro zone crisis as fears of a default and a subsequent euro zone exit overshadow a mass credit downgrade of euro zone countries.

Cash-strapped Athens needs a deal with the private sector within days to avoid going bankrupt when 14.5 billion euros of bond redemptions fall due in late March.

But talks with its creditor banks broke down on Friday over the interest rate on new bonds Greece will offer and a plan to enforce investor losses. Negotiations were suspended until Wednesday, and Athens sent senior officials to Washington to consult with the International Monetary Fund.

With a growing number of experts -- including a senior Standard & Poor's official -- warning a Greek default was on the cards, the country's creditors expressed alarm.

"There is an urgent need for agreement to inject an element of stability," Charles Dallara, head of the Institute of International Finance who represents Greece's private creditors, told Reuters. He said banks were "very surprised" at "completely unreasonable" interest rates offered to them...(continued at link)
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Re: Global Debt Time Bomb explodes soon

Post by Valarius » Mon Jan 16, 2012 10:55 pm

Out of sheer curiosity, how does one downgrade the credit of a bailout fund?

I mean... what?
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Re: Global Debt Time Bomb explodes soon

Post by raptor » Mon Jan 16, 2012 11:09 pm

Valarius wrote:Out of sheer curiosity, how does one downgrade the credit of a bailout fund?

I mean... what?
Hey if Lehman Brothers can go bankrupt, the USA lose its AAA rating AND then strengthen against most other currencies, then S&P's downgrade of the bailout fund makes a lot of sense. :wink:

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Re: Global Debt Time Bomb explodes soon

Post by SlobberToofTigger » Mon Jan 16, 2012 11:20 pm

Valarius wrote:Out of sheer curiosity, how does one downgrade the credit of a bailout fund?

I mean... what?
A bailout fund is not really a pile of money but instead a bunch of promises from supporting countries or institutions to lend money to those being bailed out. So in this case the balance of countries funding the loans are now at a lower rating so the fund inherits their lower rating.

The reason why this is important is that the loans that the respective supporting countries will have to take out to loan the money to the countries getting bailed out will now be more expensive. So the countries doing the bailing out may not want to fully fund the bailout fund anymore.

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Re: Global Debt Time Bomb explodes soon

Post by SeerSavant » Tue Jan 17, 2012 1:34 am

raptor wrote: Hey if Lehman Brothers can go bankrupt, the USA lose its AAA rating AND then strengthen against most other currencies, then S&P's downgrade of the bailout fund makes a lot of sense. :wink:

Wow... When it's put into perspective.... :shock:



What do you think are the odds on the US in the middle of a slow motion (sorta) economic meltdown, nearly 24/7 protestors in most major cities, a super committee that couldn't agree on the color of the sky if a gun was pointed to their head...
And every other major power on the planet just happens to be just worse off enough to offset what normally would be a huge crisis.

This is like some global karmic joke gone bad...


The worst part, is if you judge how "we" are doing by our "neighbors" it becomes easier to ignore just how bad it's gotten...

Which, to a large population that lives with it's head either up it's ass or stuck in the sand, is tantamount to giving the car keys back to the kid with the multiple tickets and DUIs because all of his buddies have gotten into accidents too... :gonk:
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Re: Global Debt Time Bomb explodes soon

Post by phil_in_cs » Tue Jan 17, 2012 8:37 am

Rating company Fitch expects Greece to default
http://www.businessweek.com/news/2012-0 ... -says.html" onclick="window.open(this.href);return false;
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Re: Global Debt Time Bomb explodes soon

Post by tojo » Tue Jan 17, 2012 9:45 am

raptor wrote:
This is the list of EU countries with their new credit ratings and the amounts pledged to EU rescue fund.

Image

source:
http://online.wsj.com/article/SB1000142 ... &mg=id-wsj" onclick="window.open(this.href);return false;
Wow, isn't it creepy that one of the lowest countries on the list (recently-downgraded BBB+ Italy, my country) is one of the largest (the third after Germny and France) funders of the EFSF?
This is something that I really don't get in terms of common sense: is it safe to ask such a low-grade country so much money? Can anyone elaborate for me?

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Re: Global Debt Time Bomb explodes soon

Post by sturmotter » Tue Jan 17, 2012 11:25 am

tojo wrote:This is something that I really don't get in terms of common sense: is it safe to ask such a low-grade country so much money? Can anyone elaborate for me?
Despite its credit rating, Italy is still the fourth largest economy in Europe and the third largest in the Eurozone in terms of its GNP. The credit ratings themselves don't really tell you much except at the extreme end, other than that they are pretty much guesswork - educated guesswork, but guessing all the same.

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Re: Global Debt Time Bomb explodes soon

Post by Krustofski » Tue Jan 17, 2012 11:36 am

sturmotter wrote:
tojo wrote:This is something that I really don't get in terms of common sense: is it safe to ask such a low-grade country so much money? Can anyone elaborate for me?
Despite its credit rating, Italy is still the fourth largest economy in Europe and the third largest in the Eurozone in terms of its GNP.
Excactly. You can also make a point out of population. The money per capita guranteed by Italy is less then, for example, the liability of every Dutch citizen.
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Re: Global Debt Time Bomb explodes soon

Post by raptor » Tue Jan 17, 2012 11:51 am

Krustofski wrote:
sturmotter wrote:
tojo wrote:This is something that I really don't get in terms of common sense: is it safe to ask such a low-grade country so much money? Can anyone elaborate for me?
Despite its credit rating, Italy is still the fourth largest economy in Europe and the third largest in the Eurozone in terms of its GNP.
Excactly. You can also make a point out of population. The money per capita guranteed by Italy is less then, for example, the liability of every Dutch citizen.

Italy despite its debts also has very significant gold reserves. It has more gold than France but less than Germany. It can in theory sell this gold for cash.

http://en.wikipedia.org/wiki/Gold_reserve" onclick="window.open(this.href);return false;

However the population and trade is the main reason.
Last edited by raptor on Tue Jan 17, 2012 12:02 pm, edited 1 time in total.

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Re: Global Debt Time Bomb explodes soon

Post by Krustofski » Tue Jan 17, 2012 12:01 pm

re: gold reserves

There was some talk on making profit with Germany's gold when the price skyrocketed last year (I know that I made some profit with my gold). I mean, it is the second-largest gold reserve in the world, after the US one. This would also have worked to fund the tax cuts the government promised at some point. But due to its historical record with hyperinflation, Germany is a bit... let's say paranoid about having something substantial at hand. In hindsight, keeping the gold probably was a good idea.
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Re: Global Debt Time Bomb explodes soon

Post by phil_in_cs » Wed Jan 18, 2012 8:44 am

The world bank expects 2012 to be the worst since the Great Depression
http://www.news.com.au/business/markets ... 6247357660" onclick="window.open(this.href);return false;
"The world economy has entered a very difficult phase characterised by significant downside risks and fragility," the twice-yearly Global Economic Prospects report said. While financial turmoil appeared contained at the moment, "the risk of a much broader freezing up of capital markets and a global crisis similar in magnitude to the Lehman crisis remains". High-income countries cannot count on the willingness of markets to finance their deficits and maturing debt, it warned.
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Re: Global Debt Time Bomb explodes soon

Post by TacAir » Wed Jan 18, 2012 10:56 am

Krustofski wrote:re: gold reserves

There was some talk on making profit with Germany's gold when the price skyrocketed last year (I know that I made some profit with my gold). I mean, it is the second-largest gold reserve in the world, after the US one. This would also have worked to fund the tax cuts the government promised at some point. But due to its historical record with hyperinflation, Germany is a bit... let's say paranoid about having something substantial at hand. In hindsight, keeping the gold probably was a good idea.
Gold reserves would go a log way to add some legitimacy to a re-issued DM.

or not
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Re: Global Debt Time Bomb explodes soon

Post by phil_in_cs » Wed Jan 18, 2012 11:03 am

TacAir wrote:
Krustofski wrote:re: gold reserves

There was some talk on making profit with Germany's gold when the price skyrocketed last year (I know that I made some profit with my gold). I mean, it is the second-largest gold reserve in the world, after the US one. This would also have worked to fund the tax cuts the government promised at some point. But due to its historical record with hyperinflation, Germany is a bit... let's say paranoid about having something substantial at hand. In hindsight, keeping the gold probably was a good idea.
Gold reserves would go a log way to add some legitimacy to a re-issued DM.

or not
A problem with spending your reserves (rainy day fund) is that you won't have it for the next, larger, storm. There comes a time to commit the reserves, but most battles are won by the side that commits the reserves last.
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Re: Global Debt Time Bomb explodes soon

Post by Krustofski » Wed Jan 18, 2012 11:31 am

TacAir wrote:Gold reserves would go a log way to add some legitimacy to a re-issued DM.

or not
Yeah... maybe. As in establishing trust in the issuing authorities. The DM has always been fiat currency, though. Also, despite what international media report, there is very little talk of pulling out of the € within Germany itself.

Btw, this video is over 1 year old and I don't necessarily agree with everything said, but it's hilarious nonetheless:



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Re: Global Debt Time Bomb explodes soon

Post by J.C. » Wed Jan 18, 2012 8:21 pm

Germany should be the last country to pull out of the Euro. They practically run the central bank.
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Re: Global Debt Time Bomb explodes soon

Post by phil_in_cs » Wed Jan 18, 2012 9:11 pm

J.C. wrote:Germany should be the last country to pull out of the Euro. They practically run the central bank.
Right, unless they decide they are paying for everyone else. Germans getting a tax hike to bail out Greeks isn't very popular.
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Re: Global Debt Time Bomb explodes soon

Post by J.C. » Wed Jan 18, 2012 9:46 pm

phil_in_cs wrote:
J.C. wrote:Germany should be the last country to pull out of the Euro. They practically run the central bank.
Right, unless they decide they are paying for everyone else. Germans getting a tax hike to bail out Greeks isn't very popular.
Right, but since they run the bank there is no reason for that to happen.
squinty wrote: Birds gotta fly, fish gotta swim, zombies gotta shuffle around and eatcher brains. Why do sharks eat divers? Why not swim around and starve to death?
Why do tornadoes zero in on trailer parks? Why not just blow around harmlessly? It's the way of the world, man.

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Re: Global Debt Time Bomb explodes soon

Post by raptor » Mon Jan 23, 2012 5:50 pm

Another warning from the IMF about the euro.
The global economy faces a depression-era collapse in demand if Europe doesn't quickly act to dramatically boost the size of its debt-crisis firewall, implement pro-growth policies and further integrate the euro zone, the head of the International Monetary Fund warned Monday.
Ms. Lagarde said unless euro-zone leaders urgently build a bigger emergency bailout fund, two of the euro zone's largest economies, Italy and Spain, risked insolvency as the cost of financing their debt spikes upward. Economists said failures in the two economies could spark a global financial and economic meltdown, and IMF staff are urging Europe to at least double the size of their firewall to around €1 trillion.

Insolvency in those two nations "would have disastrous implications for systemic stability," she said.

"Adding substantial real resources to what is currently available by folding the European Financial Stability Fund into the European Stability Mechanism, increasing the size of the ESM, and identifying a clear and credible timetable for making it operational would help greatly," she said.

Ms. Lagarde said it's also essential the European Central Bank fills the gap before leaders can build a bigger firewall, continuing to provide liquidity to stabilize banks funding and sovereign debt. Analysts say that, based on its average weekly bond purchases, the ECB could cover more than €1 trillion in ailing countries' bonds in the year.
The EU debt issue is by no means over or finished.
Source:
http://online.wsj.com/article/SB1000142 ... &mg=id-wsj" onclick="window.open(this.href);return false;

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