Europe

Enervating European Economic Eruptions

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volcanoIt's a 4E. The never ending European Economic Mount Vesuvius has erupted again, threatening that final pyroclastic flow to the global economy. Friday the 13th has arrived and the horror show slasher is Standards and Poors. S&P doesn't like what Europe's leaders have done about the financial crisis.

To wit, S&P just downgraded the European bail out fund. The European Financial Stability Facility was just downgraded from AAA to AA+. This affects the EFSF's ability to raise cheap funds to help contain the financial crisis. S&P what are you thinkin'?

Last Friday France was downgraded from AAA to AA+ and given a negative outlook. Austria was spanked too and lost their AAA credit rating from S&P. One again Debbie Downer Standard and Poor's is on a credit ratings downgrade rampage.

Austria is now AA+. Italy was downgraded to BBB+. Portugal was downgraded to junk, BB. Spain gets an A and Cyprus I guess gets a beggin' cup at this point. Their S&P rating is now between junk and BB+.

The big picture downgrades from S&P's press release:

The Obligatory Economic Predictions for 2012

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labrea tar pitA new year, a new day and a flurry of economic and financial predictions. Who are we to buck the trend? Yet, buck the trend we shall. While many news articles claim jobs will appear in 2012 and the economy is on the mend, uh, we don't think so. What we have is America stuck in a Labrea tar pit of bad policy and a never ending middle class head shrink.

 

Europe's Economic Implosion Heats Up

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Europe is imploding. Today S&P cut Belgium's credit rating to AA:

S&P projects Belgium will end 2011 with general government debt at around 93% of gross domestic product in net terms, and at around 97% of GDP in gross terms.

italy 2yr bond 11/25/11
Italian bond yields hit 7.8% and that's a 14 year high for borrowing costs and a doubling in a matter of days. Unlike the Fed, Italy cannot print up more Euros either to take care of their problem.

The Italian Treasury paid 6.504 percent to auction 8 billion euros ($10.6 billion) of the debt, almost twice the 3.535 percent a month ago and the highest since August 1997. Italy’s two-year bonds yielded a euro-era record 7.83 percent, almost 50 basis points more than 10-year notes.

Yesterday Moody's cut Hungary to junk status. Junk means not ready for prime time, or investment.

Americans Are Awash In Spin

orwellian
I have come to the conclusion that Big Brother's subjects in George Orwell's 1984 are better informed than Americans.
 
Americans have no idea why they have been at war in the Middle East, Asia and Africa for a decade. They don't realize that their liberties have been supplanted by a Gestapo Police State. Few understand that hard economic times are here to stay.
 
On October 27, 2011, the US government announced some routine economic statistics, and the president of the European Council announced a new approach to the Greek sovereign debt crisis. The result of these funny numbers and mere words sent the Standard & Poor's 500 Index to its largest monthly rally since 1974, erasing its 2011 yearly loss. The euro rose, putting the European currency again 40% above its initial parity with the US dollar when the euro was introduced.
 
On National Public Radio a half-wit analyst declared, emphatically, that the latest US government statistics proved that the recovery was in place and that there was no danger whatsoever of a double-dip recession. And half-brain economists predicted a better tomorrow.
 

Europe Does a TARP Redux of almost $1 trillion dollars

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Europe is putting up a $952 billion loan package.

European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases as they spearheaded a global drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro.

Jolted into action by last week’s slide in the currency and soaring bond yields in Portugal and Spain, the 16 euro nations agreed to offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators. The European Central Bank will counter “severe tensions” in “certain” markets by purchasing government and private debt.

So, instead of bailing out banks, this sounds similar to TARP except it is to bail out European countries.

Meanwhile, the Federal Reserve is opening up currency swaps to loan to foreign central banks. From their press release:

Press Release
Federal Reserve Press Release

Release Date: May 9, 2010
For release at 9:15 p.m. EDT

Economic Warfare? Europe versus Wall Street


Michael Collins

(March 10) Wall Streets is headed toward international pariah status thanks to two recent actions by the European Union (EU).

On Tuesday, the EU announced that it was banning Wall Street banks from the lucrative government bond business in Europe. They didn't express official concern or fire off a warning shot. They simply banned Wall Street from financing government bond deals like the one Goldman Sachs sold to Greece. The Guardian pointed out that Wall Street bond business from European governments has gone down over the last two years. Now the business is gone period. In effect, the EU has labeled Wall Streets business tactics as too dangerous for their governments to handle.

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