Fears that the eurozone crisis was entering a new stage intensified on Wednesday after Portugal's credit rating was slashed to junk, with European bank shares falling sharply and some government bonds coming under renewed pressure.
Portuguese bank shares tumbled in early trading, while the yield -- or interest rate -- demanded by traders to hold the country's debt jumped sharply. UK banks also lost ground, pulling the FTSE 100 down. UK government bonds, known as gilts, benefited, however, as investors looked for a safe haven.
The euro lost value against the dollar, dropping more than one cent to $1.4335.
Traders were alarmed by Moody's warning that Portugal -- like Greece -- will need a second bailout, as it became the first credit ratings agency to cut the country's debt to junk status.
Strange but the solution in Portugal and Greece is the same as in the U.S.: stop issuing debt. Okay, okay, you have to roll-over existing debt, and past profligacy requires a higher interest rate today as a penalty. You have to pay that. But stop issuing new debt and the pressure on rolling over current debt goes down.
I barely passed Econ 101 in college, but this seems like a no-brainer to me: if you're in debt up to your eyeballs and your creditors really don't want to buy anymore of your paper, stop issuing new debt. Sure it sucks as you then have to bring your government under control. Sure, you have to control expenditures and start saying 'no' to all the various interest groups.
But either you're a greedy, spineless, amoral pol or you're a statesman. Which would you rather be known as in the history books?
#2
I think Greece is too far gone merely to stop issuing new debt. Their financial status is such that they must default on the debts they already have and start over. Or should I say, Greece must default on even more of its debt than it already has defaulted on.
As far as the other PIGS, never fear - the EU mandarins have a cunning plan up their sleeves -- LYING. The EU commissioner in charge of financial regulation said the EU could explore the possibility of suspending the rating of countries that are currently receiving bailout funds from the EU and IMF, namely Greece, Ireland and Portugal. Suspending the rating means the central banks can accept worthless defaulted paper as collateral for new loans, papering over what can only be called a default. The EU authorities can also revoke the licenses of rating agencies like S&P, etc. Anything but deal with the truth.
For a vision of how the Greek debt meltdown is going to end, look no further than the International Monetary Fund's post mortem into a similar crisis that came to a head almost exactly a decade ago - Lessons From The Crisis In Argentina.
Interesting piece from The Telegraph, with a starring role by Tim Geithner. As Mark Twain once said, "History does not repeat itself, but it does rhyme."
Posted by: Steve White ||
07/06/2011 08:25 ||
Comments ||
Link ||
[11149 views]
Top|| File under:
#1
Anyone still under the impression that the best interests of taxpayers is foremost in mind of those handling our currencies should be sent to an institution...
Dutch UN peacekeepers have been found legally responsible for the deaths of three Bosnian Muslim men in the Srebrenica massacre.
Judges in the Netherlands ordered the government to compensate the men's relatives, which could open the way to other claims by relatives. It could also have repurcussions for countries sending troops on UN peacekeeping missions, as it sets a precedent for national governments being taken to court for the actions of their troops even when under UN control.
The ruling said even though the Dutch soldiers were acting under a UN mandate, they were under the "effective control" of top Dutch officials in The Hague when they ordered hundreds of Muslim men and boys out of their compound.
The ruling said the three men were among the last to be expelled and by that time the "Dutchbat" peacekeepers already had seen abuses and should have known they faced a serious threat of being killed.
"Dutchbat should not have turned these men over to the Serbs," a summary of the judgment said.
The Hague Appeals Court has not yet set a compensation figure. Victims' lawyer Liesbeth Zegveld said the sum would "not be in the millions."
Continued on Page 47
All it took was for good soldiers to stand their ground and the massacre doesn't happen. The Dutch didn't.
Posted by: Steve White ||
07/06/2011 8:18 Comments ||
Top||
#4
..not much different than the forced repatriation of Russian POWs back to Stalin after WWII. Similar fates. Just like the Dutch soldiers, ours just followed the orders of their political authorities. At least Stalin was nice enough to wait till he got them beyond the border and out side the view of the West before dealing with them.
#6
Just think what everlasting glory the Dutch would have covered themselves in if they had refused and fought. But no, military heroes are forbidden in Europe.
The deal with Stalin was a deal with the devil, to be sure. The Dutch were not in a similar situation of needing something from the Serbs.
A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.
Rantburg was assembled from recycled algorithms in the United States of America. No
trees were destroyed in the production of this weblog. We did hurt some, though. Sorry.
