Skip to comments.Bam! Bam! Bam! Huge Financial Bombs Just Got Dropped All Over Europe
Posted on 01/14/2012 9:31:19 AM PST by Signalman
The European debt crisis has just gone to an entirely new level. Just when it seemed like things may be stabilizing somewhat, we get news of huge financial bombs being dropped all over Europe. Very shortly after U.S. financial markets closed on Friday, S&P announced credit downgrades for nine European nations. This included both France and Austria losing their cherished AAA credit ratings. When the credit rating of a country gets slashed, that is a signal to investors that they should start demanding higher interest rates when they invest in the debt of that nation. Over the past year it has become significantly more expensive for many European nations to borrow money, and these new credit downgrades certainly are certainly not going to help matters. Quite a few financially troubled nations in Europe are very dependent on the ability to borrow huge piles of cheap money, and as debt becomes more expensive that is going to push many of them over the edge. Yesterday I wrote about 22 signs that we are on the verge of a devastating global recession, and unfortunately that list just got a whole lot longer.
Over the past several months we have seen quite a few credit downgrades all over Europe, but we have never seen anything quite like what S&P just did. Standard & Poors unleashed a barrage of credit downgrades on Friday....
-France was downgraded from AAA to AA+
-Austria was downgraded from AAA to AA+
-Italy was downgraded two more levels from A to BBB+
-Spain was downgraded two more levels
-Portugal was downgraded two more levels
-Cyprus was downgraded two more levels
-Malta was downgraded one level
-Slovakia was downgraded one level
-Slovenia was downgraded one level
This is really bad news for anyone that was hoping that things in Europe would start to get better. Borrowing costs for many of these financially troubled nations are going to go even higher.
In addition, there was another really, really troubling piece of news that came out of Europe on Friday.
It was announced that negotiations between the Greek government and private holders of Greek debt have broken down.
The Institute of International Finance has been representing private bondholders in negotiations with the Greek government about the terms of a "voluntary haircut" that is supposed to be a key component of the "rescue plan" for Greece.
Greece desperately needs private bondholders to agree to accept a "voluntary haircut" of 50% or more. Without some sort of an agreement, the finances of the Greek government will collapse very quickly.
For now, negotiations have failed. There is hope that negotiations will resume soon, but Greece is rapidly running out of time.
The Institute of International Finance issued a statement on Friday which said the following....
"Unfortunately, despite the efforts of Greece's leadership, the proposal put forward which involves an unprecedented 50% nominal reduction of Greece's sovereign bonds in private investors' hands and up to 100 billion of debt forgiveness has not produced a constructive consolidated response by all parties, consistent with a voluntary exchange of Greek sovereign debt"
The IIF says that negotiations are "paused for reflection" right now, but they are hoping that they will be able to resume before too long....
"Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach"
Something needs to be done, because Greece is experiencing a complete and total financial meltdown.
Back at the end of July, the yield on one year Greek bonds was sitting at about 40 percent. Today, the yield on one year Greek bonds is up to an astounding 396 percent.
That is how fast these things can move when confidence disappears.
Those living in the United States should keep that in mind.
Unfortunately, Greece is not the only European nation that is completely falling apart financially.
We aren't hearing much about it in the U.S. media, but Hungary is a total basket case right now. The credit rating of Hungary was reduced to junk status some time ago, and now the IMF and the EU are threatening to withhold financial aid from Hungary if the Hungarians do not run their country exactly as they are being told to do.
In particular, the IMF and the EU are absolutely furious that Hungary is trying to take more political control over the central bank in Hungary. The following is from an article in the Daily Mail....
The European Union has stepped up pressure on Hungary over the country's refusal to implement austerity policies and threatened legal action over its new constitution.
The warnings escalated the standoff between Budapest and the EU, as Hungary negotiates fresh financial aid from Europe and the International Monetary Fund.
Over the past months, the country's credit rating has been cut to junk by all three major rating agencies, unemployment is 10.6 percent and the country may be facing a recession.
But bailout negotiations broke down after Budapest refused to cut public spending and implemented a new constitution reasserting political control over its central bank.
Slovenia is a total mess right now as well. The following comes from a recent article posted on EUObserver.com....
Slovenia's borrowing costs have reached 'bail-out territory' after lawmakers rejected the premier-designate, putting the euro-country on the line for further downgrades by ratings agencies.
Zoran Jankovic, the mayor of Slovenia's capital Ljubljana, fell four votes short of the 46 needed to be approved as prime minister by the parliament, with the country's president set to re-cast his name or propose someone new within two weeks.
Some time ago, I warned that 2012 was going to be a more difficult year for the global economy than 2011 was.
Well, things are certainly starting to shape up that way.
Europe is heading for some really hard times. What is about to happen in Europe is going to shake the entire global financial system.
Those that live in the United States should take notice, because the U.S. financial system is far more fragile than most people believe.
Our banking system is a gigantic mountain of debt, leverage and risk and it could fall again at any time.
In addition, the U.S. debt problem is bigger than it has ever been before.
For example, did you know that the federal government is on a pace to borrow 6.2 trillion dollars by the end of Obama's first term in office?
That is more debt than the U.S. government accumulated from the time that George Washington became president to the time that George W. Bush became president.
For now the U.S. government is still able to borrow giant piles of super cheap money, but such a situation does not last forever.
Just ask Greece.
Already there are indications that foreigners are starting to dump large amounts of U.S. debt. If this trickle becomes a flood things could become very bad for the United States very quickly.
We are on the verge of some very bad things. The kinds of "financial bombs" that we saw dropped today are going to become much more frequent. As governments, banks and investors scramble to survive, we are going to see extreme amounts of volatility in the financial marketplace.
Things are not going to be "normal" again for a really, really long time.
Hold on tight, because 2012 is going to be a very interesting year.
Anyone who tracks economics and especially monetary policy, knows that nothing was coming even remote to stabilizing over the past three years.
In order to defeat the argument of the left, we must first trounce their premises.
Spending a trillion dollars does not stabilize the economy, it only contributes to the beginning of another bust cycle. This may seem like a minor point, but it is important, especially as the Communist in Chief asks for another trillion dollars of spending. They will promise that it will ‘stabilize’ or boost the economy. It will not. It will push us further over the edge of the cliff.
Looks like the Market will be on a roller coaster again next week.
So what is the end result? All the congress people take their riches and head to some islands somewhere and for the rest it’s survival of the fittest? Or does the USA turn into 1980’s Russia?
Greece wants private bondholders to take a “voluntary haircut of 50%”? That’s a haircut like Custer and his Soldiers got from the Chinese at the Little Big Horn.
Does this mean we have to pay for another Marshall Plan?
Before or after the Germans bombed Pearl Harbor?
They’ve analyzed “Native American” DNA, and it turns out that they’re Chinese. Their ancestors went out for some moo-goo-gai-pan and took a wrong turn and wound up in South Dakota.
Globalist players still engineering a global financial collapse to force the world to accept a common currency.
>>Theyve analyzed Native American DNA, and it turns out that theyre Chinese.
China didn’t exist when the native americans crossed over from Asia. They obviously share a lot of common ancestry, but calling them “Chinese” is bad science and bad anthropology.
...where Colonel Custer was also searching for some good moo-goo-gai-pan! And another chapter was added to culinary fractured history ;-)
Thanks for putting your entire article up under the header. I gave you a click after reading it.
Or does the USA turn into 1980s Russia?
More like the Weimar Republic or the 80’s - 90’s Argentina.
Monday-Tuesday should be “interesting” to say the least....
Had heard a network radio news story a couple days before this claiming things were looking up in Europe because some poll showed good sentiment for solving the debt crisis by selling more debt. Laughable.
China didn’t exist? Wow. China rose up out of the sea a few hundred years ago? Maybe they’re actually Atlantians from Atlantis, or Atlanta. Maybe they were all just treading water over there waiting for some land to come along so they could put up a great wall. I think it’s very presumptive of you to say I have bad science and bad anthropology. Maybe my science and anthropology had tough childhoods. What about that? Do you go around saying “Oh, he has bad sociology and bad botany” to people? You can scar a kid with talk like that. Have a little respect for other people’s feelings around here, if you please, or I’ll report you to the moderators for hurting my self-esteem.
P.S. - that still doesn’t make them “Natives”.
The article about how to get a job at Google is here.
You posted to the wrong artile.
The Current FReepathon Pays For The Current Quarters Expenses?
Going to Sam’s today. Time to restock anyway.
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