Hubbs Posted July 7, 2011 Author Share Posted July 7, 2011 Oh look! The ECB is throwing fundamental monetary policy right out the window: The European Central Bank has waived its rules on minimum credit ratings for accepting Portuguese debt as security for its loans to banks, President Jean-Claude Trichet said on Thursday."We have decided to suspend the application of the minimum credit rating threshold ... for the purpose of eurosystem credit operations in the case of marketable debt instruments issued or guaranteed by the Portuguese government," Trichet told a news conference after the bank raised interest rates. Moody's downgrading of freshly bailed-out Portugal's credit rating to "junk" earlier this week shocked financial markets and cast new doubt on European efforts to rescue distressed euro zone states without debt restructuring. The thumbs-down, coming so soon after a new centre-right Lisbon government announced austerity plans going beyond those demanded by international lenders, again called into question the EU strategy for dealing with the euro zone debt crisis. The giant Ponzi scheme known as "Europe" is proceeding nicely towards its inevitable conclusion. Link to comment Share on other sites More sharing options...
Stillers6SB Posted July 7, 2011 Share Posted July 7, 2011 Oh look! The ECB is throwing fundamental monetary policy right out the window:The giant Ponzi scheme known as "Europe" is proceeding nicely towards its inevitable conclusion. The ECB must protect the bondholders at any expense. F the taxpayers. If protecting bondholders from bad debt really is the primary objective of the supervisors, then the supervisors have become the problem. Capitalism does not work when capitalists are shielded from the economic risks that they freely undertake for profit when they enter into private contracts for debt finance. If bondholders know that they can get the ECB and the FSA to tilt the field in their direction, they have no incentive to balance yield against risk. They should just go for yield wherever they find it, and trust the ECB and FSA to ensure that they get their money whatever happens to the company, the depositor, the employee or the taxpayer who foots the ultimate bill for their yield.http://www.economonitor.com/blog/2011/07/protect-the-bondholders/ Link to comment Share on other sites More sharing options...
Hubbs Posted July 7, 2011 Author Share Posted July 7, 2011 Oh yeah, and Ireland's 10-year bonds cracked 13% for the first time today. Link to comment Share on other sites More sharing options...
SnyderShrugged Posted July 7, 2011 Share Posted July 7, 2011 classic Link to comment Share on other sites More sharing options...
PeterMP Posted July 7, 2011 Share Posted July 7, 2011 Oh yeah, and Ireland's 10-year bonds cracked 13% for the first time today. Can you really do that with Euros? Link to comment Share on other sites More sharing options...
Hubbs Posted July 7, 2011 Author Share Posted July 7, 2011 Can you really do that with Euros? I would guess that they would need to be creased in the middle. Link to comment Share on other sites More sharing options...
Fergasun Posted July 8, 2011 Share Posted July 8, 2011 Geithner, Bernanke and Paulson also argued to protect the bondholders, and screw the taxpayers in the American crisis of 2008. Sheila Bair actually was the only one who really cared what happened; and half the time she was butting heads with the dismissive Geithner. Link to comment Share on other sites More sharing options...
PokerPacker Posted July 8, 2011 Share Posted July 8, 2011 classic haha, those silly Aussies. Link to comment Share on other sites More sharing options...
Hubbs Posted July 10, 2011 Author Share Posted July 10, 2011 Mamma mia, the pressure on Italy is increasing: European Council President Herman Van Rompuy has convened an emergency meeting of top EU officials for Monday morning to discuss efforts to assemble a second rescue package for Greece and growing concerns about market pressure on Italy, three EU sources told Reuters.... The talks are expected to focus on the stalled effort to secure the private sector's involvement in a second bailout package for Greece, and mounting concerns about Italy after a heavy sell-off in Italian assets on Friday. Thus, the rumors begin: The existing European rescue fund now in place is not large enough to protect Italy as it was never designed to do that, an unnamed European Central Bank source was quoted telling Die Welt newspaper on Sunday."The existing rescue fund in Europe is not sufficient to provide a credible defensive wall for Italy," the central bank source was quoted telling the newspaper in an advance text of an article to appear on Monday. "It was never designed for that," the source added. The newspaper said that the rescue fund might have to be doubled to up to 1.5 trillion euros. But it was not clear if it was the central bank source calling for the increase. Just remember, Italy: You don't need a bailout. You don't need a bailout. You don't need a bailout. Link to comment Share on other sites More sharing options...
Hubbs Posted July 11, 2011 Author Share Posted July 11, 2011 Looks like everyone's starting to realize that Italy doesn't need a bailout: Italian 2-year bond, up .58% in one day: Italian 10-year bond, up .34% (rounded) in one day: Not wanting to be left out of the party, Spain is also demonstrating that it doesn't need a bailout: Spanish 2-year bond, up .41% in one day: Spanish 10-year bond, up .26% in one day: (I have no idea why the "Change" number in a couple of the graphs isn't quite right, but oh well.) ---------- Post added July-11th-2011 at 05:27 PM ---------- Quite the headline from the Telegraph: Italy and Spain must pray for a miracle If the ECB's Jean-Claude Trichet is right in claiming that Europe was on the brink of a 1930s financial cataclysm a year ago - and I think he is - it is hard see how the threat is any less serious right now.Fall-out from Greece flattened Portugal and Ireland last week. It is engulfing Spain and Italy, countries with €6.3 trillion of public and private debt between them. ... Italy has eschewed the maelstrom until now, despite losing 30pc in unit labour competitiveness against Germany under EMU. It has lower private debt than G7 peers. Its banks dodged the US and Club Med housing bubbles. However, they lent instead to the Italian state, the third biggest debtor in the world with liabilities of 120pc of GDP, and that is now turning into the problem. For though Italy's fiscal deficit looks small at 4.7pc of GDP, it is not small when adjusted for a moribund economy, rising rates, and the scale of the debt stock. Italian GDP has not grown for a decade. The official forecast is 1.1pc this year, 1.3pc in 2012, and 1.5pc in 2013, but outside analysts are gloomier. David Owen from Jefferies Fixed Income says the "elephant in the room" is that Italy's debt interest payments will explode within three or four years if the average borrowing cost ratchets up 200 or 300 basis points. The apparently stable debt trajectory will take an entirely different shape. That is the fear now stalking markets. Link to comment Share on other sites More sharing options...
Hubbs Posted July 12, 2011 Author Share Posted July 12, 2011 Annnnnnnd the major media are finally waking up to what everyone should have known months ago: Italy Fears Rattle Europe’s Markets EU Revives Buyback Idea as Crisis Hits Italy Markets rocked as debt crisis deepens Don't think that the effects are going to be limited to one side of the pond. Link to comment Share on other sites More sharing options...
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