Thursday, November 10, 2011

Not Good News

As eurozone contagion spreads to Italy, the clouds thicken over France:

But on Wednesday, the spread of 10-year French government bonds over their German equivalent rose to a euro area high of around 140 basis points. “Contagion” is not just a movie.


FrédéricLN said...

"Contagion" (or dominos) is the usual name for that, and their may be some contagion (through the French banks' support to Southern States, and the French governement's support to French banks).

But another interpretation might be "unveiling". Greece has never been a specific case, just the most salient example of a Europe-wide addiction (of our governments) to public indebtment. It was comfortable for everybody as far as the "consensus" was to question the danger.

I just learnt (or heared - did not check) that Madoff Securities hadn't invested any dollar of the more than 50 billion deposits they had. It was a pure Ponzi, not a Ponzi hidden behind Potemkine investments. Then, how could the financial market ignore it? When you spend 20 years in business and never hear about a significant investment by Madoff, you may end up understanding these investments just do not exist, true?

Banks, foreign governments, and so on, spent 37 years since the first oil crisis, seeing West European countries, and Japan since the late 80's, borrowing more and more money with pseudo-keynesian justifications that never found since these 70's or 80's, as far as I know, the slightest confirmation from facts (jobs numbers, growth, a better financial situation…). At some moment, the inconvenient truth comes up. It started with Greece just become Greece was the caricature of it; but once you laughed at the caricature, you also have to recognize the usual face of it.

FrédéricLN said...

oops : as the "consensus" was NOT to question the danger.

René said...

Puisque l'on parle de spread, le véritable scandale est dans l'écart de taux entre la Grande Bretagne qui peut emprunter à 2,45% quand l'Italie est à plus de 7%. Leur taux d'endettement sont pourtant comparables.
La politique aveugle et dogmatique de l'euro, telle qu'elle continue d'être menée par l'Allemagne (car les autres pays ne comptent pas, y compris la France)ne peut mener qu'à l'écroulement de 50 ans de construction européenne.