Moody's Catches Up

Moody's downgrade of France's sovereign credit rating can be viewed in all its glorious details here. Keep in mind that Moody's actually had France rated Aaa hitherto and has now altered this to Aaa minus,  which is only a minor change. However, the credit outlook rightly remains negative. Some of the reasoning actually reads almost like stand-up comedy, as it sounds a bit as though Moody's had only just noticed things everybody including grand-aunt Emma and her dog know about already:

 

1.) France's long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labor, goods and service markets.


2.) France's fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand, and in the longer term due to the structural rigidities noted above.“




Gee, ya think? And this has only been found out just now? 


 

The Zinger


However,  the real zinger comes at point three:




3.) The predictability of France's resilience to future euro area shocks is diminishing in view of the rising risks to economic growth, fiscal performance and cost of funding. France's exposure to peripheral Europe through its trade linkages and its banking system is disproportionately large, and its contingent obligations to support other euro area members have been increasing. Moreover, unlike other non-euro area sovereigns that carry similarly high ratings, France does not have access to a national central bank for the financing of its debt in the event of a market disruption.“

 

(emphasis added)

Oh, so 'access to a national central bank' that finances a broke government's debt is a reason to rate said debt more highly? This is utterly misguided and quite dangerous thinking. In fact, we would argue that because such thinking has become quite fashionable lately, the risk embodied in the debt of such countries will ultimately turn out to be far higher, and the eventual financial and economic catastrophe all the more devastating and complete.

We do of course grant that the point about France's disproportionately large exposure to peripheral Europe via its overleveraged banking system has merit, it is a point we are frequently making in these pages ourselves after all.  Still, the remark about central bank financing demonstrates how perverted the thinking about government debt and the monetary system has become in modern times. 

In times past, the mere mention of central bank financing of government debt would have sent investors running, not walking, from the debt of the country concerned. After all, it means nothing less than the piecemeal theft of their funds, with the possibility of an eventual hyperinflation episode thrown in to spice things up a bit.

Meanwhile, France's bond yields remain at a 270 year low for the moment:

 


 

France's 10 year yield – almost at a 270 year low – click for better resolution.

 


 

However, the downgrade is certainly a reminder that the clock is ticking for France as well as the rest of the euro area….tic-toc, tic-toc…

 


 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

4 Responses to “Moody’s Downgrades France …”

  • If you go to scribd and type in Kyle Bass, you can get his latest letter. Great math on the debt subject, as it goes into the multiple of debt against a country’s revenues. France doesn’t look too bad on a chart he puts out, but remember their government is half their economy, so 10 times their government income is much larger than 10 times the US income. In fact, I still have the page open, so the following link will get you there. It is worth the time to read it..

    http://www.scribd.com/doc/113621307/Kyle-Bass

    The debt of Japan and the assets of its various banks are 40 times its government revenue. Japan owes over 20 times its annual revenue and it deficit spends about 50% of its budget. The new idea is to bring the central bank into the picture and print money and drive down the yen. The rest of the world is about to get a look at what happens when this becomes the solution and I wouldn’t be too shocked if mass starvation of those that saved their money and loaned it to the government isn’t an end result. Bass calls Japan the only large asymetric trade left on earth. Lending a bankrupt that is 20 years income in debt money for 10 years at under 1% is insane.

  • htm:

    Actually Moody’s downgraded France to AA1 – there is no such rating as AAA-

  • No6:

    When will Germany leave? or will the Panzer divisions begin to roll once more?

  • worldend666:

    “Meanwhile, France’s bond yields remain at a 270 year low for the moment:”

    Much to my chagrin. It’s tough being ahead of the curve.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • snake-charmerGold Price Skyrockets in India after Currency Ban – Part III
      When Money Dies In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.   Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...
  • wads-of-cashGold Price Skyrockets in India after Currency Ban – Part II
      Chaos in the Wake of the Ban Here is a link to Part 1, about what happened in the first two days after India's government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days.     India's prime minister Nahendra Modi, author of the...
  • shopGold Price Skyrockets in India after Currency Ban – Part IV
      A Market Gripped by Fear The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state. The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.   Indian jewelry...
  • very-bad-boyA Note on Gold and India – What is Driving the Gold Price?
      Hidden Motives It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.   Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious! Photo via thenewsminute.com   In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...
  • sittingWill Trump Do What Reagan Couldn’t?
      Depravity and Degeneration BALTIMORE – Finally, it’s over. We were both delighted and appalled by the news. A smile spread over our face... and our steps lightened... as we looked ahead to four years without Hillary Clinton’s know-it-all mug in the news.   Praise be! This mug will be largely missing from the airwaves and the intertubes in coming years. And your caption scribbler PT won't have to look for a fall-out shelter! We thank the Lord and the American public for...
  • gold-pm-fixIndia's Currency Debacle – An Interview with Jayant Bhandari
      A Major Crisis Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).   Banned 500 rupee banknotes   The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...
  • winInflation Expectations Rise Sharply
      Mini-Panic Over Inflation After Trump's Election Victory We have witnessed truly astonishing short term market conniptions following the Donald Trump's election victory. In this post we want to focus on one aspect that seems to be exercising people quite a bit at present, namely the recent surge in  inflation expectations reflected in the markets. Will we have to get those WIN buttons out again?   A 1970s “whip inflation now” button. The only thing that was actually needed...
  • santorinigreeceThere Are Two Types of Credit — One of Them Leads to Booms and Busts
      Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.   What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
  • vigilantesWill the Swamp Swallow Trump?
      Permanently Skewed TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.   Lieutenants in Trump's army: Bannon, Flynn & Sessions Photo credit: Drew Angerer / AFP   Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...
  • yellen_duct_tape_7-16-2014_largeGold Bull Market Remains Intact – Long Term Fundamentals Outweigh Short Term Market Gyrations
      A Strong First Half of the Year, Followed by Another Retreat In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.   Initially, gold rallied sharply...
  • david_stockman_0Too Early for “Inflation Bets”?
      The Trump Trade After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”   The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc.  We have...
  • train-to-hellAll Aboard! Trump’s Express Train to the Future
      Free Money! BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.   Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com