GoodSarmatian
Jokerfied Western Male
- Joined
- Apr 25, 2006
- Messages
- 9,408
I think we mean different Theys.
I was talking about rating agencies, and not politicians whose party affiliations mean nothing to me.
France loses S&P's AAA
- Thread starter kronic
- Start date
I think we mean different Theys.
I was talking about rating agencies, and not politicians whose party affiliations mean nothing to me.
BasketCase
Username sez it all
Actually, your context was ambiguous. Doesn't matter.
It was public knowledge that a crisis was coming. Nobody listened (that context is not ambiguous; neither Democrats nor ratings agencies nor anybody else listened to the warnings).
It was public knowledge that a crisis was coming. Nobody listened (that context is not ambiguous; neither Democrats nor ratings agencies nor anybody else listened to the warnings).
If Republicans knew it was coming as early as 2005, why wasn't anything done to help mitigate the effects?
I'm pretty sure the Republican drum was very positive about the economy in that time period.
Heck, Helga Zepp-LaRouche, the German wife of Lyndon LaRouche, and her wacky splinter party did correctly predict the subprime crisis, of all people. Doesn't mean I'll support their opinion that Germany needs 80 new nuclear plants or that reviving the silk route by constructing a monorail network from Europe via Asia and an artificial land bridge over the Bering Strait to America is the only way for global economic growth.
Well, based on the private wealth of Italy for example and the countries' total debt (rather small in comparison with most other Western nations), the country could easily reduce the government debt. There's just no intention or maybe capacity, i.e. will of the people, to do that.
innonimatu
the resident Cassandra
- Joined
- Dec 4, 2006
- Messages
- 15,374
True, but the likelihood of repayment must take that into account. Greece clearly can't pay its external debt, nor can Ireland and Portugal and Spain, unless interest rates for them were held at zero until repayment and people were willing t put up with more hardship in addition to that already necessary to close their trade gaps.
Italy might be able to, but my bet is that as soon as one of the others defaults all four will, and when the sky fails to fall afterwards several other highly indebted countries will just follow suit.
Marla_Singer
United in diversity
Mario Monti's reforms are pretty convincing in my humble opinion.
As a matter of fact, I have very small doubts in the solvency of most European economies, including Italy (Greece being the obvious exception). And the fact European interest rates will get higher gives even less doubts about it.
Governments are growing their debt only when it's cheap to do so. Everyone did so, even Germany. It's only once debt is getting expensive that debt becomes a problem. Check for instance the United States. Interest rates are still low there and as a result they've grown in 2011 a deficit twice bigger than the eurozone.
And as a matter of fact, I actually believe Europeans have already drawn their long term strategy to readapt their economies. On the other side, the US still believes that it can continue as if nothing happened. And that's why this whole economical mess is still only beginning.
Rashiminos
Fool Prophet
Oh really. GEAB qualifies as specialists now? (I wonder if I could find some of the other sites I saw back then).
John Williams of shadowstats?
Rashiminos
Fool Prophet
The information was publicly available at the time in question.
Sure it was. But publicly available does not equal common knowledge. After all, as I said above, there were at least as many people who said there was no problem. And those who said there was no problem were typically the more prominent people. So the public, that small share of it that was paying attention, sees conflicting views. Who do they believe? What do they do about it? We can't get a consensus on what to do about Climate Change, when 97% of the experts studying the subject say it is a real problem. How do you get a consensus on what to do about the housing bubble when more than half the experts studying the subject do not think that it is a problem? And in any case, by 2005 it was too late to do anything about it.
Rashiminos
Fool Prophet
You don't... even... try.
If you're convinced the herd is traveling in the wrong direction, get out of the herd. Those who have eyes to see, ears to hear, or minds to accept will follow. Let the authoritarians be concerned with the correctness of their authorities.
Verbose
Deity
What you are suggesting is turning everyone into an intellectual. That is, in order for primary things like human tendencies to bunch together and follow the group even in the wrong direction requires some serious thinking, self-refelection and observation of oneself and the surroundings. It would take time and effort. Which otherwise could be spent making money perhaps?
Human sociability is apparently hard-wired into us, but not more so than that humans have developed higher faculties allowing individuals to go against that grain. However, is that what we think Wall Street is all about? It would need to be...
I agree. Other than Greece and to a lesser extent, Portugal, the Italian economy is not fundamentally broken and most of the debt was incurred long ago (there was no "low interest rates? Hey let's borrow" effect like in Greece, for example).
I think we've fallen into the trap of applying actions that are necessary for Greece to Italy, too.
Mise
isle of lucy
I don't see why people are conflating the rating of CDOs with the rating of sovereign debt. CDOs were an entirely new thing, with absolutely no historical precedent for how they should be rated or valued. They were murky and opaque, with very little information about what exactly they were made up from. On the other hand, sovereign debt is one of the oldest asset classes there is; governments have been selling them for centuries, and people know exactly how governments intend to repay them (with tax receipts). And they're incredibly transparent, too - we know exactly what the finances of sovereign states are (well, unless they lie). It doesn't take a genius to tell you that the public finances of those downgraded European governments are in a poor state.
And in any case, the problem with S&P's rating of CDOs was that they systematically underestimated risk, by not understanding that there were "unknown unknowns" on the horizon (such as people defaulting on homes before they defaulted on their cars). If S&P are guilty of systematically underestimating risk, then surely France's credit rating is actually even lower than S&P claims? Afterall, most government projections depend on robust global and domestic growth (the UK's included); it's not exactly paranoid to suggest that growth won't meet up with governments's typically rosy outlook.
Anyway, none of this actually changes anything. Markets price risk based on their own estimations of it; they only listen to S&P, Moody and Fitch because regulators tell them to. There might be a sell-off by investors with marginal portfolios, but this won't really change anything. Europe's massive problems are very much priced into the market already.
And in any case, the problem with S&P's rating of CDOs was that they systematically underestimated risk, by not understanding that there were "unknown unknowns" on the horizon (such as people defaulting on homes before they defaulted on their cars). If S&P are guilty of systematically underestimating risk, then surely France's credit rating is actually even lower than S&P claims? Afterall, most government projections depend on robust global and domestic growth (the UK's included); it's not exactly paranoid to suggest that growth won't meet up with governments's typically rosy outlook.
Anyway, none of this actually changes anything. Markets price risk based on their own estimations of it; they only listen to S&P, Moody and Fitch because regulators tell them to. There might be a sell-off by investors with marginal portfolios, but this won't really change anything. Europe's massive problems are very much priced into the market already.
Don't accuse me of not trying when you aren't even pretending to get off your butt and try either.
The simple fact is that for most people they did not know there was a bubble, and they didn't have any particular reason to think there was a bubble. Those who did were looking at data that was not something the average person has access to without going to a lot of work to find it.
So what is a person supposed to go on? You had a lot of very prominent people saying everything was fine, and you had groups of less known people saying we were in for a disaster, and no one was saying anything until it was too late to avert it in any case.
BasketCase
Username sez it all
Yes it was. It was on the front page of my local newspaper.
Not for lack of trying, to be sure. President Bush himself tried to stop the crisis at least twice. The Democrats killed his efforts in committee. Why? As I already explained: the Democrats wanted more money for low-income housing, and for that to happen they needed the banks to be declared AAA. The Democrats didn't need the banks to actually be solvent, and they didn't care as long as the loans kept coming.
Now there's no more loans. The Democrats burned the bed, they get to sleep in it.
Truth be told, if it hadn't been for Democratic roadblocking, the Republicans wouldn't have been able to do much about it anyway, because the only way to stop the crisis from occurring was to stop lending to the poor. Gee, guess how the Democrats are gonna react to that? Killing loans for poor people. Great campaign plank.
Actually, this had nothing to do with it. It's all about who's the President at the time an economic crisis hits; the party to which the President belongs gets the blame. So, no: the Republicans were not very positive about the economy, because they needed to prevent the crisis from happening in order to win the 2008 elections (and, BIG surprise, the crisis was the one thing that caused the Republicans to lose to Obama!).
For the same reason (an economic crisis would cause the Republicans to lose in 2008), the Democrats had a very clear motivation to CAUSE the crisis!
Bottom line, there was just no way to stop it. One party couldn't stop it because of bad publicity, and the other party was trying to cause it.
