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Wednesday, 25 July 2012

Moody's Threatens Germany?

A report in our local paper caught my eye yesterday. The 'Ratings Agency' Moody's, based in New York, is apparently threatening Germany with a Rating Downgrade. The reason is interesting. Apparently Moody's don't like the amount of Government Treasury Bills the Germans have underwritten for the Spanish.

OK, we all know that Greece is likely to default on its borrowing, Italy is still on the brink and so are Portugal and Ireland. Spain is taking the pain, but is reducing its debts, and the German's are merely underwriting what the European Central Bank and the European Finance Ministers have agreed between them to pick up. The fact is that the German economy is strong, and their borrowing is among the lowest in Europe, so what is Moody's playing at?

You could be excused if you thought it was a deliberate ploy to start a run against the currency the German economy uses - the €uro. Why would they wish to do this? Why make such an announcement? After all, it is well known that the ECB has worked with the various member states Finance ministers to find a way to spread the debt and make sure the currency is stabilised. Who benefits by weakening it or undermining this attempt?

I would suspect that the intent is to further weaken the currency which was showing a small recovery. Again, one needs to ask why? Who benefits from this? One beneficiary would be the US $. Persuade enough investors that the €uro is a high risk investment and they have to shift their money to one of two alternatives, the Dollar or the British Pound. Both currencies have problems in the economies that support them - and both stand to benefit by weakening the €uro.

One of the other tricks which intrigues me with these ratings, is that as a country's rating is lowered, the interest charge against their borrowing increases, and not by small amounts either. Again, who benefits - why the lenders of course. And who controls the Rating Agencies?

Well, for the moment I benefit as well. My pension is paid in GB£, and at present I get more €uros for my £ - but, pretty soon I suspect, that other beneficiary of people playing with currency values will kick in - and we'll find prices being forced up by inflation. That, more than anything else, is what worries the Germans.

4 comments:

  1. Frankly, it's because they see the writing on the wall for the euro. I for one will be glad to see its demise, as that could mean the end of the EUSSR. What's not to like about that? The EU is a corrupt, anti-democratic construct designed to undermine the nation state, and my, how we have been undermined! Our politicians have signed away our sovereignty on so many issues, and it was not theirs to give away! Add to that the toxic effects of rulings from the ECHR, which seems to bend over backwards for the criminal, and overrides the safety of society as a whole. No, the EU is the PROBLEM, not the solution. Monetary union without political union was putting the cart before the horse, and sadly, the rear end of that animal is dumping its load all over us!

    Slim Jim

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  2. One must always remember that "stuf" is worth exactly what someone is willing to pay for it, no more and no less. The world's politics have been built upon paper tigers for nearly 500 years.

    I rather like Slim Jim's "EUSSR" comment, but fail to see why the demise of the Euro would affect him or me one jot. (Should it not be USER?)

    Methinks that far from reviving the Deutschmark, or focussing on the £ Sterling or the US $ we would do far better to watch the Rouble, the Yen and increasingly the Yuan. Europe and the "West" have come ot the end of their era as the ruling influences, mostly, I suspect becuase they a ruled by those who understand prices rather than values (Valves?) and "freedom" as the right to inconvenience, harass and bully others.

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  3. While I agree that the EU is deeply flawed, most of the problem with the EU Commission in the UK at least is the way the UK Civil Service 'Gold Plates' everything issued from Brussels. The currency was a good idea, and may still be a good idea, but I suspect it requires a lot more 'co-operation' than its architects thought. To my mind the Commission needs to be directly elected, not, as at present, appointed by various PMs and Ministers.

    With the UK in the longest 'Double dip recession' in its history and the US sliding even deeper into debt, Josephus may well be right. The immediate beneficiaries are the Yen, Yuan, Rouble and the Rupee. One everyone overlooks is Brazil, currently edging into the top 10 of the G20. One thing that becomes very apparent when we look at the demographic curve for the 21st Century is simple, if Europe (including the UK) and the 'West' want to remain a force for influence, they simply can't afford the kind of national individuality they have squabbled and fought over for the last 1,500 years. As we cut each others currencies to pieces and destroy our own economies, the only beneficiaries lie to our East ...

    As Josephus says, we are currently 'managed' (you can't call it governed) by morons who can put a price on everything, byt have not the faintest idea of how to place a 'value' on it. Their constant attempts to bully the rest of the world and to force others to accept their 'values' which seem more like prejudices wrapped in twisted morality, will eventually rebound to our detriment - and hopefully theirs.

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  4. not to mention the fact that no-one in Britain expects "foreigners" not to speak English, whereas France refuses to speak any but their native tongue. The Portugese have a huge advantage if Brazil becomes the predominant "BRICK" nation and their national trade will be "interpreter".

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