From Channel 4 news on Ireland...

runswithascript

I just caught the end of this and I was wondering if somebody could explain what was meant..

They were showing a graph which was meant to represent risk I think and the economist said that on the back of Ireland's guarantee today the market has doubled in risk which means that it is worried the Irish government will default.

Jon Snow went on to say that it was unprecedented for a government in western Europe to do this since the first world war.

Can anyone elaborate on this for me?

dresden8

On the basis that there's 4 million of us, we've each promised to loan the banks €100,000 if it all goes arse over t1t for them. That's after they've re-possessed your house and made you bankrupt.

You could be working in a Chinese salt mine for a long time to pay off that 100 grand.

daveirl

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eamonnm79

It has increased the cost of borrowing for the government in order to allow banks get funding (INCREASE LIQUIDITY) from other european banks.

damnyanks

daveirl wrote: »

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Russia

daveirl

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damnyanks

Just pointing out that a large country defaulting can happen at some stage. If the last few weeks have shown anything its that the market mentality is always "Ah sure it'll be grand" (Which is a true show of how far Irish have spread)

but eventually it isn't all grand and the thing people never thought would happen does happen.

I dont see the US defaulting in the near future. But after that who knows, it isnt looking good for them.

daveirl

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Sponge Bob

The doubling was in the spread relative to the Bund and not in absolute terms, national debt is 0.3% more to service on new issues is what it means.

That premium over the Bund will expire in 2 years.

damnyanks

daveirl wrote: »

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Yes because the Argies are and have been as big as Russia.

The scale of the US going bust right now would be immense no doubt about that.

What about in 10 years from now assuming they continue to decline and go through a number of downgrades.

SoCal90046

damnyanks wrote: »

Yes because the Argies are and have been as big as Russia.

The scale of the US going bust right now would be immense no doubt about that.

What about in 10 years from now assuming they continue to decline and go through a number of downgrades.

If the GDP declined for each of the next ten years and US debt were downgraded, it would cause problems for the US. It would undoubtedly hurt others too.

daveirl

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BenjAii

I wonder just how much faith people can have in ratings anyway. Moodys, S&P, and Fitch were after all the people who gave triple A ratings to the subprime debt products that started this whole disaster.

I'm not familiar with the esoteric science behind rating a country say AAA or AA, but I wonder if the decision in the case of the US is political.

In other words, such would be the almighty disaster of a US downgrade that they don't dare do it.

Though perhaps by the criteria they judge other countries, given what has happened in the US, if it had happened to any other country they would at the very least be on watch for a downgrade from AAA.

Begs the question of ourselves as well, given our new E500 billion obligation.

jd

BenjAii wrote: »

I'm not familiar with the esoteric science behind rating a country say AAA or AA, but I wonder if the decision in the case of the US is political.

Basically sovereign states can raise taxes.

BenjAii

jd wrote: »

Basically sovereign states can raise taxes.

That's a fairly bare statement of fact. It doesn't say anything about why their creditworthiness might be rated AAA or AA by a rating agency, which seems to be the point you are replying to.

SoCal90046

BenjAii wrote: »

I wonder just how much faith people can have in ratings anyway. Moodys, S&P, and Fitch were after all the people who gave triple A ratings to the subprime debt products that started this whole disaster.

For the case of US debt, I think that the flight to Treasury bills probably gives some indication about the faith that people have about the ratings. Ratings tend to lag reality.

I hope that Congress appoints an independent commission to look at what happened during this financial fiasco. It's pretty rare for something with an Aaa or an AAA rating to default; something that's happened a lot recently. I think it will prove interesting to find out exactly what occurred behind the scenes.

damnyanks

daveirl wrote: »

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WTF?!?!?

daveirl

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BenjAii

daveirl wrote: »

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Dave its a fairly mainstream view that America is in a recession.

"the National Association of Business Economists said they expect the U.S. economy to come to a halt in the fourth quarter, showing no growth in the last three months of the year. Two-thirds now say the U.S economy is in recession or will be by the end of the year"

And I think we can all agree that if a solution in not found to the current financial collapse quickly, we are all, US included, in for a very deep recession.

SoCal90046

BenjAii wrote: »

Dave its a fairly mainstream view that America is in a recession.

"the National Association of Business Economists said they expect the U.S. economy to come to a halt in the fourth quarter, showing no growth in the last three months of the year. Two-thirds now say the U.S economy is in recession or will be by the end of the year"

And I think we can all agree that if a solution in not found to the current financial collapse quickly, we are all, US included, in for a very deep recession.

It may well be that the economy is in recession, even Warren Buffett has said so, but so far the official call hasn't been made. A call on whether or not the US economy is in recession is made by the National Bureau of Economic Research. Often a call is made when the economy is already in recovery. However, to date, the NBER hasn't made the call, so saying the economy is in recession is just a matter of personal opinion.

damnyanks

daveirl wrote: »

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I was being lazy. The states is pretty buggered. Far too many bad things happening to them.

I think France and Ireland are the only countries officially in recession in EU at the moment. The way things are going though its like we're all slowly bleeding to death. Hopeing the blood comes back magically isnt going to happen.

eamonnm79

damnyanks wrote: »

I was being lazy. The states is pretty buggered. Far too many bad things happening to them.

I think France and Ireland are the only countries officially in recession in EU at the moment. The way things are going though its like we're all slowly bleeding to death. Hopeing the blood comes back magically isnt going to happen.

Two quarters of negative growth in a row = recession.
However if the consumer sentiment is an important ingredient in growth then it can be seen as justifiable by some to use various numeric tricks in order to distort reality.
The use of hedonics in calculating American GDP is a good example.
I heard a call yesterday from ash suggesting we increase the cost of Cigarrettes but then take them out of the consumer price index.

There are also calls in America to abandon mark to market.

They are seeking to actively and diliberitely delude ourselves.
Thats the last thing we should be doing right now.

SoCal90046

eamonnm79 wrote: »

Two quarters of negative growth in a row = recession.
However if the consumer sentiment is an important ingredient in growth then it can be seen as justifiable by some to use various numeric tricks in order to distort reality.
The use of hedonics in calculating American GDP is a good example.
I heard a call yesterday from ash suggesting we increase the cost of Cigarrettes but then take them out of the consumer price index.

There are also calls in America to abandon mark to market.

They are seeking to actively and diliberitely delude ourselves.
Thats the last thing we should be doing right now.

What does the term "hedonics in calculating American GDP" mean? You've used the expression before, but haven't defined it. What does it mean?

daveirl

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SoCal90046

daveirl wrote: »

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Personally, I think that the US is in a recession, but I'm not the one that makes the call! Over the past two months or so, I have seen a slowdown in many areas; it appears to be pretty major too. It wouldn't surprise me if a recession started in Q2 and didn't really doesn't end up entering into a recovery until Q2 or Q3 of next year.

daveirl

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