Moody's: Every European nation now at risk on debt

[dkf]

Throwing more logs on the Eurozone fire, Moody's Investors Service said early Monday that the continent’s debt crisis now is "threatening the credit standing of all European sovereigns."

That's a not-so-subtle warning that even Moody’s top-rung Aaa ratings of countries including Germany, France, Austria and the Netherlands could be in jeopardy.

In a report from London, Moody’s painted a despairing picture of the choices European governments face as investors have grown increasingly fearful of buying Eurozone countries’ bonds, thereby driving up market interest rates to prohibitive levels.

The firm said its “central scenario” remains that the euro area will be preserved without widespread bond defaults. But policy moves to keep the Eurozone intact “may only emerge after a series of shocks, which may lead to more countries losing access to market funding for a sustained period and requiring a support program,” Moody’s said.

“This would very likely cause those countries' ratings to be moved into speculative grade,” meaning “junk” quality, it said.

http://latimesblogs.latimes.com/money_co/2011/11/europe-moodys-eurozone-credit-ratings-warning-bailout-.html

[Old and In the Way]

1. Reset the debt.

Wipe out all of the negative numbers. Doesn't make a lot of sense for the entire world to go decades crippled by a lot of fraudulent debt that we'll never be able to unwind. Reset and pass international laws that don't let this kind of unregulated debt to cripple the world economy. If any bankers complain...shoot 'em.

[Response]

3. You're far too kind to the bankers.

[Prometheus Bound]

4. What about depositors though?

Government deposit insurance wouldn't mean much in such a scenario since they couldn't possibly pay out every deposit.

[Old and In the Way]

6. Sadly, there are winners and losers in this game of international debt

kind of like musical chairs for Masters of the Universe crowd. Since no one seems to know who owns what in the mortgage backed securities that are driving this colossal mess, the big losers will be the financial markets and institutional debt holders that were betting up the worth of these worthless instruments. Yeah, there's going to be government and pension funds also taking a hit and I don't doubt that there are a lot of little people with their retirements tied up in holding these debt instruments. I know that this debt amounts to collectible assets on some balance sheets...but what exactly is this asset?

This situation kind of reminds me of a scene in 'Master and Commander' where the Captain of the ship has to make the call to cut away the ship's rigging to keep the boat from getting dragged down under. The poor bastard in the water clinging to the rigging is sacrificed for the good of the ship and remaining crew. Do we take down all depositors and global market economies to save a relatively few depositors/investors? Under the current scenario, there will eventually be losers anyways and maybe a lot more later; taking extraordinary action now to clean the decks and the cut away the downed financial rigging that could end up sinking the entire world's economy may be the only sensible action left. Or we can all hang on, do nothing, and see what happens next....

[no_hypocrisy]

2. By itself, that's pretty bad. Now consider the derivatives, the cancer of

international finance.

[JDPriestly]

5. Ironically, it is beginning to look like the only people who can

save capitalism are the Wand working class folks.

The rich seem to have given up on the system. They seem to have lost faith in our economy.

We may just have to create our own jobs and businesses. I think that is a great idea.