Credit-default swaps on sovereign bonds surged to a record on speculation Europe’s debt crisis is worsening after Hungary said it’s in a “very grave situation” because a previous government lied about the economy.
The cost of insuring against losses on Hungarian sovereign debt jumped 107.5 basis points to a record 416, according to CMA DataVision prices. Swaps on France, Austria, Belgium and Germany also rose, sending the Markit iTraxx SovX Western Europe Index of contracts on 15 governments 21 basis points higher to an-all time high of 174.4.
Hungary’s bonds fell after a spokesman for Prime Minister Viktor Orban said talk of a default is “not an exaggeration” because a previous administration “manipulated” figures. The country was bailed out with a 20 billion-euro ($24 billion) aid package from the European Union and International Monetary Fund in 2008.
More European optimism here.
Leaving philosophical considerations aside, the comments by the Hungarian prime minister are of very dangerous nature. Combined with the IMF declaring they are not properly capitalized to handle further bailouts, then we are left exposed to a possibly deadly riptide in sovereign bonds. If you owned a Hungarian bond here and you found a bid you would hit it wouldn’t you? So should everybody, and then comes Romania with a recently failed auction, and then Ukraine which already received one round of bailout and will clearly need more. Then comes Western Europe, even Germany with its exposure to Eastern Europe, Japan…
Meanwhile…. stimulus! The “Black Friday Employment Report”.
Socialism works great until socialists run out of other people’s money to spend.
Seems like the uber smartypants socialist ohhhhh so progressive Europeans are now finding out the truth of that truism.
Because Europe has all the culture and we have hockey.
The irony is that the US dollar is benefiting from this but they are in no better shape than Europe. It is a case of the least ugly one looking better. Eventually this will circle around and nail the US again.
The whole G20 thing is a scam they are powerless to fix it and can only try to sustain the status qua a little longer. Gold may look expensive now but just wait till they are done fixing things.
Kevin:
the best investment ever made was/is America’s military spending. With it America has long been the safest place to store wealth that is liquid – gold is not – a very important consideration for someone who lives in a part of the world that is feeling threatened.
The US dollar will only see steep declines in its value when the rest of the world’s financial sytem stabilizes – something that looks to be at least a coupe of years away. And when it does we could see a very considerable drop coupled with rapid increases in US interest rates.
The governments should do something about this.
Fred beat me to it. The Euros have exhausted the producers. Now, the pain.
How come a few of us knew this is exactly what would happen when they started down this road? Maybe it’s because we know squat about national economics but we know ‘way too much about gutless politicians and vicious special interests.
Question: how might the recession recovery look if governments everywhere had gone with a free-market response instead (e.g., no stimulus funding; minimal state intervention, etc.)? Better? Worse?
Any plausible, evidence-backed scenarios out there?
I’m back in the USSR
You don’t know how lucky you are, boy
Back in the US
Back in the US
Back in the USSR
http://life.nationalpost.com/2010/06/03/retail-therapy-test-drive-simple-natural-reusable-grocery-bag-to-green-habits/
The government “stimulating” the economy is akin to swapping the jockey on a race horse for a 240 lb linebacker since, after all, the linebacker can whip the horse harder thereby making it go faster, right?
Meanwhile, provided we can keep the libs and the NDP at bay, the Canadian dollar should just keep getting stronger. That’s going to be hard on the export businesses, but should be good for financials.
So just who are the counter parties on these sovereign debt CDS’s. The analogy to two years ago is a somewhat scarey. AIG was the counterparty on all the swaps backing the debt. AIG underpriced it all and did not set aside appropriate reserves, treating an insurance product as an investment product. Oh, and the models never contemplated a meltdown.
Do you think the models contemplate multiple sovereign defaults? The trade will fall apart when the counterparty cant pay. We better figure out who holds them, because there is
1) Major systemic risk
2) A great short to be made.
This is actually quite a serious situation that is a replay of 2 years ago.
As we speak the political-fiscal establishment which built the Euro-socialist union now in decay meets in semi secret high security posh hotels in Spain.
http://tinyurl.com/2br6as4
They wanted to wish this plutocratic social-economic nightmare on North America as well, and were well on their way to crafting a North American economic block under fiscal control by international financiers who funded the Euro-Socialist state – then smaller rogue inside players ruined the game by getting greedy and imploding the economy. Now they meet to decide to let it implode and start new or shore it up and continue towards the dream of a single centralized global economic system aided and supported by socialist plutocrat puppets.
http://www.corbettreport.com/articles/20100528_bilderberg_agenda.htm
Biderberg blah, blah.
Spare the conspiracy theories.
“Spare the conspiracy theories.”
They aren’t theories dim wit.
First one to name-call loses the debate.
My golf club holds meetings that are not open to the public.
What secrets could they be hiding?
I’m just wondering what would happen when these “too big to fail” companies, err I mean countries actually tank. It isn’t like you just shut the borders and turn out the lights.
Davenport asks (no doubt thinking it rhetorical): “Question: how might the recession recovery look if governments everywhere had gone with a free-market response instead (e.g., no stimulus funding; minimal state intervention, etc.)?”
You’re living in it. The Canadian banks did not buy in to the mortgage backed securities from the USA which precipitated this crash. Canada was not running a huge deficit (compared with GDP) when the crash occurred. Canada has the highest tax rates in the West except for Sweden and a couple more Eurozone nations, so the government is very well funded. The Canadian stimulus package (extorted out of the CPC by the Liberals on threat of a non-confidence vote in the middle of the crash) was small compared again to GDP.
Canada is in the best shape of anyplace in the West right now, with Australia a close second.
So this is as good as it gets. Note that Harper, the bad guy, pretty much LEFT EVERYTHING ALONE and didn’t stick his fingers in the gears more than they already were.
Canada’s economy is essentially crippled by the size of our tax and regulation burden. We crawl when others run. We look pretty good right now because we’re still crawling forward while the rest of them are going backward and picking up speed.
Europe has members which are going to -default-. Which means a lot of people are going to -starve-to-death- there. Greece had people literally killing each other in the streets from nothing more than a news story that the government was going to cut back. Imagine what’s going to happen when the government checks all stop the same day. Now multiply that by Portugal, Spain, Hungary, the Balkans, Italy, Ireland, plus some mystery participants whose prime ministers haven’t admitted they’ve been cooking the books for 20 years.
Now I have questions for you, Davenport.
1) What do you think will happen to the world economy if Barry the Turks declare open war on Israel and they both start sinking ships in the Med?
2) What do you think would have happened to the Ontario economy if Harper’s stimulus had been as big as Iggy was screaming for, which was twice to three times as much?
3) What would happen if Harper cut the top income tax rate by 10% and the corporate rate by the same amount?
Sorry, Question 1 should be, if Barry Obama -lets- the Turks declare open war on Israel.
The governments should do something about this.
LOL set you free LOL
Now I’ve forgotten what my comment was going to be.
Any plausible, evidence-backed scenarios out there?
Posted by: Davenport
Google Reaganomics.
Ronnie had his own recession to tackle and he beat it good.
Only problem was that Reaganomics produced such surplusses that the pols had to create new programs to spend it on.
Social programs lead to ramping costs.
Oz, that’s where I was going with the tax cut question. It worked when Regan did it, when Thatcher did it, when JF Kennedy did it (yes he did!) and it even worked when the eeeeeeeevile ChimpyMcBusHitler did it.
Funny how Davenport felt the need to ask -us- about that, eh? Selective amnesia syndrome or merely a short lifespan?
America is broke thanks to the Democrat’s.
They have progressed right into the dumpster.I,m hoping as Bullwinkle would say: They can pull a rabbit out of their hats.
If this does not wake up Harper about spending, than we are doomed to be party of the fools ball now being enacted down south. By a guy watching his Nation burn, while he golfs.
Time to make Canada family friendly. Lets try giving people with ideas tax breaks instead of politicians.
Let the private sector allow folks to get a head without onerous restrictions.
Downsize Government, not Mom & Pop buisness while giving tax dollars to corporate ineptitude or worse. Corporate welfare forever.
Stop Islamic immigration. Use the fall of Europe to import its intelligent personages , not its leftist appeasement Morons who have destroyed their own Countries.
Kill the HRC mad houses of injustice.
Make it mandatory for citizens to be able to have self protection. Not the reverse as it is today with a do nothing Political police.
New curriculum at schools that teach Western Civilization ,not moral equivalence.
Oh yeah start thinking about our own Nuclear program for self defense.
If, If we do this we may get out of this in one piece.
JMO
Totally agree, Revnant Dream.
I’d like to add: Get the Feds out of Provincial jurisdiction.
End the redundancy of having Federal and Provincial ministries in the same areas.
What Revenant Dream said +1: deregulate business at least 50%
Do not stop monitoring necessities, like disease control, but stop requiring licenses and permits for every breath of air.
Phantom,
Re your questin 1)….lets make it even more complicated. What if Turkey invokes article 5 of the Nato treaty?
So “Canada’s economy is essentially crippled by the size of our tax and regulation burden,” yet “Canada is in the best shape of anyplace in the West right now” in part because Canada’s tighter leverage ratios, capital requirements, and other regulatory measures discouraged banks from taking on excessive risk and because our high taxes provided our governments with a solid buffer to ride out the recessionary storm? In other words, our tax and regulatory status quo — which minimized the recessionary pain, which Harper “pretty much left…alone,” and which has positioned us for the faster post-recession recovery out of the G8 — is a bad thing that you’d like to see dismantled?
“What do you think will happen to the world economy if Barry the Turks declare open war on Israel and they both start sinking ships in the Med?”
Gee, I think I’ll go with…”Down the crapper”?
“What do you think would have happened to the Ontario economy if Harper’s stimulus had been as big as Iggy was screaming for, which was twice to three times as much?”
Probably not much difference.
“What would happen if Harper cut the top income tax rate by 10% and the corporate rate by the same amount?”
My guess? Already wealthy Canadians would become even wealthier, and middle-class incomes would continue its decades-long stagnation.
Couch:
When you get your cheque, does the name on it say ‘wealthy’ or ‘middle-class?”
Mine has my name on it.
I’d rather see NATO dissolved and an alliance of US/UK/CAN/AUS/NZ take its place. The Anglosphere has always done the heavy lifting anyway.
cut ALL forms of gov’t in Canada by 50% or more
cut welfare by about 75% (cut the recipient list by this amount)
load the ship with those who are fighting deportation
cut all funding to “arts” and “multi-cult” endevours
once these have been effeted and those “cut” are working, and paying taxes, Canada will remain the envy of thworld for a long time, because productive work is the ONLY thing that supports the value of a currency
Just imagine the business/people/wealth we could pick up from the USA once everyone starts to leave that sinking ship?\
We should be setting our tax policy to take advantage of America’s coming brain drain.
As goes Canada’s economy so goes Ireland, the UK, France and the rest of the socilaist crowd. Canada is an inspiration to Spain.
Davenport: “Already wealthy Canadians would become even wealthier, and middle-class incomes would continue its decades-long stagnation.”
What makes you say that? Support? History repeatedly shows that not to be the case. Kennedy, Regan, Thatcher, Bush. Records indicate income stagnation increases with the size of government, not when its size is reduced.
Here’s an interesting experiment for you to try. Plot historical middle class income against taxes for the last 60 years. See what you get.
Stephen, I guess if Turkey invokes Article 5 we shall get to see if the Harper balls are brass or not.
I don’t see them trying it. NATO will just kick them out. Or, given Helen Thomas’ remarks today, Barry might kick Canada out of NATO and go to war with Israel. Go with a “muscular appeasement strategy where America fights the enemies of the Caliphate, hoping to be eaten last.
Chamberlain had “Peace in our time”, Barry can have “Joooos! Go back where you came from!”
I’m for outside audits of government financial statements by accounting firms on a rotating basis eg. differing firms to end this kind of problem.
OK, real conservative, how many auditors discovered the problems at Enron or Lehman before they blew up?
Not. One.
Recessions uncover what auditors can not, and convicted short sellers right after that.
re-ante, so you can play again.
OK, real conservative, how many auditors discovered the problems at Enron or Lehman before they blew up?
Not. One.
Recessions uncover what auditors can not, and convicted short sellers right after that.
re-ante, so you can play again.