Is France next?

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The decision by Standard & Poor’s to downgrade the U.S. credit rating leaves France as the AAA country most likely to lose its top grade, some investors and economists say.
France is more expensive to insure against default than lower-rated governments including Malaysia, Thailand, Japan, Mexico, Czech Republic, the state of Texas and the U.S.
“France is not, in my view, a AAA country,” said Paul Donovan, London-based deputy head of global economics at UBS AG. “France can’t print its own money, a critical distinction from the U.S. It is not treated as AAA by the markets.”
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http://www.bloomberg.com/news/2011-08-07/aaa-rated-france-may-be-vulnerable-to-downgrade-following-cut-to-the-u-s-.html

Not three days after Standard & Poor's downgraded the U.S.'s triple-A credit rating, investors are already asking the question: Which triple-A country is next?

The answer may be France, based on a host of data, a gaggle of market chatter and, ironically, a measurement developed by S&P.

Though all three major ratings firms--S&P, Fitch and Moody's--rate France as triple-A and give it a stable outlook tag, there are growing signs that it may soon lose its top spot. French credit-default swap spreads, or the cost of insuring French debt, hit their highest levels in history Monday, significantly higher than that of the U.S. The spreads jumped from 1.45 to 1.60 over the past day--more than twice as high as the U.S.'s 0.60.

The sharp increase is a sign that "would be indicative of [investors] expecting a downgrade," says Greg Anderson, a senior FX strategist at Citigroup in New York.

Some investors are buying French credit-default insurance because they think its debt problems could worsen sharply if other euro-zone countries continue weakening and France ends up having to contribute significantly more money to the region's bailout effort, says Steven Mitra, partner and senior portfolio manager at LNG Capital LLP, a London-based hedge fund. LNG doesn't have any France-related bets.

France's debt-to-GDP ratio is expected to hit nearly 86% by the end of 2011, according to S&P. By comparison, the U.S.'s ratio is forecast to be 74%. When euro-zone countries' debt has been downgraded in recent history, their sky-high debt-to-GDP ratios are often cited.

"Some of the fiscal indicators today of France are actually slightly worse than the U.S., particularly if you look at the debt position," John Chambers, chairman of S&P's sovereign ratings committee, said in a conference call Monday.
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http://online.wsj.com/article/BT-CO-20110808-718961.html
 
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The moment the ECB announced to bail out any state in the Eurozone that gets in trouble the spread between Italian and Spanish bonds lowered and they didn't have to intervene yet. It seems to me that this is all speculation to try and tank the Euro. All countries have their fair share of problems but overall the French and Italian economies are sound and safe. Spain remains a ticking timebomb.
 
So, the whole world is going bankrupt, capitalism has failed. Will we see some kind of reasonable change or an absurd clinging onto what´s left in hope for repair?


“France is not, in my view, a AAA country,” said Paul Donovan, London-based deputy head of global economics at UBS AG. “France can’t print its own money, a critical distinction from the U.S. It is not treated as AAA by the markets.”
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I didn´t know France was a video game.
 
Sennorin said:
So, the whole world is going bankrupt, capitalism has failed. Will we see some kind of reasonable change or an absurd clinging onto what´s left in hope for repair?




I didn´t know France was a video game.
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Third party developer.
 
Sennorin said:
So, the whole world is going bankrupt, capitalism has failed. Will we see some kind of reasonable change or an absurd clinging onto what´s left in hope for repair?.
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It's not capitalism that's the problem. It's socialist "entitlements" that are causing the problem. (The US hasn't been a capitalist country since the New Deal, before that we had a number of "Progressive" reforms that neutered capitalism, and France even more so...)

As Margaret Thatcher said, the problem with socialism is that eventually you run out of other people's money. And that's exactly what's happened. We've been paying stuff with basically a credit card. But not paying off the balance, just the interest

Indeed, the real problem is that we've been mixing the two, as sort of a "Third way" corporatism, with government and big business working together in hand. That gets the worse aspects of both systems.

The bailouts for instance. Under capitalism, they never would have happened. The companies would go bankrupt. Instead, taxpayer money went to prop them up. But that's exactly the wrong way to do things - you are rewarding failure, and taking money from the people who need it (the taxpayers).
 
France should have been first

DiscoJer said:
It's not capitalism that's the problem. It's socialist "entitlements" that are causing the problem. (The US hasn't been a capitalist country since the New Deal, before that we had a number of "Progressive" reforms that neutered capitalism, and France even more so...)

As Margaret Thatcher said, the problem with socialism is that eventually you run out of other people's money. And that's exactly what's happened. We've been paying stuff with basically a credit card. But not paying off the balance, just the interest
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you can't have your cake and eat it too

its really hard to argue with a free marketer when you have to argue from a basis in reality while the other has no actual proof of anything they are saying
 
Teh Hamburglar said:
This is Asterix's fault.
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But Asterix isn't even connected to the market, living in a disconnected village. Imagine the stock market drops his shit caused the Romans.
 
DiscoJer said:
It's not capitalism that's the problem. It's socialist "entitlements" that are causing the problem. (The US hasn't been a capitalist country since the New Deal, before that we had a number of "Progressive" reforms that neutered capitalism, and France even more so...)

As Margaret Thatcher said, the problem with socialism is that eventually you run out of other people's money. And that's exactly what's happened. We've been paying stuff with basically a credit card. But not paying off the balance, just the interest

Indeed, the real problem is that we've been mixing the two, as sort of a "Third way" corporatism, with government and big business working together in hand. That gets the worse aspects of both systems.

The bailouts for instance. Under capitalism, they never would have happened. The companies would go bankrupt. Instead, taxpayer money went to prop them up. But that's exactly the wrong way to do things - you are rewarding failure, and taking money from the people who need it (the taxpayers).
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Reminds me of communists saying the reason the Soviet union failed was because they weren't communist enough.
 
If everyone falls, no one falls.

What is next is stupid riots in France.

Mark my words.
 
arnoldocastillo2003 said:
So If France is taken down to AA then Germany is next but before Italy, so in other words Europe is fucked by four ways......am i doing it right?
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I dont think Germany will be downgraded our budget is fairly balanced.
 
DiscoJer said:
It's not capitalism that's the problem. It's socialist "entitlements" that are causing the problem. (The US hasn't been a capitalist country since the New Deal, before that we had a number of "Progressive" reforms that neutered capitalism, and France even more so...)

As Margaret Thatcher said, the problem with socialism is that eventually you run out of other people's money. And that's exactly what's happened. We've been paying stuff with basically a credit card. But not paying off the balance, just the interest

Indeed, the real problem is that we've been mixing the two, as sort of a "Third way" corporatism, with government and big business working together in hand. That gets the worse aspects of both systems.

The bailouts for instance. Under capitalism, they never would have happened. The companies would go bankrupt. Instead, taxpayer money went to prop them up. But that's exactly the wrong way to do things - you are rewarding failure, and taking money from the people who need it (the taxpayers).
Click to expand...

Before the New Deal in the U.S. and reforms in European countries that led to the creation of economies mixing regulated private markets with a public sector, capitalism worked so poorly that large numbers of people were willing to ditch it in favor of centrally planned economies like those seen in the Soviet Union and China before 1980. Starting in 1980 the United States starting reversing many of the measures put in place during the New Deal in order to prevent another depression. One notable example of those measures was the Glass-Steagall laws regulating banks, which were repealed during the late 1990’s along with a generally loosening of the regulations governing the U.S. financial sector. The result was disastrous.

What is really going on in Europe is that they tried to create a currency block without a mechanism for a common fiscal policy and coordination between that fiscal policy and their central bank. As a result, the policy priorities arising from the different needs of the countries using the Euro, as well as the actions of the central bank, are pulling in different directions, resulting in incoherence. For example, Germany, as a creditor to a country such as Greece, wants (or thinks it wants) a tight money policy, while Greece, as a debtor, needs their currency to depreciate significantly.

From what I heard it was thought by those who set up the Euro that a crisis such as this would force the different governments of Europe to unite under a common fiscal policy. Apparently that is not working out as planned. I would think that the end result of all this turmoil will be the abandonment of the Euro by several, if not all countries.
 
Wall said:
Before the New Deal in the U.S. and reforms in European countries that led to the creation of economies mixing regulated private markets with a public sector, capitalism worked so poorly that large numbers of people were willing to ditch it in favor of centrally planned economies like those seen in the Soviet Union and China before 1980. Starting in 1980 the United States starting reversing many of the measures put in place during the New Deal in order to prevent another depression. One notable example of those measures was the Glass-Steagall laws regulating banks, which were repealed during the late 1990’s along with a generally loosening of the regulations governing the U.S. financial sector. The result was disastrous.

What is really going on in Europe is that they tried to create a currency block without a mechanism for a common fiscal policy and coordination between that fiscal policy and their central bank. As a result, the policy priorities arising from the different needs of the countries using the Euro, as well as the actions of the central bank, are pulling in different directions, resulting in incoherence. For example, Germany, as a creditor to a country such as Greece, wants (or thinks it wants) a tight money policy, while Greece, as a debtor, needs their currency to depreciate significantly.

From what I heard it was thought by those who set up the Euro that a crisis such as this would force the different governments of Europe to unite under a common fiscal policy. Apparently that is not working out as planned. I would think that the end result of all this turmoil will be the abandonment of the Euro by several, if not all countries.
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And maybe the end of the european union.
 
maniac-kun said:
I dont think Germany will be downgraded our budget is fairly balanced.
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But itsn´t supposed that if France is reduced to AA then Italy will too AA so by consecuence Germany will too because they have lend too much money to different European countries that are bankrupt?
 
arnoldocastillo2003 said:
But itsn´t supposed that if France is reduced to AA then Italy will too AA so by consecuence Germany will too because they have lend too much money to different European countries that are bankrupt?
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If the situation in the other EU countries significantly hurts German exports is the only way I see Germany getting downgraded. Germany is maybe the most fiscally conservative nation in Europe, possibly on the planet, if they get downgraded then everyone is fucked.
 
- banks fuck about with bad debt, selling it on to each other and making shit loads of money.

- All goes tits up. Banks go 'wash', governments bail them out. Banks say thanks.

- Governments put stricter rules in place on fiscal responsibility for the banks.

- banks get all arsey and stop lending money to anyone, and if they do its at a high rate.

- businesses get squeezed and recovery is weak as they can't borrow to invest

- Governments try and pressure banks to lend more.

- banks get annoyed with governments and decide if they can't make money off businesses and crappy mortgages, they'll make money off of screwing the governments that saved them in the first place.
 
Wall said:
Before the New Deal in the U.S. and reforms in European countries that led to the creation of economies mixing regulated private markets with a public sector, capitalism worked so poorly that large numbers of people were willing to ditch it in favor of centrally planned economies like those seen in the Soviet Union and China before 1980. Starting in 1980 the United States starting reversing many of the measures put in place during the New Deal in order to prevent another depression. One notable example of those measures was the Glass-Steagall laws regulating banks, which were repealed during the late 1990’s along with a generally loosening of the regulations governing the U.S. financial sector. The result was disastrous.

What is really going on in Europe is that they tried to create a currency block without a mechanism for a common fiscal policy and coordination between that fiscal policy and their central bank. As a result, the policy priorities arising from the different needs of the countries using the Euro, as well as the actions of the central bank, are pulling in different directions, resulting in incoherence. For example, Germany, as a creditor to a country such as Greece, wants (or thinks it wants) a tight money policy, while Greece, as a debtor, needs their currency to depreciate significantly.

From what I heard it was thought by those who set up the Euro that a crisis such as this would force the different governments of Europe to unite under a common fiscal policy. Apparently that is not working out as planned. I would think that the end result of all this turmoil will be the abandonment of the Euro by several, if not all countries.
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Well he's right in that entitlement spending is the reason behind the market's concerns. Not so much the spending in and of itself, but the fact that no one feels like actually paying for all that spending. All the controversy about the debt ceiling just opened everyone's eyes and made them say 'holy shit, everyone is running massive deficits, only expected to get larger with current demographics trends, and economic growth across all the major western nations has substantially slowed, maybe permanently'.

I doubt you'll see Norway or Sweden run into any trouble with their fairly large welfare states, as they actually fund their programs. They don't just vote for them and cross their fingers and say 'hope we figure out a way to pay for all this shit before we go bankrupt'.

Unless everyone else finds a massive oil deposit in their backyard or can live with 50% taxation, the current levels of spending are unsustainable. Well in the US the level of entitlement spending is probably sustainable (though would require serious reform to improve efficiency in the future), just not at the same time as all the military spending.
 
mrklaw said:
- banks fuck about with bad debt, selling it on to each other and making shit loads of money.

- All goes tits up. Banks go 'wash', governments bail them out. Banks say thanks.

- Governments put stricter rules in place on fiscal responsibility for the banks.

- banks get all arsey and stop lending money to anyone, and if they do its at a high rate.

- businesses get squeezed and recovery is weak as they can't borrow to invest

- Governments try and pressure banks to lend more.

- banks get annoyed with governments and decide if they can't make money off businesses and crappy mortgages, they'll make money off of screwing the governments that saved them in the first place.
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That's an awful good evil banker conspiracy theory, i bet you are even picturing a monocle, top hat and gold pocketwatch in your mind's eye. Unfortunately it breaks down around point 3, Banks are practically giving money away at the current rates, and even at its worst they never stopped lending to anyone, they mostly just stopping lending to other banks.
 
mrklaw said:
- banks fuck about with bad debt, selling it on to each other and making shit loads of money.

- All goes tits up. Banks go 'wash', governments bail them out. Banks say thanks.

- Governments put stricter rules in place on fiscal responsibility for the banks.

- banks get all arsey and stop lending money to anyone, and if they do its at a high rate.

- businesses get squeezed and recovery is weak as they can't borrow to invest

- Governments try and pressure banks to lend more.

- banks get annoyed with governments and decide if they can't make money off businesses and crappy mortgages, they'll make money off of screwing the governments that saved them in the first place.
Click to expand...

Basically, yes. The past 5 years have been all about the financial titans taking the world's governments in every hole they have.
 
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