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It's interesting to me that this is not caused by European countries being in bad shape (most have a lower debt to GDP ratio than the US, although there are of

It's interesting to me that this is not caused by European countries being in bad shape (most have a lower debt to GDP ratio than the US, although there are of course other indicators). The problem is the perception of a problem and that leads to higher bond yields and that is what leads to this real problem. I'm not a conspiracy theorist, but it seems the timing of the downgrades of Greece, Portual, and Spain by US rating agency was quite perfect to cause exactly this effect. It seems at least "dubious".

learc83 15y ago
A US ratings agency also downgraded the US. Also, the US can inflate its way out of debt, the individual European countries can't because they don't have control over their currency.
tsotha 15y ago
>The problem is the perception of a problem and that leads to higher bond yields and that is what leads to this real problem. No, there is a real problem, which is the eurozone is a monetary union without a fiscal union. It's fundamentally unstable, something that can only work in good economic times. One of two things is going to have to happen to align fiscal and monetary boundaries - either national currencies will be reintroduced or fiscal policy will have to be aligned for the entire eurozone.
- linuxhansl 15y ago
  How exactly is this causing the problem? The problem is the cost of financing debt. That cost is high because the risk of the investment is (perceived) high.
  - tsotha 15y ago
    >That cost is high because the risk of the investment is (perceived) high. Eh, that's semantics. The risk is high. None of these countries can afford the slightest rise in interest rates, whether that rise is associated with a loss of confidence or because there are better places to put money. That's what the Maastricht treaty was supposed to prevent. But that was a pipe dream because there's no way for the union to keep the spendthrifts in line.
nhaehnle 15y ago
There is no conspiracy, there is only the importance of monetary sovereignty. To get some idea of what the latter perspective entails, you could take some looks at the (under devleopment) Modern Money Primer at http://neweconomicperspectives.blogspot.com/p/modern-money-primer.html http://neweconomicperspectives.blogspot.com/p/modern-money-p...
127 15y ago
Yes, in that regard it works exactly like a pyramid scheme. The point where people realize they have been duped the whole thing falls apart and only those who gamed the system profit. The majority will lose everything they invested.

learc83 15y ago

A US ratings agency also downgraded the US. Also, the US can inflate its way out of debt, the individual European countries can't because they don't have control over their currency.

tsotha 15y ago

>The problem is the perception of a problem and that leads to higher bond yields and that is what leads to this real problem. No, there is a real problem, which is the eurozone is a monetary union without a fiscal union. It's fundamentally unstable, something that can only work in good economic times. One of two things is going to have to happen to align fiscal and monetary boundaries - either national currencies will be reintroduced or fiscal policy will have to be aligned for the entire eurozone.

linuxhansl 15y ago
How exactly is this causing the problem? The problem is the cost of financing debt. That cost is high because the risk of the investment is (perceived) high.
- tsotha 15y ago
  >That cost is high because the risk of the investment is (perceived) high. Eh, that's semantics. The risk is high. None of these countries can afford the slightest rise in interest rates, whether that rise is associated with a loss of confidence or because there are better places to put money. That's what the Maastricht treaty was supposed to prevent. But that was a pipe dream because there's no way for the union to keep the spendthrifts in line.

nhaehnle 15y ago

There is no conspiracy, there is only the importance of monetary sovereignty. To get some idea of what the latter perspective entails, you could take some looks at the (under devleopment) Modern Money Primer at http://neweconomicperspectives.blogspot.com/p/modern-money-primer.html http://neweconomicperspectives.blogspot.com/p/modern-money-p...

127 15y ago

Yes, in that regard it works exactly like a pyramid scheme. The point where people realize they have been duped the whole thing falls apart and only those who gamed the system profit. The majority will lose everything they invested.