Friday, 5 August 2011

08:29 – Black Friday. I suspect that when we look back upon this day, we’ll see it as the day the Euro died. And probably the EU itself. Even Barroso, the chief EU cheerleader, now concedes that the “contagion” has spread beyond the periphery. After denying, as late as Wednesday afternoon, that it would even consider doing so, Spain has now withdrawn a bond auction scheduled for later this month, in hopes that people won’t notice that its bonds are nearly worthless.

With the stock market crashes across the world yesterday and US employment numbers that are likely to be worse than everyone fears due later today, the stage is set for a real Black Friday on the markets today. And most of the EU country leaders have caught the last train for the coast, unwilling to interrupt their planned vacations. Geez.

Incidentally, for weeks news reports have been using the word “unsustainable” with regard to bond yields. I read an article this morning that reported that benchmark 10-year Spanish and Italian yields were “approaching 7%, a level that most economists consider unsustainable”. Just to be clear, there is no single rate that marks the “unsustainable” boundary. It varies from country to country, according to its own economic situation. For countries in horrible economic shape, like Spain and Italy, that rate doesn’t have to get to 7% to be unsustainable. For them, 6% is just as unsustainable, as is 5%, as is 4%. Looking at the numbers, I think 3% or even 2% is unsustainable for Spain and Italy. In fact, they’re both in such bad shape that anything much over 0% is unsustainable.


Barbara is taking the day off work today to help me build more chemistry kits. Just in time, too, because we’re down to less than half a dozen in inventory.


21:37 – Oh, my. The United States of America, which has had a AAA credit rating since before my mother was born and before my father’s father was fighting in the trenches in France, has now been downgraded by S&P to AA+. It’s ridiculous, really, and unlikely to have any real effect on US debt yields. After all, where else will investors put their money? Britain, despite its AAA rating, and Japan have higher debt loads than the US, and less dynamic economies. Switzerland is solid, but much too small to matter. The Euro is a joke. No one in his right mind would buy Asian debt. And does anyone really believe that bonds issued by Belgium, which hasn’t even had a government for the past year or so, are of the same risk level as US bonds?

11 Comments and discussion on "Friday, 5 August 2011"

  1. BGrigg says:

    Since I didn’t respond to the cultural trivia from 1941, let me jump in with American Pie!

  2. Roy Harvey says:

    On a completely different note, this YouTube video about baboons and dogs reminded me of what our host has said about how early dogs were domesticated. Of course the dogs in the video were feral, which means they were the product of tens of thousands of years of human selection so it is not really the same thing, but it is still fascinating.

  3. Robert Bruce Thompson says:

    That was the one with Alyson Hannigan, right?

  4. Robert Bruce Thompson says:

    I still maintain that we have women to thank for the domestic dog, which means ultimately we have women to thank for civilization. No one knows how the first domesticated dog came to be so. It may have been an injured pregnant bitch who was so desperate for food that she approached a human campfire. The men would have killed her on the spot, but the women took pity on her. Or perhaps a wandering group of human found a litter of orphaned puppies. Again, the men would have killed them or at least just kept walking. The women took pity on them. Oh, look! Puppies! They’re so cute! It wouldn’t surprise me if a human woman nursed them, a la Romulus and Remus.

    Yes, I know. The Latin for “wolf bitca” and “whore” are the same, lupa, so in reality it’s most likely that Romulus and Remus were raised by a whore rather than a female wolf.

  5. BGrigg says:

    RBT wrote: “That was the one with Alyson Hannigan, right?”

    Mmmm, no. Don McLean’s American Pie “And the three men I admire most, the Father, Son and the Holy Ghost. They caught the last train for the coast. The day the music died”

    RBT wrote: “I still maintain that we have women to thank for the domestic dog, which means ultimately we have women to thank for civilization.”

    I thought it obvious that women are responsible for civilization. Without them, we would be sitting around campfires, farting and telling lies about our hunting prowess.

    They have much to atone for.

  6. Robert Bruce Thompson says:

    Yes, men invent things like machinery and pharmaceuticals and mathematics. Women invent things like eating utensils and Kleenex. If human males were apomictic, we’d have space travel and nuclear power and all that good stuff, but we’d still be sitting around campfires, farting and telling lies about our hunting prowess. And wiping our noses on our sleeves.

    Incidentally, how could you have missed the obscure pop culture reference, particularly since I gave you a hint in an earlier message? (Hint: Alyson Hannigan)

  7. BGrigg says:

    Sorry, you mentioned Alyson Hannigan, and every time I hear her name I get this particular mental image and when I come to, I forget what I was doing. I was referring to the “last train” comment. I presume you mean the 1999 movie American Pie?

  8. Robert Bruce Thompson says:

    Willow: That’s what it was! I mean, why else would she be acting like such a b-i-t-c-h?

    Giles: Willow, I think we’re all a little too old to be spelling things out.

    Xander: A bitca?

    Tsk. Tsk. Mary Chervenak would have been all over that one with an appropriate quote from BtVS.

  9. BGrigg says:

    Ah, missed that one. I’ve never been a fan of vampire stuff, even if it had Alyson in it.

  10. Miles_Teg says:

    Hmmmm,

    This story reminds me of our host…

    http://www.abc.net.au/news/2011-08-05/swedish-kitchen-nuke-reactor/2825356

    Man tries to build nuke reactor in kitchen

  11. gfl says:

    I believe you’re overly optimistic about the world’s willingness to continue to invest in USA bonds. Not that the USA is likely to default, I agree, so the drop to AA+ is mostly symbolic, but your bonds are unlikely to be paid off without substantial inflation of the USD$ before maturity. Matters less if your funds are in the USA already and you want to keep them there; matters somewhat more if your funds are outside the USA.

    Personally, I’m glad to see the USA rating drop. Waiting for both shoes to drop (Broken Euro, unsustainable USA borrowing) is paralyzing.

    What will investors do? No real idea, other than that they’ll want to keep more of their money at home, wherever “home” is.

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