Notes From Underground: MOODY’S Downgrades Greece again, and yet the DOLLAR fails to gain strength

Moody’s, the major seers of economic events, has done it again. The Greek sovereign debt rating was lowered and rates on 2-year Greek notes increased to more than 15 percent. Rates on Greek 10-year debt rose to more than 12 percent, yet this is not an inverted curve that one would wish to buy. The group at Moody’s is awakening to the coming dreadful effects of the “NEGATIVE FEEDBACK LOOP.” The more the economy is squeezed, the less tax revenue is collected and that results in a further deterioration of the GREEK BUDGET. The Greek government is going to have to go back to the EU/IMF bailout gurus and ask for further assistance in preventing the next round of financing from causing a greater drain on Greek Government coffers. Imagine the deleterious effects of the Greek polity having to refinance its DEBT at current market rates rather than the considerable lower rates offered through the European Financial Stability Facility (EFSF).

This is the position that the newly elected Irish government finds itself, so the Greeks will be watching closely to see the route that the Irish officials take. Will they demand further concessions from private sector lenders or push the EFSF for better terms on its emergency loans? Europe is certainly not out of the stressful DEBT situation but the global investment community still deems the EURO a better value than the U.S. DOLLAR. Chairman Bernanke’s desire to proceed in the promotion of the FED’s DUAL MANDATE has rendered the U.S. currency a new role as the world’s “PISSING POST.

At least the pundits have gotten off the mantra of  “DOLLAR HAVEN.” The image of the FED being behind the curve is presently far more important than other geopolitical concerns. Ugly domestic budgetary politics in a zero interest rate environment seems to be trumping all other factors but I remind all our readers that markets are DYNAMIC and their ability to shift focus arises swiftly. ALL POWER TO THE YIELD CURVE!

In a disturbing political story out of Japan, Foreign Minister Seiji Maehara quit the government because of an illegal campaign contribution. The highly respected foreign minister was accused of accepting 250,000 YEN ($3,000) from a South Korean national who has resided in Japan for a long time. It is illegal in Japan for foreign nationals to give political donations. FM Maehara was considered a leading candidate to succeed Prime Minister Kan and therefore his loss is a blow to the DPJ and to Japan’s foreign policy agenda. Mr. Maehara was well known to the U.S. and highly respected in his knowledge of global affairs so this is a double loss for the ruling DPJ.

The impact of his departure further shows how Japan continues to be sidetracked by political minutiae when there are very important issues that need to be resolved. As my son, Tobias Harris, commented on Asia Squawk Box tonight, maybe the recent downgrade to Japan’s debt is very forward thinking. The resignation of such a highly respected government minister because of such a relatively trivial matter is the political quagmire that Japan seems to regularly find itself. Petty politics will not forever be overlooked by global markets but yet the YEN still remains close to its all time high, another woe for the DOLLAR.

Monday’s Financial Times had two stories that, as readers of NOTES are aware, elicit interest from the global macro perspective. The Russians announced that they want to attract $10 BILLION in investment capital from private equity groups and sovereign wealth funds. The MEDVEDEV government wants to sell off public companies to private firms and SWFs in an effort to show it’s serious about advancing as a pro capitalist/rule of law economy. President Medvedev is also forming a committee to advise him . The group will be composed of the top names in global banking. It will be interesting to see what global investors participate but as my readers know, MONEY IS FASCIST and craves a good return in a STABLE ENVIRONMENT. Will Russia become global capital’s newest “PLACE TO BE”?

In a totally opposite direction, Brazil announced that it was going to ban sovereign investment in agricultural land. Brazil sees itself as the best positioned country to take advantage of the increased global demand for food. The Brazilian government does not want to lose control of its agricultural sector the way that some African nations have in succumbing to sovereign wealth funds’ capital. Emerging economies are showing that they are not all the same so it is wise to begin looking at the emerging nations as individuals and not monoliths. There are growing cracks in the BRICS and it is best to invest accordingly.

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2 Responses to “Notes From Underground: MOODY’S Downgrades Greece again, and yet the DOLLAR fails to gain strength”

  1. Joe Says:

    I wonder how much of that “Fascist Money” will be backed by the “full faith and credit” of Too Big To Fail U.S. financial institutions that are convinced they are doing “Devine” work?

    >rule of law< Is that bridge in Brooklyn still for sale?


  2. Алоис Says:

    It is simply magnificent thought

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