Thursday, January 27, 2011

Japan Downgraded, Japan/China Bail out EU, Irish, house of Cards

Asian investors lead massive demand for first Euro bail-out bond

The Asian's are export driven economies, and by buying this EU Debt, they want to support their export market in Europe, the same reason the Chinese and Japanese are not dumping their U.S. Treasury Debt en masse, but diversifying out of them. 

Even though the Japanese Government is broke (200% Debt to GDP) (and recently downgraded by Debt Rating agencies ) they are willing to delay the day of reckoning by helping the EU bail out member nations. China stands on the edge of political change if there is financial and economic pain in losing their EU and US export markets, so they support the EU bail outs as well.

It’s a house of paper cards, acting reactively to the problems, playing defense when there are so many little things that could bring the house down.

For example the Irish people have voted out the government, that accepted the EU ‘Bail out’ and the demanded ‘Austerity’, I believe they will (and should) vote to leave the EURO, following Iceland. Their currency will be worth little, but they will be able to start with a clean slate (without crushingly high interest rates on massive loans), this future Irish government won’t be able to borrow from world markets so they’ll live within their means. –and all that ‘Irish debt’ that sits on world banks balance books (Mainly EU Banks --the real reason they ‘bailed out’ the Irish) will then be worthless. –developing.

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