Professor Elam

Tuesday April 19, 2011

http://globaleconomicanalysis.blogspot.com/

Mish points out that two year Greek debt now yields 20%. In short the market is betting the Greeks will default. The price of bonds fall when interest rates rise. The market is now betting Greece will default. So yesterday US Stocks fell, US bonds fell then rallied, and the S & P suggested it will eventually downgrade US debt. No wonder with the Federal take now at 25% of the economy. The US  Dollar rallied.

I would say the future of the Euro is in doubt why it is still up is a bit of a  mystery. The Finns voted against bailing out Europe in their choice of candidates this past weekend.  Tiny Finland you see is a well managed country, Greece is not. 

This bears watching the next few weeks, such a spike in price suggests a coming climax of sorts, bailout or default. The Greeks refuse to restructure, ie slow default. as their own state controlled pension funds of full of Greek bonds. So they would be defaulting to their own citizens. 

By the way, those going to Ireland on the trip are surely aware that Irish banks have all been downgraded to or near junk status. The saga of PIGS Portugal Ireland Greece Spain slogs on.