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http://finance.yahoo.com/banking-budgeting/article/112482/ireland-economy-going-bust?mod=bb-budgeting&sec=topStories&pos=2&asset=&ccode=
Generally I think it is safe to say that governments cannot default because they can simply print more money, but this is not the case for Ireland as it is part of the EU. Now Ireland is facing a debt crisis and will default if they do not get bailed out.
Is this even a big issue as "Ireland's entire debts amounts to less than 5% of the total revenue of the euro zone's 17 governments and its net debts are about 3%"?
The graph above is the EUR/USD over the past 6 or so months. The continually strengthening Euro would suggest that Ireland's default is not very important.
This article mentions many parallels between Ireland and the current US situation. I found this quote particularly intreguing:
ReplyDelete"Our net debt position is actually worse than Ireland's, and our current account deficit is twice as big as a share of our national economy.Yet lending money to Uncle Sam for 10 years at 3.5% is considered "risk free."
If gigantic banks that were once had "risk free" investments crumbled, will the US do the same? Who will bail out the US? Perhaps the banks
I like what you said about the Euro, Chris, and how it keeps rising despite the debt issues. That is mostly due to investments into the Euro. the day that Ireland announced its debt in October or Nov, can't remember (Dec?), the Euro was trading at 1.40 and dropped to 1.25, just in a day. People lost faith in the Euro. But it shortly returned to its fluctuating rate between 1.38 and 1.41 since people realized that there are other nations and investors that have so much stock in the Euro. As noted in the quote below from the article,
ReplyDelete"Europeans have a lot of capital — personal, political and financial — invested in keeping the EU and the euro going."
Like Germany. They are a ridiculously strong nation that unfortunately, will have to keep the Euro going for a while.
I was wrong. It looks like Portugal is going to fall first.
ReplyDelete