HAHA!!!
Shouldn't laugh really. The UK and US have both been reduced from AAA rating. Wait.......that's the first time it's happened since when?
Did someone say a depression?!?!?
(5 December 2012, 23:08)MikeA Wrote: Unsure what this will mean for us here in blighty, but just more evidence that the whole bastard EU train is coming off the tracks !
I wouldn't dare say I have the understanding of Soros or Buffett, so please take that into consideration when I say what I will.
To put it simply, there is a very high chance the Euro, that we have all come to 'love' could well be losing a member to save itself. Which has the potential to cause a chain reaction of leaving states/countries. If Europe decides to kick Greece out of the EuroZone, then it would cause international attention that is far from wanted! The negative reaction would be felt most in the PIIGS (minus the G obviously haha). Those countries would be in danger of also being kicked out to save the EZ. However, if Greece were to go, and that saved the EZ, highly unlikely, then I could see Greece leaving the EU......which is basically what would be happening if they were booted from the EZ. So you can see why I don't see Greece forcefully leaving the EZ as a viable scenario. It would be like Asia having a single ruling power, and kicking out a border country. What ruling system wants to lose an area of land? Exactly, why it wouldn't happen.
A much more viable option, one that works out for the EU, Greece, the EuroZone, the PIIS (that poor G is all alone) is for Greece to voluntarily leave the EZ, and convert back to the Drachma or another solitary currency. That way it stays in the EU without damaging the EZ's reputation, and then alleviates the stress caused by other countries having to bail them out every few months. However, the EU and Greek politicians would have to let Greece reach rock bottom, to then allow for it to recover, like Iceland did. Pumping money into a bottomless pit simply doesn't work. When over 12% of your GDP is tourism, building new roads and the alike isn't going to help the economy.
In essence, the down regulation is just a suggestion on how likely they are to pay back loans. That answer is what we've all known will happen. Dey ain't gunna pay da cash back, baas <---- woo accented 40's gangster speak! I'm so clever haha.
S&P, Moodies, and the other rating's companies will always give recommendations. After all, it's their job to do so. The problem is when the rating breaks the faith in another countries willingness to lend to the down rated one. Like Zimbabwe, a country unable to receive funding will just start printing more and more money and boom, super hyper mega inflation (hyper inflation isn't always a good enough expression).
The rating change could end up with nothing coming from it. We all know Greece isn't able to pay back any of the loans. Selective Default usually means, in regard to a company "Let's start liquidating the assets and sell the company for £1.00" Which you can't do for a country. So, what does it mean for Greece? Well, it means that in regards to lending them money, only a fool would do so. It is literally DEAD money.
The real question, is whether the EU keeps them afloat, or whether they're smart enough to leave the EuroZone, that has been killing them for so long.
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