From Reuters:
Moody’s became the first ratings agency to cut Portugal’s credit standing to junk, warning the country may need a second round of rescue funds before it can return to capital markets.
The downgrade on Tuesday was not entirely unexpected and served as a reminder that Europe’s debt troubles extend beyond Greece, which has dominated news headlines over its second financial bailout.
Some economists think Ireland may also need additional support, and investors worry Spain and Italy could be next in line for aid…
Which, as it turns out, is just what I’ve been saying. But I’m no genius – all anyone has to do is total up the debt these countries owe, divide it by their (declining) population and you can easily see that they owe more than they can pay. And I don’t mean “can pay this year” or “can pay in ten years” – I mean “can pay, ever”. Even if these nations decided to dedicate themselves to debt payments – if they decided to live in poverty and work very hard, that is – they still couldn’t do it.
You can bail them out all you like – Germany and France can buy all the bonds from these nations they like: eventually a day will come when there is simply no more money available to bail them out, and then they’ll have to pay…but they won’t have any more money then than they do now…and, in fact, will just be more in debt. Then they’ll default – and France and Germany and the entire European Union will be left holding debts that can’t be paid…and then the EU will have to default. Somewhere in this process, the financial system of the world will break down. And it will break down because it must break down – the “too big to fail” banks must fail; the economy must complete its recession; bad debts will have to be written off; assets will have to fall to their real value…we built up a fake prosperity founded on debt and fiat currency. It has failed, it has to go – the good news is that once it goes, we can start to rebuild.
And, I think, we’ll get a better world out of it – I don’t know about you, but to me debt has become poison. I would no more borrow money than I would sell myself in to slavery. If I can’t afford it with the money I have, then I just won’t have it – period. I don’t need the latest gadget. I don’t need a new car. I can wear my clothes a little bit longer. I can also shop around for more durable goods…things which are better made and may cost more, but will last me a generation. I can be a very old fashioned person who believes in thrift. And I think more and more people are coming to understand this – and want to be like this.
But, first, we must clear out the Ruling Class which brought this on and still hopes to salvage the system…mostly by stealing what wealth we have left. And that task of Ruling Class-ectomy begins for the United States in 2012.
HAT TIP: Mish’s
Blogs For Victory 