"The Sovereign-Debt Bubble [Kevin D. Williamson]
Fitch has downgraded Portugal's government debt, from AA to AA-, and the euro is dropping on the news. Lots of Germans must be wondering why their economy is shackled to those of Greece, Portugal, Spain, etc. And lots of Americans, particularly Americans named Tim Geithner, must be breathing a sigh of relief: U.S. public finances at least look relatively good in comparison with Europe's. (But not with Johnson & Johnson's!) On the upside, that diminished euro means continental vacations just got a little cheaper for Americans — a cherished stimulus package for half-caf soy hope-and-change latte set.
BBC reports:
Analysts stressed the wider European impact the downgrade could have.
"The downgrade has more impact on the wider sovereign debt crisis, rather than on Portugal at the moment," said Peter Chatwell at Credit Agricole.
The ratings agencies are making noises about the supposedly gold-plated credit of the United States, the United Kingdom, Germany, and France. Remember when government bonds were bulletproof — like housing prices? All those mortgage-backed securities turned to slime because the underlying assets were not worth what investors thought they were. The reversal was hard and brutal — but there were real assets, still, at the bottom of it all: houses, land, etc. What about government bonds? You can foreclose on a house, repossess a car, but ... full faith and credit? Good luck with that."
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