As previously discussed,
back in the days before the euro, every few years the large French banks would take what were then massive write offs, with the French govt. writing the check and adding a bit to the French govt’s budget deficit, and life went on.
The idea that after switching to the euro French banks would suddenly upgrade their underwriting to the point where the periodic massive write offs would no longer take place seemed illogical to me.
So along those lines, after a dozen or so years with no major losses, it’s very possible some very large loan losses could be about to surface.
The way this hurts the US is through equity valuations for companies that trade with the euro zone, as well as currency translations of assets and earnings should the euro fall.
THE CATALYST FOR LOWER STOCK PRICES IS COMING OUT OF EUROPE..SPECIFICALLY FRANCE.. THE RUMORS OF FRANCE BEING DOWNGRADED SEEM TO BE UNFOUNDED, BUT CDS CONTINUES TO WIDEN.. THIS MORNING, SARKOZY CAME IN FROM HIS CHATEAU TO HEAD UP HIS WEEKLY WEDNESDAY MEETING. THE DIFFERENCE WAS THAT BANK OF FRANCES NOYER WAS IN ATTENDANCE, WHICH IS UNUSUAL…THE MARKET IS SPECULATING THAT A FRENCH BANK IS IN TROUBLE… SOCGEN STOCK IS DOWN OVER 20%….THE REAL BENEFICIARIES OF TRADING ARE THE UK AND GERMANY IN THAT ORDER…UK 10 YEARS ARE 23 BETTER, GERMANY 16 BETTER AND FRANCE 14 BETTER… THE EURO HAS GONE FROM 1.44 TO 1.418 TODAY.. AGAIN…SOCGEN IS THE RUMOR..WE SAW IT ON MONDAY IN A BB ARTICLE..WE HEAR IT AGAIN TODAY…