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Anniversary Weaks

August 21, 2012

A couple of anniversaries last week: five years since the start of the credit crunch and one year since the US downgrade. The ramifications of both are still evident daily, of course


-Christian
Thwaites, president and chief executive, Sentinel 

A couple of anniversaries last week: five years since the start of the credit crunch and one year since the US downgrade. The ramifications of both are still evident daily, of course. We all probably underestimated that day in August 2007 when BNP suspended liquidity on a money market fund in France without telling the Finance Minister. They reopened with a Gallic shrug a week or two later, but we had seen the first bite from the layered collateralized assets that were embedded throughout the financial system. The downgrade came amidst toxic debt-ceiling negotiations and so took on heightened alarm. There's no conclusion from either event. We're still living the consequences. So this is as good a time as any to take stock.

Europe, dear Europe 
Almost everything in Europe over the last months has been a band-aid. Here are a few: i) the Spanish bond buying program from last year petered out leaving rates unchanged but with numerous interim scares ii) the LTRO rally lasted only a few months before petering out iii) the Spanish bond recapitalization agreed in June has yet to happen and iv) financing the ESM remains in legal limbo. The miserable profession of forecasting has been found wanting, too. Last December, the IMF report on Greece said growth would be -3% in 2012 and unemployment 19%. The latest numbers are -7% and 22%.

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