Dow Jones Industrial Average: the terrible news from Europe may lead to the final collapse

Dow Jones Industrial Average - the negative trend will go to next week

In brief: Dow Jones Industrial Average continues to fall on the strong background of very bad news from Europe. In the euro area is expected the new defaults.

Dow Jones Industrial Average could not resist the bears, who got down to business with renewed vigor after the next bad news from the Old World. Dow Jones Industrial Average falls below a boundary mark. Bulls demonstratively leave the market. Now Dow Jones is a mark of 10,218.40. Losses on the basis of today grew up not so much -40.59 points (-0.40%).

So, the reason for the fall of Dow Jones Industrial Average began the European crisis. Five years after the Group of Eight summit, whose theme was played, as the beds of poverty will be history, “one news Agency published the results of the problems on the program of assistance to the poorest regions of the world by the richest nations. Turned out that the United States who have been sharply criticized for a modest amount of allocated funds, exceeded his plan. Help Italy, which was once so praised for her generosity, was obscene is scanty. Generally, when it comes to assistance, the results of Italy always looked the most miserable compared to other countries of the Group of Eight. Not only Italy, but many other European countries, and in particular peripherals, live under the motto “promises a lot, do a little”. Then it was disappointed the poor countries in Africa, but now it has become a bitter revelation to investors. To begin with, that in trying to patch the holes in the budgets of those same countries promised cost savings, which are only a few basis points of GDP. This is a pittance compared to how much they spend. The same is true, and promised government reforms. For example, Greece is not able to realize savings program, which she signed. That is, if she still does it, then blow to the country’s economy is so strong that tax revenues and increasing social budget items (for example, welfare benefits) will result not only delayed the growth of income and capital. This program will increase the already massive debt. The only way to Greece – is an even larger transfer payments from rich center of Europe. In other words, Greece is waiting for the mercy of Germany. Not surprisingly, distributed at this week’s rumors that Greece intends to request a review of conservation programs at once believed, because when confronted with a wave of popular protest against government action, have something in them to change. If not immediately, then at least until it was too late. But just can not! In the end, the IMF is not a simpleton, to give assistance to the right and left. He gives her a few trenches and only under certain conditions. Right? Here is how come the IMF when it comes to third world countries. But his wallet, which is the U.S. and Europe, is interested in preserving the euro for political reasons. After all, nothing terrible will happen if the fund will be slightly more loyal to eurozone countries.

Greece will be traded as much as possible, giving the promise, taking a back, giving back. And so long as its creditors will not lose confidence, as has already happened with investors. Managing Director of Pacific Investment Management Co. (Pimco), Bill Gross believes that pntikrizisnye measures to reduce the budget deficit of Greece, slowing growth in its economy, and prohibitive rates on loans in the interbank market does not leave Greece other choice but to restructure its public debt.

He said that Greece could bear the burden of its own national debt requires such a significant growth in its economy, that in an environment where rates have already reached a prohibitive level, the situation is absolutely desperate. Previously executive director of Deutsche Bank (Josef Ackermann), also said that he considered “questionable” ability of Greece to pay all their loans. Experts in this case did not believe that restructuring can happen any time soon. Financial markets are currently very unstable to withstand such a blow, and the assistance provided by Greece, the EU and the International Monetary Fund (IMF), gives this country a break. Restructuring the debt is essentially a default. Greece will have to negotiate with bondholders or the extension of their treatment, or reduction in payment that will bring investors to losses. According to rating agency Standard & Poor’s, in case of default of Greece on the debt, bondholders will get only 30-50% of their investment. This problem is not only the Mediterranean region. According to some position of Ireland, for example, much worse than in Greece. In the UK, have not been able to dry the ink on the coalition agreement, as have reason to believe that the proposed coalition government budget will have to rest not like it, and chances are that the country is in political deadlock. Measures to be taken, are undemocratic. As a result, we see defaults in any of their form. Greece ceased to pay its debts. In the UK, Bank of England starts printing money with such force that the country flood the inflation. The bonds’ investors put on the altar of unkept promise.

Anrey Torbinski
2010-05-28 19:34, Economics.

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