I am not so optimistic about Europe, with the hedge funds and their Ratings Agencies dogging them. The saber rattling by Moody's at the US is merely to provide cover for the next assault on Ireland and Italy.
The solution is obvious, but difficult to achieve. A single currency for a range of economies is simply not feasible without transfer payments and a single financial authority as exist among the States in the US. Some states give more and others receive more as the necessary resolution of regional currency inflexibility.
A two-tiered system would work, as would spinning off a few of the PIIGs into a system which would allow them to devalue currencies as required. It would hamper the strong economies' regional exports, but that is the price they would pay.
The stumbling block is the CDS market and the debts owed to the French and German banks, and to a lesser extent the English and the Americans. This is why the Wall Street banks can ruthlessly press a default scenario as just another Goldman opportunity.
And in the meanwhile, Asia bides its time. The next eighteen months should be interesting.
MarketWatch
Stock index futures fall after Moody's warning
By Carla Mozee
July 13, 2011, 6:13 p.m. EDT
U.S. stock index futures fell Wednesday evening after Moody's Investors Service warned that it may cut its triple-A rating on U.S. government debt. Dow Jones Industrial Average futures recently fell 79 points, to 12,346 from its settlement Wednesday afternoon.
S&P 500 Index futures /quotes/zigman/1277190 SP1U -0.38% fell 9 points to 1,303, and Nasdaq 100 Index futures /quotes/zigman/876546 ND1U -0.48% shed 15 points to 2,330.
The U.S. dollar index /quotes/zigman/1652083 DXY 0.00% , which measures the U.S. unit’s performance against a basket of six other major currencies, fell to 75.01 and reached as low as 74.93. The benchmark was above 75 before the news. The euro /quotes/zigman/4867933/sampled EURUSD +0.44% and the Japanese yen each strengthened.
Moody’s said the review was prompted by the possibility that the U.S. debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes.
“As such, there is a small but rising risk of a short-lived default,” Moody’s said, adding that it considers the probability of a default to be low but no longer minimal.
“An actual default, regardless of duration, would fundamentally alter Moody’s assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate,” it said. If lowered, the rating would most likely be somewhere in the Aa range, said Moody’s.
Jeffrey Goldstein, the U.S. Treasury’s under secretary for domestic finance, said in a statement that Moody’s assessment “is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country’s obligations and agree upon a substantial deficit-reduction package.”
Earlier Wednesday, a stalemate between lawmakers appeared to be breaking after Senate Democratic Leader Harry Reid lauded a proposal from his Republican counterpart to let President Barack Obama raise the debt ceiling on his own. Reid praises Republican debt-ceiling proposal.
