European View

http://blogs.telegraph.co.uk/business/ambrosevanspritchard/august07/marketmayhem.htm
To doom and gloom for me but a couple of takeaways.

Like I said on Friday this is what Greenspan tried to do in the United States for two years and was unable to. Instead it has happened violently and within a few weeks.

Credit spreads on the iTraxx Crossover (a good barometer of corporate bonds) have ballooned 180 basis points since February. The cost of borrowing for most firms in Europe and North America has jumped from circa 6.5pc to 8.3pc, if they can get it.

The outcome below.

Germany’s Chamber of Industry told me yesterday that it had been flooded with distress calls from family Mittlestand firms unable to roll over credit lines. In Canada and Australia, junior mining finance has dried up almost entirely.

And of course our European friends are starting to realize the scam we pulled on them.

In a warped sense, one has to admire the cool way that Americans – who save nothing, in aggregate – tapped into the vast savings pool of thrifty Germans to finance their speculative excesses, and then left the creditors holding a chunk of the subprime losses.