I am a regular "Joe" may be not a plumber but a regular average next door guy who is concerned with USA economy. Currently underemployed and with a $ 250 000 in student loans and with a bankruptcy filed not long time ago my passion for the state of the economy arouse ... My purpose is to gather information from different journals and or blogs and help those fellows americans interested in the economy have a broader perception of what really is happening.
PIIGS and CINN are the new acronym that you will be hearing for the next 2 or 3 years. PIIGS stands for Portugal, Ireland, Italy, Greece and Spain while CINN is for California, Illinois, New Jersey and New York. Why? Very simple: CDS... What a CDS is? CDS means Credit Default Swap and this is some king of insurance that investors buy in case the bond issuer defaults (does not pay)...High yields and low price bonds means that investors believe that there is a high possibility of defaulting you will start noticing that 2 year bonds issuance is higher with higher yields while 5 and 10 years is less. Why? Because investors want their money back as soon as possible and before the country starts defaulting...If you at the charts Greece CDS is high followed by Portugal and Spain...Investors strongly believe Greece is not going to pay, its bond rating has dropped and is expected to keep dropping...While here in the USA the panorama is similar: the debt compare to GDP is going to reach 114% by 2014 or who knows if sooner...meanwhile Illinois is increasing taxes to cover its budget deficit (let see the consequences), California is an old well known story, New Jersey has a deficit and New York? Lets wait one more year to see the monster coming out of the closet...
PIIGS and CINN are the new acronym that you will be hearing for the next 2 or 3 years. PIIGS stands for Portugal, Ireland, Italy, Greece and Spain while CINN is for California, Illinois, New Jersey and New York. Why? Very simple: CDS... What a CDS is? CDS means Credit Default Swap and this is some king of insurance that investors buy in case the bond issuer defaults (does not pay)...High yields and low price bonds means that investors believe that there is a high possibility of defaulting you will start noticing that 2 year bonds issuance is higher with higher yields while 5 and 10 years is less. Why? Because investors want their money back as soon as possible and before the country starts defaulting...If you at the charts Greece CDS is high followed by Portugal and Spain...Investors strongly believe Greece is not going to pay, its bond rating has dropped and is expected to keep dropping...While here in the USA the panorama is similar: the debt compare to GDP is going to reach 114% by 2014 or who knows if sooner...meanwhile Illinois is increasing taxes to cover its budget deficit (let see the consequences), California is an old well known story, New Jersey has a deficit and New York? Lets wait one more year to see the monster coming out of the closet...
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