Tuesday, July 19, 2011

Sean Egan on CNBC

An excellent interview Sean Egan who runs his own ratings agency, Egan Jones.
- Recovery rates for Greek bonds will only be 10% vs. market expectations of 30%.
- The Fed is effectively the lender of last resort for the PIIGS through its Swaps lines and also because it will be the quickest to react and take action.
- Euro debt needs to be guaranteed by a "currency printing agency" but there are always risks of a weimar situation.
- Egan Jones cut the US Govt debt rating over the weekend
- The US Debt to GDP is on par with Portugal, while Canada is at 35% and is a "true" AAA.
- Debt has gone from $8T to $14T over the past few years via 3 wars ($3T) and the financial crisis
- On the debt ceiling: delay is not the same thing as default. The most likley scenario is that the ceiling will be raised, but the more important thing is to get Debt/GDP down.

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