Just a little more than a month after stripping the United States of its coveted credit rating, Standard & Poor's has set its focus on struggling European debt addicts, downgrading the third largest economy in Europe—Italy. The cut was made with negative outlook, meaning that Italy will face further cuts soon if things don’t turn around, and, let’s face it—things aren’t turning around any time soon despite Italy’s best attempts to unveil a brand new austerity program.
Even despite the European Central Bank’s buying Italian bonds to drive down interest rates, Italian borrowing costs have risen steadily. With the third largest bond market in the world (second only to the U.S. and Japan), its downgrade is significant. The Financial Times reported the story early this morning:
Yesterday, we commented on the Eurozone jumping into the fray as a gold buyer, but fears of a currency collapse are running rampant despite any last ditch efforts to own something other than worthless paper. While the focus has been on the euro as the weak link in the global monetary system, people have failed to zero in on the real culprit—the system itself.