Irish Eyes Are Crying, Part 12

Moody's has downgraded Ireland's credit status to junk and is warning the country will need another bailout due to the abject failure of austerity measures there (as I predicted long ago).

Moody's now rates Ireland Ba1, one notch below former financial market pariah Colombia and two notches below Brazil, and has kept a negative outlook, meaning further downgrades are likely in the next 12 to 18 months.

Ireland's rating is still one notch above Portugal and six above Greece. Both Standard & Poor's and Fitch Ratings have Ireland at BBB-plus, three notches above junk status, with S&P's outlook stable and Fitch on outlook negative meaning it does not expect a downgrade in the short-term.

Moody's move, however, will likely put pressure on the other ratings as the downgrade forces some investors to dump Irish bonds because they no longer enjoy a clean investment-grade sweep of the three major ratings agencies.

"It's amazing to me that Ireland was still investment grade," said Suvrat Prakash, interest rate strategist at BNP Paribas in New York.

"A lot of people assume that these rating agencies tend to move with a lag so there could be more downgrades to come.

Ireland's borrowing costs are already at levels once thought unimaginable, with five-year paper yielding over 15 percent on the secondary market and 10-year paper close to euro-era highs of 13.86 percent.

When Ireland agreed an 85 billion euros ($119 billion) bailout package with the European Union and the International Monetary Fund last November -- a move designed to soothe market fears -- its 10-year paper was yielding around 9.5 percent, a level viewed as shocking at the time.

Yeah, let's recap here.  Irish austerity has failed so badly that Irish debt is now 4 whole percentage points higher than the "crisis" level that austerity was supposed to solve.  The latest Greek bailout nonsense has wrecked Italy on Monday, and hit Ireland on Tuesday.

When you make massive government spending cuts in a recession, the recession gets worse.  Britain, Ireland, Greece, Spain...all are in serious trouble now.  And here in the States, Republicans want to cut trillions in spending.  The results will be an order of magnitude worse here should that happen.  Republicans are trying to destroy the economy for political gain.  We know what happens when you make massive government spending cuts in a weak economy.  Austerity hasn't helped any country since the crisis began in 2008.

But we're told if we don't cut spending, we'll go bankrupt or some idiocy.  We'll go right into a recession, if not a full blown depression, if we do.  As it is, ending the stimulus is about to do just that.

But that's okay with our masters.