French debt coming under investor scrutiny(risk premium too low?)

LONDON (Reuters) - French debt looks set to come under pressure in the near future with investors battered by the Greek crisis arguing it is pricey and does not reflect France's growing indebtedness.

As a result, other euro zone paper, including Germany's and -- perhaps surprisingly -- Italy's, could be in for a filip.

The gist is not that France's economy is under any immediate Greece-like default stress, but the cost of its bonds -- and the cost of insuring them -- does not properly reflect what stress is actually there.

The French deficit is set to climb to 8.2 percent of gross domestic product this year, the highest for at least half a century. Its debt is projected to jump to 83.2 percent of GDP -- up 20 percentage points in just two years.

"France has been lumped as a core euro zone economy. To our mind the budgetary situation is not as good as the pricing suggests," said Richard Batty, an investment director at Britain's Standard Life Investments.

This is how a depression seems to work. There is a catastrophic snap, followed by a lot of disbelief and ignorance that “things can’t really be this bad”. So people go about their lives at every level, believing the status quo.

The masses believe their jobs and shops and money is more secure than it is at this time. The elites believe that debt is not catastrophic because they have not seen it swallow them to date, therefore it must not in the future.

We keeps seeing fits and starts of deleveraging and it happens so slowly over such a long time, people continue to think “the worst is over”.

This depression is going to unwind for years, with a continuing parade of bad news as the world’s economy is dragged down, before this period of deleveraging is done and people can get back to hard work, investment, risk and prosperity.

There is going to be a long unwind. By the time we are done, people will think we will never see good times ever again.

Prior to Obama’s inaugeration, I predicted the economy would be on the ropes in 2012, making him a one-term wonder. I stand by that prediction. The massive debt spending by Obama may prove me wrong. He may find a new bubble to inflate, and delay the inevitable worse depression. I don’t think they can stop this. I think the Great Debt Unwind is unstoppable and we are going to see the fall-out from it for the immediate future, 5 to 10 years.

Just my ignorant worthless 2 cents as I don’t have any better raw data to work with than anybody else, and I have no formal training at this stuff. I do pride myself in having been right about this depression far more often than our supposed economic “experts” and all of their years of financial training and experience.

I don’t profess to know, but it is lonely knowing what I think I know. I am sort of on edge with a feeling that my stable world can come crashing down very quickly. I feel like the people around me aren’t aware of this in the least. They are just going about their business as usual. It is almost like the movie Matrix. They are acting like nothing is different.

In the meantime, I have pulled up the carpets and found that the foundation our house is resting on is cracked and tilted. Maybe I can live out my life before the foundation gives way. Maybe it will give way next week. I just don’t know. All I know is, the foundation is going to give at some point and I feel like the only one aware of this fact among my circle of friends and acquaintances. Their ignorance is blissful. My knowledge weighs heavy.

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