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Greenspan: It's about the eurozone, not the US

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Greenspan said the current sense of crisis that has unnerved investors is about the euro zone, not the US.

'The United States was actually doing relatively well, sluggish but going forward until Italy ran into trouble," he said. "That destabilized the European system, and the crisis re-emerged. Europe is very critical to the United States in the sense not only do we have a fourth of our experts there, but more importantly, significant proportion of the foreign affiliate profits, in fact half of U.S. corporations, are in Europe."

"When Italy showed signs of significant weakness in selling its bonds—the yield is now over 6 percent, which is an unsustainable level—it created a massive problem within Europe because Italy is a very large country, cannot be easily bailed out and, indeed, cannot be bailed out," Greenspan added.

http://www.cnbc.com/id/44051683

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Greenspan said the current sense of crisis that has unnerved investors is about the euro zone, not the US.

'The United States was actually doing relatively well, sluggish but going forward until Italy ran into trouble," he said. "That destabilized the European system, and the crisis re-emerged. Europe is very critical to the United States in the sense not only do we have a fourth of our experts there, but more importantly, significant proportion of the foreign affiliate profits, in fact half of U.S. corporations, are in Europe."

"When Italy showed signs of significant weakness in selling its bonds—the yield is now over 6 percent, which is an unsustainable level—it created a massive problem within Europe because Italy is a very large country, cannot be easily bailed out and, indeed, cannot be bailed out," Greenspan added.

http://www.cnbc.com/id/44051683

This is about how I'm hearing it too from the traders I've talked to today.

The S&P downgrade is the headline-news the talking heads are fixating on. But it's not what's motivating the selling by institutional players. Europe, and Italy in particular, are that motivation. If the Eurozone unravels due to the big PIIGS (Spain and Italy) and the ECB+Germany+France can't generate a bailout large enough to prevent that unraveling, that is a big enough shock to push the whole global economy deep into a double dip recession. That's what's freaking out investors who are bailing on everything today and seeking quality. The fact that people are buying Treasuries is evidence they're not paying any attention to an AAA->AA+ downgrade. They're just scared shitless to own any stock that's any part of the global economy at this point.

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