The Pain in Spain
Wow that was fast.
MADRID (AP) — Euphoria over a lifeline of up to €100 billion ($125 billion) to rescue Spain’s hurting banks morphed into a financial markets rout in a matter of hours Monday, as investors digested the still-undefined plan and became concerned the country may be unable to repay the new loans.
Nils Pratley at the Guardian is impressed. “Bailouts in the eurozone used to generate relief rallies that lasted at least a week. The Spanish version couldn’t even manage a full morning.”
The yield on 10-year Spanish government debt, which had fallen to 6% soon after the start of trading, ended the day at 6.5% – an astonishing turnaround. Worse, Italian bonds followed the same pattern, closing a whisker above 6%, the highest since January. Far from calming nerves, the grant of €100bn (£81bn) or so of cheap loans for Spanish banks seems only to have hardened investors’ analysis that the eurozone debt crisis is getting worse.
The Spanish weakness only seemed to underline the weakness of other countries in the Eurozone as the bulls-eye moved directly to Italy. “Investors also zeroed in on Italy, sending its bond yields sharply higher amid worries it could be next in line for a bailout because of a deepening recession and increasing pressure on the administration of Premier Mario Monti.”
And Spain’s economy is in terrible shape with no sign of improvement anytime soon. … Spain’s bond yield is worrisome because it is perilously close the 7 percent rate that is considered unsustainable, and the level that pushed Greece, Ireland and Portugal to ask for bailouts of their government finances. While Spain’s bailout does not include the government, investors are worried that Spain might eventually be forced into such a situation.
In the case of the Eurozone, to suspect something is to find that it is true. Now the only question is how long until the next step, the next failure, the next bailout, the next failure? In the video below Nigel Farage finds that even Red Ken Livingstone now agrees with him. Godzilla’s footsteps are now audible outside London. Livingstone says what everyone knew all along. The Euro was nothing but a set of handcuffs designed to bind countries to a “United States of Europe” project which Livingstone claims was meant ‘end war’ — and probably to end racism, stop climate change, foster gender equality, promote gay rights and all that good stuff as well. But handcuffs they were and they are pulling the countries towards disaster.
The bitter truth is that the European collapse is simply the consequence of Leftist fantasy politics. It is what happens when people realize that the ‘paradise’ they’ve been building is nothing but a deconstructed, demographically collapsing, hollowed-out and bankrupt shell of lies.
Still, nothing focuses a man’s man like the prospect of being hanged on the morrow. If fear — what is it but that? — is now changing Ken Livingston’s mind — his intelligence finally burning through the veil of delusion in spite of everything — then it is possible that as the crisis deepens even dyed in the wool liberals will begin to see the shackles around their legs for what they are.
What am I doing with these? Help! Help!
The only problem with the deathbed conversions of the sort that Ken Livingston is metaphorically experiencing is that it often happens at the stage when a crisis is cascading. It happens too late. The damage is widening exponentially. There won’t be years or months left to change course. What Spain illustrates is the compression of time within a crisis. Things are not only happening, they are happening faster than anyone believed was possible.
And of course there is always the motive of opportunism. Suddenly outlets like the Independent are sounding like they were free-enterprise advocates all along. When the Big Government model starts to unravel the public will find that the most unlikely people will confess to secretly posing as commenters on the Belmont Club all along. Who knows, it might be even true.
Belmont Commenters
How to Publish on Amazon’s Kindle for $2.99
The Three Conjectures at Amazon Kindle for $1.99
Storming the Castle at Amazon Kindle for $3.99
No Way In at Amazon Kindle $8.95, print $9.99
“Things are not only happening, they are happening faster than anyone believed was possible.”
Of course, here at BC, the question has always been, “What’s taking this so long?” followed by, “Wake me when it’s time to take the trigger lock off the shotgun.”
Most business fraud occurs, not because of planned theft, but because when the business gets into trouble, the principals resort to dishonesty to avoid reality. They lie and cheat in both hope and fear.
Spain and most, if not all the EU, is trading whilst insolvent. More debt, more lies and indeed more speeches can only make things worse.
Are the Germans prepared for inflation as the only way to deal with the debts.
I look for mysterious market forces to make this crisis climax on September 15.
The better analogy would be mountain climbers tied together on a vertical cliff. The pitons are pulling out, and everyone is telling someone else to dump their pack first. Of course, no one wants to be first, because one or two dumping everything might save the rest from dumping their own packs. So they will all go down together.
what about if europe just moved all the old people out of europe, would that help?
does a country ever pull back from socialism once it’s gone over?
Livingston is a waffler not a convert. In the video above, he insists Britain must stay in the EU trading bloc and remain economically shackled to the sinking continental economy.
He was also fundamentally wrong about the Common Market. It did not start as a primarily political endeavor, the initial goal was to expedite/sustain post-war recovery by encouraging cross-border commerce, particularly in mining and manufacturing. As the Common Market evolved into the European Economic Community and then European Union, leadership shifted from business people with a business focus to politicians, economists and academicians with their own social and economic agenda. We can see how that’s worked out.
Krugman writes:
“So there’s nothing necessarily wrong with this latest bailout. . .”
. . .except that it is not going to work. Right? I mean, except for that one little thing of course. The Krugman column linked from RCP today (morning edition) is amusing in the extreme, with Krugman twisting and spinning like mad. In the past, Krugman’s terrible track record of economic prognostication has only been detectable to those who have kept his writing cached for years. Now, however, his suggestions and prescriptions for economic bliss are proving false and misguided in the extreme before the ink even dries.
It becomes harder and harder for a reader, even one positively disposed towards Krugman, to maintain the suspension of disbelief that he himself is buying the snake oil he’s selling. It becomes progressively (no pun intended) clearer, that the man is just what commentators on the right have accused him of being for years, a shill for the Democratic party’s economic ideology.
Nations shuffled certificates for gold deposited in NY Fed vaults to resolve bank crises in years past. Perhaps Europe needs a Cultural Reserve Bank where nations can shuffle certificates for artworks deposited in a Berlin CRB Museum. Gold supplies haven’t kept up with global economic growth, but artists keep cranking out growing supplies of culturally-and-hence-financially attractive “hard” assets. Except for the Irish, the PIIGS could enter into the CRB with strong credits, and even the Irish would be OK if manuscripts count.
Mark White @ 8: “Perhaps Europe needs a Cultural Reserve Bank where nations can shuffle certificates for artworks deposited in a Berlin CRB Museum.”
Certainly true that governments have lots of assets which could be sold to pay off debt — from space shuttles to Greek islands. But shuffling certificates of ownership would not help. Shuffling pieces of paper is how the Global Political Class created this mess. Instead, assets would have to be genuinely sold to those with the means to pay for them. If that means the French have to visit the rebuilt Louvre in Moscow, and Londoners have to visit the rebuilt Formerly British Museum in Riyadh, so be it.
By analogy with what an individual or family would do when finding themselves financially strapped — first step has to be to cut back expenses to match income. Second step is selling whatever assets they can to pay off debt. Governments ought to do something similar.
Ah! But the Keynesians would cluck about deflation and austerity. Let them! Keynesianism has now been proved to be a busted flush.
Mark White @ 8: “Perhaps Europe needs a Cultural Reserve Bank where nations can shuffle certificates for artworks deposited in a Berlin CRB Museum.”
Carinhall?
It would be funny if it were not for the lives of hundreds of millions of people who were about to be wrecked.
A particularly dour British friend assured me there would be a war in the near future, allegedly because of all the financial mumbo-jumbo that’s gone wrong.
That’s impossible because there have to be people to wage it. Europe’s demographics have already written this novel, and if we want to skip ahead to the last pages to find out how it all ends….go visit an old folk’s retirement home, and watch the old folks doddering around reminiscing about the past.
Because that’s all they have left.
The deeper mystery was why all the nations of the West have decided to commit some form of democide, the death of the poulous, the body politic. I would bet that at the root of it is the years of a type of subtle intellectual message of personal defenestration, that has so percolated into the conscious minds of so many European, Japanese and Americans, that they cannot even tell you WHY they think this way, because it is the only way to think.
They are in an intellectual trap of their own making and cannot think of a way to escape it. Their groupthink and newspeak has killed them.
The future is the more vigorous and primitve, retrograde culture of the Middle East Arab and North African (and in America, the Mexican or other hispanic, and we are luckier because they are not so culturally estranged from us) taking over the empty cradle of Europe.
Will a spanic follow the grexit? Sorry, couldn’t resist.
> When the Big Government model starts to unravel the public will find that the most unlikely people will confess to secretly posing as commenters on the Belmont Club all along. Who knows, it might be even true.
Shhhh! Quiet, comrade!
“It is what happens when people realize that the ‘paradise’ they’ve been building is nothing but a deconstructed, demographically collapsing, hollowed-out and bankrupt shell of lies.”
Don’t sugarcoat it we can handle the truth
The only question is who gets caught holding the bad ofdog dirt when the music stops. That will only be sorted out when we see who has which credit default swaps. Who knows what the Bernank has in his little pandora’s box at the unaudited Fed.
Well, I’ve been here since before the trombonist reformed. After all, how can anyone trust someone whose instrument changes shape as they play it?
That’s my story, yada, yada. It’s no secret. I’ve even been known to drink with trombone players.
One more thing – name the last time borrowing your way out of debt worked.
When the Big Government model starts to unravel the public will find that the most unlikely people will confess to secretly posing as commenters on the Belmont Club all along. Who knows, it might be even true.
OMG, if it turns out that Subotai is really Alec Baldwin, I think my head will explode.
And FWIW, I am not, nor have I ever been, Hugo Chavez.
@David, #11: primitve, retrograde culture
Do not count out the Texan, the Midwesterner, or the unreformed rank-and-file Southerner. Chicago itself, though its name be tarnished by recent emigrants, remains the City of Big Shoulders. As a denizen of flyover country and the Coasts as well, I can say the rot has barely spread beyond tidewater.
@mezzrow, #15: the last time borrowing your way out of debt worked
Donald Trump. You owe the bank $100, the bank owns you. You owe the bank $1M, you own the bank. But that only holds true for so long as the bank itself remains solvent.
> Well, I’ve been here since before the trombonist reformed. After all, how can anyone trust someone whose instrument changes shape as they play it?
It’s true that we have been known to shift our positions.
The Lord loves a sinner who has discovered a truth.
“When the Big Government model starts to unravel the public will find that the most unlikely people will confess to secretly posing as commenters on the Belmont Club all along.”
This really tickled me. How true!!!
This was a scam from the start. The bailout didn’t have any money, it was a call from Spain saying we need help and the bureaucrats and bankers saying sure.
All it did was start the process of subjugating sovereign debt which will inevitably lead to a writedown of everything not owned by the IMF, ECB and other euro organizations.
There is going to be somewhere in the vicinity of 50-80 trillion dollars in debt written off before this is finished. There is no way around it. The owners of that debt are starting to realize that fact and are manoeuvring around to make sure someone else gets the cut.
The situation is cascading out of control. Not even the sycophants can keep enthusiastic for more than 4 hours. Reality is intruding.
Those who have to write the checks are giving up on the utopian dream already. Politicians are getting nervous and feeling their necks gingerly. The last to realize will be the brains behind the operation and those selling the utopia.
#16 bogie wheel
Wo3 de5 ma1 he2 ta1 de5 feng1kuang2 de5 wai4sheng5 dou1
I go away from the computer for a few hours to address one of our local TEA Party groups on the Supreme Court decision that defined what a “natural born citizen” is, and return to find myself slandered. Alec-freaking-Baldwin??!!!??
YOUR head would explode? I’d eat my old service revolver.
I will say that Mrs. Subotai shares my sick sense of humor, though, and laughed her …. posterior …. off.
Subotai -”detests ‘People for the America Way’ and thinks PETA means ‘People Eating Tasty Animals’”- Bahadur
Cats and dogs, living together…
I’m gobsmacked that Red Ken is making sense. This must be the End of Days. Did you notice that he said almost en passante that he was “wrong” about Britain joining the EU?
Amazing. A true Emily Litella moment.
The pain in Spain falls mostly on the lame.
The speed with which this Spanish bailout faded is astounding. A high mass star, at the end of its lifetime, tries to support itself against the relentless pull of its own gravity, by burning heavier and heavier nuclei, each nucleus the residue of the previous burning stage. Each fuel turns out to be less efficient than the previous, and the demands for more energy are greater as the crush of gravity becomes stronger.
All of the star’s helium is burned in about a million years. Carbon begins to burn and is depleted in a thousand years. Oxygen in several years, and silicon in a day or two. The end result in the explosion we call a supernova.
9. Kinuachdrach notes “…assets would have to be genuinely sold to those with the means to pay for them.” Claims on assets — warehouse receipts, deeds — have long substituted for physical possession when physical possession is inconvenient. Of course, you have to trust the warehouse and the recorder of deeds.
10. Mrs. Davis asks “Carinhall?” Those in the know did not place much trust in the proprietor there.
My impression of Germany today is that warehouse receipts from a Cultural Reserve Bank Museum in Berlin would inspire a very high trust level… much higher than a similar institution situated in Athens or Rome or Madrid now, or in Third Reich Berlin. London would be the other European alternative, and if you were to go further afield, almost any sizeable US, Canadian, Australian or New Zealand city would do. But since Germany holds so many PIIGS obligations, that seems like a natural home for the Cultural Reserve Bank. It’s existence would serve as a nice incentive for Germans to hold PIIGS obligations and a nice disincentive for PIIGS to issue more obligations than their revenues can support.