La gente esta muy loca

Spain, oh Spain!

Just as Greece moves towards the the pro-bailout group in terms of election polls, the Prime Minister of Spain is today digging bigger holes for the current set of EU Eurofudge.

Things are indeed crazy for Spain, their short-term debt rates are hitting 7%. Totally unsustainable in the long-term and for Ireland this was the trigger for a bailout.

If it was not so terrible for the Spanish it would be quite funny. After all, UK rates are at 1.8%. The UK has a worse structural deficit, a higher Debt to GDP ratio and far higher personal and total indebtedness; but we have the Pound and Quantitative Easing.

Spain is not Greece, the problems in Spain are centred around a huge property bubble, the likes of which we too had in the UK. This was driven by low rates across the EU. Now Spain is suffering a massive bust which again it does not really have to. This is a disastrous situation.

Spain cannot remain in the Euro in its current form. Neither the markets nor the politicians are going to stand for this forever. What Prime Minister Rajoy is calling for today is in fact common sense. If the Euro is to survive then it must change, there must be a last guarantor and debts must be shared in some form to give the weaker Countries access to cheap funding so that they can pursue austerity policies in a less charged atmosphere.

Of course Germany does not seem to trust that austerity will be followed through if Latin countries are allowed to borrow at cheaper rates. In this case, if Germany does not trust its own currency counter-parties then someone has to leave the party. As I have said before, it will be better for everyone if that is Germany, but somehow I doubt it will turn out this way.

Greece is a sideshow, as Greece itself sinned many times and deserves little sympathy for its own mess. Spain is different, Spain is a victim of the Euro - how Spain is treated will determine the fate of the Euro.

Eurofudge part 999

The astounding, no, amazing news this morning is that under intense pressure the Greek socialists have put together what might prove a workable coalition - workable for a few months anyway.

Who would have believed that eurofudge would win yet again. instead of a nice resolution to the real issue, namely Greece's massive uncompetitiveness due to its over-valued currency, we get some more, delicious fudge.

However, as with all sweet goods, the initial rush and taste will be welcome but the side effects wear off quickly. For a start, Greece will ask for better terms on its debt repayments and other concessions - all these things cost other people, not Greeks, more money. Moreover, when the inevitable default arrives, this is more money that has been wasted.

Now of course, with a magic money printing machine this money was in many senses never real anyway. The reality of monetary economics is of course under huge attack from the efforts of central banks playing with fire by printing money whilst hoping trust in paper currency does not collapse.

I don't think we are anywhere near that point yet; indeed, whilst the bailouts and eurofudge continue, the chimera can continue. The turning point will be the first default when the ECB should go technically bust, but somehow miraculously won't.

What will people think then of the digits they have in their bank accounts? Scary as the prospect is I am intrigued to see what the reaction is when people start actually questioning what money is and what has value. That way of course lies hyperinflation - policies today are determined to keep us in a Japan style financial repression for the foreseeable future to prevent this scenario from occurring.

Let's see what the next week brings....

Isn't the Euro crisis boring - will Sunday change it?

I mean really, it has been going on for 3 years now, the same events repeating over and over.

Country X has a hug deficit
Markets get jittery and bond prices rise to over 6%
Eurofudge meeting and some more magic money created to sooth tensions
Things get better temporarily whilst most people observing say this is not cure
More economic bad news comes out, Country X still has a huge deficit

Believe me it is hard to write about it time after time; I even feel sorry for financial journalists who have to re-write the same article day after day after day. They could probably get good jobs in North Korea now given their skills at repeating the same lines over and over.

Of course the solution is staring everyone on the face, break-up the euro, end the deficits, devalue the currencies, a bit of default and hey presto, competitiveness is back.

However, the Euro elite are not for turning. Or even discussing anything rationally. The ludicrous Oli Rhen said today he wants markets to stop being spooked by Spain - it's a real finger-in-the-dyke approach to the world.

Sunday though sees the French election and a very good chance of the end of Mr Sarkozy as French President. Without the Ozy for Angela' Merk we will have a new world. Sadly, Francois Hollande is a lumpen socialist in the mould of Ed Milliband. He does though not agree with the Euro consensus. This could mean that things will begin to change.

On the other hand, the brainwashing from Brussels is very effective on new leaders..but it will be interesting to see the Euro elites try and impose a technocratic Government on France if they fail.

Eurofudge part 96

So here we are, another day and another Euro.

David Cameron comes back from Europe having not signed anything and is being accused of "selling us down the River" according to no lesser authority than Ed Milliband.

meanwhile in the real world, the next President of France, Francois Hollande, has said he will re-negotiate the treaty anyway..

But what is this treaty - a final fix to the debt crisis, a burst of liquidity and debt forgiveness to restore some vitality to the PIGS? No, nothing of the sort, it is a treaty to stop Countries from borrowing too much in the future (Europe had one of these before, called the Stability Pact, which worked so well in the 2000's that we are where we are today).

The real deal will have to wait as this one is to help Angela Merkel persuade the Germans that they can put more money up to save the Euro. Safe in the knowledge that they will get it back again in the future.

I can't really see any progress since March 2010 when the problems in Greece first emerged and showed signs of being terminal. That makes the crisis nearly 2 years old and with nothing but hot air created to try and fix it.

Amazing to watch such inept people in action.

"I love the smell of eurofudge in the morning; it smells like..."

Fitting the misquote in the title is taken from a film entitled 'Apocalypse Now' (still one of my fave all time films, showing my age I guess).

But today is the day, senior politicians from around Europe are gathering in Brussels for a massive fudge baking contest. the ingredients have been chosen and mixed by legions of expensive eurocrats and sundry non-jobbers for a few weeks now. All that is needed is to switch the oven on and see whether we get a rise or a burn.

So, to kick the day off, I thought we should come up with some sharp marketing spiel for the Politicians, whatever they do they are going to need to sell it so some viral branding is essential. My effort is:

"Eurofudge, sweet to bite with a long, bitter aftertaste"

(if have you ever eaten any of this salted chocolate stuff that is being pushed now - its the same concept)

Your efforts please...