Sunday, July 10, 2011

Italy and Spain are Now Coming on Stage

Poor Greece was getting lonely. Now come the big boys -- Italy and Spain. These guys have between them nearly nine times as much sovereign debt as our pals in Greece. Wonder how deep the French and German banks are willing to go to bail these guys out. Poor little old Portugal and Ireland -- they must feel neglected -- they've been forced off the front page by Greece and now along comes Italy and Spain.

I wonder if Italy will consider selling off the Colosseum in Rome. That should fetch a pretty price. Spain could let go of a few bullfighting rings and maybe some El Greco paintings (he wasn't Spanish anyway, he was Greek). I should have gone into the sovereign debt bailout consulting business. It looks like it has legs.

So, the ECB continues to believe that if we simply increase the amount of debt in the Eurozone by about 10 percent per year, we can solve the Eurozone debt problems. An interesting view.

Markets aren't as dumb as the ECB (and as the ECB wishes the markets to be). Yields on everything with a Euro attached to it have been heading straight up and will continue their upward ascent until every government in the Eurozone has fallen and virtually every state in Europe has, in one way or another, defaulted on their sovereign debt and crushed their domestic banking system.

Haven't we seen this movie before?

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