Call me a prophet of doom if you want, but Europe's meltdown isn't a recession - it's a coming depressionThe interest rates on Spanish government debt are now heading up towards 8%. If you want to borrow money from the bank, you can likely do it cheaper than that. You personally may have a better credit rating than the Spanish government right now. In any case, a government can’t pay those punitive rates when its debt is gaping, its deficit out of control, and its economy in recession.
There’s muttering about a €300 billion bailout, which would keep Spain away from the financial markets for three years, but so what? For reasons I’m about to come to, I don’t think such a bailout could possibly happen, but even if it did, so what? Spain’s problem is too much debt piled onto a creaky economy.
That €300 billion ‘bailout’ wouldn’t be a gift, it would be a loan. The solution to too much debt is not more debt. (And, for that matter, Mr King, the solution to wehater siteey is not to print an endless supply of the stuff.) Naturally a giant bailout would kick the problem down the road, but bankruptcy is bankruptcy no matter when you meet it.
That’s point one.
Point two is that Germany (and creditworthy northern Europe in general) is coming to the end of its borrowing capacity...Germany is now on credit watch for a possible downgrade. No wonder Angela Merkel is showing the strain.
Point three: the terrible data, released today, about the British recession. I said we were in recession back in autumn last year. (No one believed me but, hey, I’m used to it.)
And now we find that we’ve actually had three successive quarters of recession, with the last quarter the worse of the lot. Even if things turn up – and, pardon me for asking, but do you see any grounds for optimism right now? – we’ve still experienced the worst recession in British economic history. Not a bit worse than the Great Depression but, by now, very significantly worse.
... There’s a big storm coming and it’s about to strike.Read more: [
link to www.dailymail.co.uk]