What Comes After the Bailout of Portugal

By: Inoljt, http://mypolitikal.com/

Sometimes reviewing past news events can yield unexpected irony. Here, for instance, is the New York Times’ page on Portugal News. The second-to-last article, dated on January 12th is titled, Portugal Says It Needs No Bailout and Won’t Seek One. After that there is a series of optimistic articles titled, respectively, Portugal’s Bond Sale Better Than Expected, Bond Sale A Success In Portugal, Optimistic Outlook Eases Portugal’s Borrowing Costs.

Two days ago, however, came this gem: Portugal to Ask Europe For Bailout.

This bailout comes after the previous bailouts of Greece and then Ireland. The European Union has detailed a bail-out fund of approximately one trillion dollars, which can be lent to countries at lower than at-market interest rates. Originally this was meant to stop the market panic over the European sovereign debt crisis. To some extent it has succeeded in alleviating the panic.

On the other hand, it has obviously failed to contain the contagion to Greece alone.

By itself Portugal is not too big of a problem for the fund. Its economy is smaller than Greece’s; so is its population. The fund will be able to deal with Portugal, as it did with Greece and Ireland.

The question is, however, what comes next. With the bailout of Portugal, all eyes are looking towards Spain. This is the market’s next target.

A bailout of Spain would be a magnitude more difficult than the previous bailouts. Its economy is far bigger; more than a trillion dollars in GDP. This is four to five times bigger than Greece. It has a population of 46 million, several times that of Greece.

It would be very difficult and extremely expensive to rescue Spain’s 1.4 trillion dollar economy, unlike the relatively cheap rescues so far enacted. The bailout might perhaps or probably be impossible.

In other words, the eurozone has almost reached the end of its line. In the summer of 2010, during the height of the Greek crisis, analysts worried not about Greece but about Spain (and Italy after Spain). Spain was the big fish, the debt-ridden country in a recession big enough to pull down the euro. The fear was that Greek bankruptcy would set off a chain reaction, moving from Greece to Ireland to Portugal and finally to Spain.

Well, Greece, Ireland, and Portugal have asked for a rescue, and it has come down to Spain. Spain must not fall.



The devil's in the details in the deal with the devil

This post is about the many ways in which Wall Street is about to do what they've always done to us: game the system for their own advantage.

It's what they do. As the old question goes: "Why do you think they get the big bucks?"

But, first, a little background...

There are a ton of extremely valid reasons why our government is engaging in the biggest giveaway of all time to the status quo (a/k/a Wall Street).

There's more...

The GOP's hidden gas tax: $1 per gallon

My Senator, Norm Coleman, was sworn in on January 7, 2003, just before the start of the Iraq War, when the price of oil was $31.08 per barrel. On July 21, 2008 the price of oil had risen to $131.04 a barrel, $100 higher. That's an increase of 320% in five and a half years. My Congressman, John Kline, began his career in congress at the same time, and like Norm, he still serves.

There's more...

Bush and the Dollar: What is America Worth?

For the first time in my memory (and I'm 61 as I write this) the American Dollar and the Canadian Dollar are at equivalent value. I heard this on NPR as I drove to Betty's lunchcounter in Shepherdstown this morning for a late breakfast.

Frankly, I was stunned. I remember growing up and working as a kid in my father's drug store in Connecticut and his sign on the cash register not to take Canadian coins. When I asked him why, he would tell me that four Canadian quarters were only worth seventy cents... and we took a loss when we sold things and collected Canadian money in the mix.

At different times in my life an American dollar was worth 1.25 Canadian, or 1.40 Canadian, etc. But it was never worth the same (and heaven help us it was never worth less.)

Now, with our current economy, which Bush seems to think is just the greatest on Earth, the value of the American Dollar is no different than that of the Canadian Dollar. What's more, the Euro is taking over world markets as the standard trading currency, when the American Dollar had always been the International Standard.

What does it all mean? Is it a reflection on the value of all things American? I'm glad Paul Krugman's column is free again... I'm sure this is something he will address in the short run.

Meanwhile I'm saving the Canadian coins I pick up.

Under The LobsterScope

There's more...

The Deflationary Death Spiral Has Begun

Oil down.  Euro down.

Deflation is such a theoretical concept.  It should be called "Saving".

You save when you think prices are going down.  And, gosh almighty, they go down!

To prove me wrong, you have to point to an area where prices, in dollars, are going up.

Housing?  The stock market?  Try harder.

A key question: when US consumers get a taste of the benefits of not having to spend as much money on oil this winter, are they going to blow it all at the mall?   Not so much.

[We're still sinking on Friday. Guess people don't want to be long over the weekend. The theory that this is all an interest rate scare because of good economic news will certainly be put to the test. Hope it's right!]

There's more...


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