Italy and Spain are solvent countries facing speculative pressure on their bonds. Rather than an attack, it just seems like the arbitrary bond holders are selling these 2 countries' bonds as a precaution against adverse moves rather than an actual fear that these countries will be like Greece. Fundamentally, they are in better shape than 6 months ago when yields were lower because of the ECB backstop and EFSF which will commit to bond purchases later.
This is still a faux crisis which is nothing like 2008. If Italy and Spain were really in bad shape, I would say that this was a real crisis. But the market is overreacting by grouping them with Greece. It's traders pricing in a coming recession in Europe and contagion fears. This doesn't mean we don't go down. It just means if we go down to 1180, we won't stay down there for long. No opinion on today's trading, it is fairly neutral on most fronts.
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With yields above 7% again it becomes a real crisis, Italy 110bn to roll over in Q112, more than half of the full year amount. The ESFS doesn't have the fire power for this. Especially considering Spain's borrowing costs are getting out of hand. This won't stop until ECB monetizes debt (illegal for now) or we get fiscal union, both a long way off so we likely go down a long way first.
EFSF is going to be 1 trillion. That isn't enough firepower? LOL. There is plenty of firepower, always is when you have fiat currencies. All roads lead to inflation.
ESFS is only one trillion if they can leverage... look at the yield on the ESFS bonds, they can't... we aren't ripping straight back above 7% for nothing. Unleveraged we have approx 150bn left. It isn't enough. I agree all roads lead to inflation including the one that starts with deflation. Deflation isn't good for equities, just I ask anyone who has invested in Japan over past 20 years.
The europeans are being more pre-emptive than the Americans were in 2008. Same situation but they are following the blueprint quicker this time. QElite and QE2 came way later in the US cycle. EFSF is here now
Deflation is a myth perpetrated by the money printers. Funny how people still think there is a possibility of deflation with Fed's balance in the trillions and soon to grow again with QE3 and with ECB on the verge on monetizing debt. And with Brent oil at $112+.
Deflation and cycles are covered up by the illusion of inflation is how fiat and usury works until population strips resources. Then real inflation happens. These are always followed by wars to reset the ponzi which is where deflation finally occurs.
Sorry but I disagree, deflation usually precedes hyper inflation... then you get your wars et al. I would also argue surging oil will prove more deflationary than inflationary from here. i.e. $150 brent will crush all economies triggering a contraction.
I'm glad we are talking a bit about the price of oil.
It has been rocketing higher.
Another reason to be nervous..
financials rolling over??
check out xlf chart...it's close!
that's what i said moron. deflation covered up as engineered inflation, then real inflation then war.
Issue is not if Europe will blow up it's when. Just kicking the can further. America has more hope since it's populace work hard and play hard. Modern post WW2 Europe is a failed experiment in pseudo capitalist socialism and it's people are the laziest on the planet. Austerity and tax hikes + 0% GDP growth = Japan all over again.
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