The World Is Flat And Other Tales From Spain
From Mark Grant, author of Out of the Box
The World is Flat and other Tales from Spain
“The very powerful and the very stupid have one thing in common. Instead of altering their views to fit the facts, they alter the facts to fit their views... which can be very uncomfortable if you happen to be one of the facts that needs altering.”
The art/science of Deduction is a process that I engage in daily. To paraphrase Mr. Sherlock Holmes; it is where I make my bread and cheese. On the most fundamental of levels you must have the facts right before you can reach any conclusion or series of conclusions and here is where Europe tries its best to mislead you; they do not wish for you to have the correct data. I used to think it was just some political strategy of giving the public information but I now honestly believe that the Europeans engage in a very devious manipulated charade quite on purpose. It probably dates back to the Church claiming that the Earth was flat when it was heretical to disagree with the doctrine which was provided by Rome. The way the Spanish Prime Minister is behaving concerning the Spanish bailout he must still believe this heretical nonsense today. This week the bailout; next week the Inquisition.
"But as to the fable that there are Antipodes, that is to say, men on the opposite side of the earth, where the sun rises when it sets to us, men who walk with their feet opposite ours that is on no ground credible. And, indeed, it is not affirmed that this has been learned by historical knowledge, but by scientific conjecture, on the ground that the earth is suspended within the concavity of the sky, and that it has as much room on the one side of it as on the other: hence they say that the part that is beneath must also be inhabited. But they do not remark that, although it be supposed or scientifically demonstrated that the world is of a round and spherical form, yet it does not follow that the other side of the earth is bare of water; nor even, though it be bare, does it immediately follow that it is peopled."
The Church may now recognize that the world is round but the attitude remains the same and it is still almost heretical to disagree with the numbers handed out by the new hierarchy; the European Union. They count what they wish to count, they add what they wish to add and when I count all of the numbers and not just those they wish me to count then I am branded an evil-doer making “mischievous comments” which is how the Irish characterized me at one point. It is no surprise I suppose, governments in peril will go to any length to preserve their own existence and the more they are under siege; the worse their behavior.
After the now humorous proclamations by Europe and the IMF that the austerity measures in Greece would bring the country to a 120% debt to GDP ratio the second most ludicrous claim was that the EFSF and then the ESM will ring fence the core countries in Europe. This notion was heralded by both the EU and the IMF and the concept was just as effective for keeping Spain out of trouble as the advice of Mr. Ponzi for making investments. Now Troubadour Rajoy of Spain sings that the bailout for Spain was “a great victory for Europe” one supposes that we have returned to the flat earth theory. Since neither of the stabilization funds were actually funded of course; contingent promises to pay, which seem to get counted and then counted again like votes under Mayor Daly of Chicago are once more in vogue. However now with Spain to actually receive $125 billion (a $26,400 debt for each and every person in Spain) in the first round of funding and I say the “first round” because the money is nowhere near adequate for their banks much less their regional debt no matter what nonsense Ms. Lagarde speaks these days as she follows the advice of Marie Antoinette, “Let them eat cake;” now someone has to come up with the cash. You may have noticed in your life as I have noticed in mine that promising to pay and actually paying are two very different things. You may have also noticed that actually paying lessens the amount of money that the payer has left which is just what the European nations are concerned about as their credit quality deteriorates as they cough up the cash. Funny how that works!
The EU notion of ring walls did absolutely nothing, as I long ago said it would not, because the economic decline happens from within and not from without. The EU attempted and failed to protect itself from a threat that did not really exist because economic deterioration happens because of fiscal and monetary policy and not real or perceived threats from real or perceived bond vigilantes. A coral may protect the horses from the wolves but it does nothing to keep the horses from getting sick and the horses are most assuredly sick.
For those of you that keep waiting for some giant change-the-world event; I invite you to re-gear your perspective. Greece has fallen, Portugal has fallen, Ireland has fallen and now Spain has followed the road into Purgatory. These are significant events that are, in fact, changing the world though none has caused Armageddon to date though they may by their aggregate but not singular importance. This is also why Greece is of such key importance; it has nothing to do with staying in or out of the Euro or of the preservation of the European Union as a political entity. That part of the equation is barely relevant. What is of critical importance though is that if they leave the Euro that they will default on some $1.3 trillion in total debt that can be afforded by no one. That is the rub and you may ignore the rest of the Eurospeak that is bandied about from Brussels to Berlin. A default by Greece will bankrupt and cause re-capitalization at the European Central Bank, it will throw the IMF into a tailspin and it will play havoc with Target2 and the German Central Bank. Do not allow yourself to be taken in and mis-directed; this is THE issue and the only issue of real importance.
Pay close attention, as well, to the method of funding. First the EFSF money because the ESM is not yet in existence and then the ESM money, if/when approved, to the Spanish FROB (Fund for Orderly Bank Restructuring) which is part of the Spanish Government. The ESM money then immediately subordinates not just Spain’s sovereign debt but any and all bank debt in Spain so that the senior debt of Bank Santander gets subordinated and the bank’s assets can be called upon just like the sovereign to repay the fund if necessary. Look at the fine print here; pretty frightening. Then the Regional Debt will come into play which will cause another round of funding for Spain and which will toss the country into the vice-grips of the Men in Black who will arrive in droves from Berlin and Paris. We are also about to confront a very angry Ireland, Portugal and Greece who will legitimately ask why Spain is being funded at 3.00% while they are penalized for their indiscretion in much more painful ways. The first reaction of the markets may well be that the Three Kings of the Orient have arrived to save the day and, if so, take advantage of it because like in times recently passed the daylight will soon dawn that the core countries, Spain represents 12% of the budget of the EU, has now been infected and the cancer has spread to the lymph nodes as the “great victory for Europe” becomes the severing of the coronary artery. Now it is just not that Spain had to be bailed out but the problem is squared as Spain can no longer afford to pay to help the rest of the periphery nations.
“Hemmed in by the Americans and the Russians in the final days of World War II, Hitler convinced himself that he had two armies in reserve to mount a counter-attack and win the war.
Meanwhile, having lost the entire Pacific, Japan's Imperial Cabinet believed that no enemy could set foot upon the country's sacred soil.
When the truth is unimaginable, human psychology finds an alternative reality in which to dwell.”
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