Submitted by Mark J. Grant, author of Out of the Box,
“Depend upon it, Sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”
-Samuel Johnson
The world today does not smell of lavender and lilacs these days but more like old grease that has gone rancid. Always a skeptic, I find myself these days looking with more of a jaundiced eye than usual as I stare out on the fiscal landscape. Yesterday a High Court Examining Magistrate opened a second investigation into the ruling party in Spain examining new corruption charges that include Prime Minister Rajoy. These focused on money paid by the construction industry but a second article by Reuters made me wonder. This story centered on Santander selling off $393 million in troubled assets to a hedge fund. What caught my eye here was that they were apparently sold at four cents on the Dollar; a 96% discount. You might think write-off but the bank is having serious difficulties so that doesn’t quite fly. You might think some other reason in the normal course of business but at four cents on the dollar there is scant benefit to be gained. I wonder if Santander wasn’t, given the two ongoing investigations, not removing consumer loans from their books, as reported, but questionable loans that they did not wish to be investigated. If the loans are not there then they cannot be found and if they can’t be found then perhaps it lessens the chance of implication and criminality. I look at it all and wonder.
“Every man serves a useful purpose. A Prime Minister who has been caught stealing, for example, may make a perfect scapegoat for the next man that assumes his office.”
-The Wizard
Meanwhile in Italy the spaghetti sauce continues to boil. It once simmered but the heat has been turned up and it is a full boil now. Every political leader on the Continent is hoping for a deal. I can almost visualize them wandering around, “Deal, deal where is the deal?” I can see Signore Grillo on the dais, “No Deal,” he proclaims to the audience as the contestants hem and haw in frustration and the crowd goes wild. What is worse for the people in Berlin and Brussels is that every indicator points to that if another election were held that Signore Grillo would emerge with even more votes and maybe a majority of votes. This is not politics as usual in Italy. The 5 Star Party does not wish to play by the old rules. They want to re-write the Rulebook.
It can be said with certainty that the yields for the periphery nations in Europe are lower but it can also be said with certainty that their economies are in worse shape. The Great Disconnect not only continues but worsens. We go back to the Great Singularity which is that the tide is still in as caused by the world’s central banks who have flooded the globe with little blue and green pieces of paper. When I was growing up there was a maxim that, “Money doesn’t grow on trees.” Now, by God, there are Money Trees in Washington and Frankfurt. It is a miracle of nature and something to behold. Even the price of gold, the alternative currency, is now manipulated by the central banks as they sell into any rally and control the Relative Value part of the equation. Currency skirmishes are underway and denied as the fiscal alchemists ponder how to devalue all of the currencies at once. The politicians have abandoned their posts and the central bankers have taken charge in their absence. The inmates are now in charge of the asylum. Officials elected by no one and accountable only to their green eye shades and private investors, shoved to the sidelines, are left to scratch out a meager living searching the garbage dump for scraps.
It is a peculiar time. The land is filled with fantasy once again. The Emperors are minimized by their inadequacy. The High Lords Bernanke and Draghi have assumed the Regency!