Portugal’s debt costs jumped again. Up nearly one percent in a single month. Up from 3.7% to 4.6% for 5 year debt. This continues the pattern seen for Spain and Italy. Both of them had debt costs jump recently.
There is no denying it, European debts are sliding down the same slope Greece already fell off. It will only take one of them to fall over the edge and they all go over because they are tied together. In particular Postugal will pull Spain over with her, if she herself goes. Spain is exposed to (ie is owed) about 85 Billion euros of Portugal’s debt. But neither Spain nor anyone else is willing to lend Portugal nor its banks any money at a rate she can afford. And let’s be clear Portugal cannot afford 4.6%. Portugal is, to paraphrase the Inquisition, sorry, IMF, ‘a small economy with few prospects for significant growth’. Portugal will not grow her way out of this recession.
This sale of 5 year debts is the first of what will be a series of increasingly expensive and desperate bond sales. Each will allow Portugal to pay some bills but each will also make her postion worse. Every time a country borows money at a rate it can’t actually afford ( a rate below their own rate of growth) then that country is in effect agreeing to be in MORE debt after the sale than she was in before.
Go G20!
I found an interesting article by Niall Ferguson here:
http://www.iie.com/events/event_detail.cfm?EventID=152
Fiscal Crises and Imperial Collapses: Historical Perspective on Current Predicaments
Gloomy reading but riveting saying much the same as yourself Golem.
Thanks Ian,
I'll take a look. But interesting if he's saying similar things. I wouldn't have guessed it. I have always thought he was an out and out apologist.
Hi Golemxiv,
Love the blog as always.
It is refreshing to see someone looking past the next headline.
If you are sick of the spin put on every story you might find the following source of 'relatively' objective stats useful?
http://www.forexfactory.com/calendar.php
The graph function on the right tends to be scary when you look at unemployment etc.
Of course, all these numbers are easily available and the agencies coming-up with the stats in the first place can change their 'methodology'. However I find I get more solid facts out of that single web page than the whole BBC business section!
Morning John,
Now that is a useful page. Thank you!
The lecture by Niall Ferguson was fascinating for its *historical* viewpoint.
However, surely the modern crisis is unlike anything that has happened before, for two reasons:
1) the developed countries are not recovering from major wars – no public euphoria to usher in harsh new belt-tightening regimes.
2) most of the global debt has not been defined in terms of values on balance sheets – the academics can present as many forecasts as they like, but do they take in to account the real, undeclared values of financial instruments such as credit default swaps?
RichGB,
I have to agree. This is where I find Ferguson a bit of an apologist. I can't decide if its because of his politics or his academic investments (in ideas I mean) or perhaps both.
But I agree that his analysis deson't do it for me. I think he is still very much within the denialist camp. Deny the debts, dney they make a difference, deny that economics is theology for a dead god.