Wednesday, June 20, 2012
Spain’s 10 year bond rate has risen above 7%. This is seen as a benchmark because it drives up the cost of borrowed money for Spain above the level where the GDP can produce enough activity to make the interest payments. The ‘fix’ is another loan that will push back the insolvency date a few months. More band aids on the problem. Financial crisis are happening with alarming frequency today. I remember hearing about them every 5 or 10 years. Now we are hearing about them monthly, even weekly. The spending has been raised exponentially, and yet we have not seen the massive inflation that I have expected. The latest indicator that I have heard about is manufacturing capacity. The U.S. is now approaching the 80% level, a point where inflation pressures will become more pronounced. Another crisis approaches. That economic cliff that President Obama has saved us from is approaching fast. I expect it will hit somewhere else in the world and eventually make it to the United States. We may be able to hold off the next crisis, or the one after that. But sooner or later something will break. I expect that politicians just want to push it off until after the election. More band aids. Well, at least then we can blame President Obama for all of the problems for the next four years.