Tag Archives: Spain

The Pain in Spain

2-Year Yield + 36.5 basis points to 7.007%
5-Year Yield + 12.5 basis points to 7.717%
10-Year Yield + 2.7 basis points to 7.648%
Read more at http://globaleconomicanalysis.blogspot.ca/#j0IF5ghsbAo5Ay0p.99

Bond junkies will note a mildly inverted yield curve. The rest of us should be looking at the headline number of over 7%.

The Euro is, agonizingly slowly, unwinding. Sovereign debt is being priced in Greece (no sale), Portugal, Italy and Spain as if these nations were not in the Euro. Which strongly suggests  that the markets no longer believe that the Euro is going to last much longer.

Which, realistically, it shouldn’t. It was not a terrifically good idea in the first place to hitch disperate economies together in one currency.  Jane Jacobs once wrote that a single currency across a variety of regional economies was rather like one set of lungs shared between a person running, one sitting, one walking and one asleep – no one would be getting optimal performance.

The great thrust of the 20th century was towards ever larger units. The EU, the Euro, NAFTA, ASEAN and so on. In so far as these were trading units they might create efficiencies (though at what cost?). But closer integration makes less and less sense as high speed communications and increased computer power, reduce the need for the economies of scale promised by ever larger units.

I suspect that the thrust of the 21st century will be away from large units and towards small, efficient, states and regions. At smaller scales it is possible to innovate and experiment. Pushing power away from the “center” towards the edge means that it is much closer to the people and much closer to their specific concerns rather than the amorphous aggregate which somehow satisfies no one.

Ambrose on Spain

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