The pain as Spain goes mainly down the drain
Spain recently had a tough time selling bonds, following in Greece’s footsteps. On the secondary market Spanish 10-year bonds are trading to yield an interest rate around 5.75%. Spanish unemployment is about 23%. Yes, you read that right, 23%, as in Great Depression level unemployment. Their massive “investments” in solar energy haven’t worked out either, by the way.
Even worse, Greek 10-year debt is trading to yield a 20% interest rate. By comparison, mutual funds of American junk bonds are paying in the 6% vicinity. What does a 20% interest rate tell you? That you won’t get your principal back. European Central Bank are you listening? If Spain’s debt trades like junk, what is Greece’s debt? Don’t answer that, it was a rhetorical question. As Europe continues down the road of massive capital destruction because of some pan-European, bureaucratic, socialist, utopian fantasy called the Euro, what will they do when all the capital has been destroyed? That was a rhetorical question, too.
These countries have debt to GDP ratios that will make the debt load unsustainable and impossible to repay. Does that sound familiar? Welcome to America’s future courtesy of President Obama.
The government reported that the unemployment rate dropped to 8.2%. Remember how the stimulus was supposed to keep unemployment from going over 8%. Never mind.
A drop in the unemployment rate would be a good thing, if it were true. Amazingly, the unemployment rate dropped even though there were only about 120,000 new jobs created, well below the expected 200,000 (which would not have been that great a number even if it had occurred). What’s up with that you say? I am glad you asked. There are now 88 million Americans no longer in the labor force and no longer counted as part of the unemployed. That is an all-time high. In other words, the government has created such a bad economy it just resorts to defining the problem away. The economy creates substantially less jobs than expected and the unemployment rate goes down. This is quite a brave, new world we have here.
According to an article in Bloomberg.com,
“We see a lack of sustainability in terms of strong job growth,” Tony Crescenzi, a strategist at Pacific Investment Management Co. in Newport Beach, California, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
Gee, no kidding that there is a lack of sustainability.
We all know the definition of insanity….doing the same thing over and over again while hoping for a different result, yet the Obama administration reflexively trots out its tiresome soak the rich, attack business policies. Unless action is taken there will be major tax increases in January 2013. The Obama administration’s budget (and I use that term loosely) proposes to raise taxes even more and Obama is constantly railing against the producers of economic growth. Obama may refuse to see the connection between the weak economy and his policies but the American people do and it will be evident in November. Election Day can’t come too soon.
Barack Who’s Sane? Obama. What a guy.