Starving Spain, Part IV

The theme of this series: Our massive spending binge will suck all of the capital out of global markets, starving other countries who are in desperate straits themselves, such as Spain. The previous post is here.

-----

Ambrose Evans-Pritchard, admittedly an alarmist, has a column today on there not being enough money in the world to pay for all the stimuloids and wild spending binges going on all at the same time.

The world is running out of capital. We cannot take it for granted that the global bond markets will prove deep enough to fund the $6 trillion or so needed for the Obama fiscal package, US-European bank bail-outs, and ballooning deficits almost everywhere.

Who will get hurt firstest and worstest? Why, the very countries Obama seeks to emulate - a bunch of profligate Euro-socialists.

Commerzbank said every European bond auction is turning into an "event risk". Britain too finds itself some way down the AAA pecking order as it tries to sell £220bn of Gilts this year to irascible investors, astonished by 5pc deficits into the middle of the next decade.

US hedge fund Hayman Advisers is betting on the biggest wave of state bankruptcies and restructurings since 1934. The worst profiles are almost all in Europe – the epicentre of leverage, and denial.

Europe is the epicenter? I blame George Bush!

This single example from Japan is being replayed in different versions all across aging, overspent, secular humanist Europe:

Japan's $1.5 trillion state pension fund – the world's biggest – dropped a bombshell this month. It will start selling holdings of Japanese state bonds this year to cover a $40bn shortfall on its books. So how is the Ministry of Finance going to fund a sovereign debt expected to reach 200pc of GDP by 2010 – also the world's biggest – even assuming that Japan's industry recovers from its 38pc crash?

Into this vortex of money-sucking debt strides our Boy King, throwing trillions of dollars around that do not, in fact, exist. His spending spasms will use up the global investment money that countries like Spain are counting on. The backlash ought to be something to behold.


H/T: Paul Kedrosky.