CBO Says Debt Will Reach 62 Percent of GDP by Year's End

← Back to list

7/3/2010

 
As the reality of the July 1 termination of the ECB's €442 billion LTRO (long term refinancing operation) is starting to dawn on Europe the weakest financial markets in Europe are starting to panic. Case in point, Spain, where the FT reports local banks are fighting the ECB tooth and nail so their imperatorial nudity is not exposed for all to see: "Spanish banks have been lobbying the European Central Bank to act to ease the systemic fallout from the expiration of a €442bn ($542bn) funding program this week, accusing the central bank of “absurd” behavior in not renewing the scheme."
      
As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight. Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
      
As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve. Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy. The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

  

Stack of Stuff: