"There is a crack in everything, that's how the light gets in"
(Leonard Cohen)
"Ignore all proffered rules and create your own, suitable for what you want to say"
(Michael Moorcock)
"Look for your own. Do not do what someone else could do as well as you. Do not say, do not write what someone else could say, could write as well as you. Care for nothing in yourself but what you feel exists nowhere else. And, out of yourself create, impatiently or patiently, the most irreplaceable of beings."
(Andre Gide)
"I want my place, my own place, my true place in the world, my proper sphere, my thing which Nature intended me to perform when she fashioned me thus awry, and which I have vainly sought all my life-time."
(Nathaniel Hawthorne)
“A book must be the axe for the frozen sea within us.”
(Franz Kafka)
"All mankind is of one author, and is one volume; when one man dies, one chapter is not torn out of the book, but translated into a better language; and every chapter must be so translated"
(John Donne)
“Never attribute to malice that which is adequately explained by stupidity.”
(Robert J. Hanlon)
"Life is beautiful, but the world is hell"
(Harold Pinter)

Thursday, June 14, 2012

EXTRACTThe reasons for the renewed crisis, which refuses to go away, are not too hard to discern: investors are spooked by the sheer confusion surrounding the June 9 deal. Who exactly is going to pay what and when? Critically, no-one is yet sure whether it will be the European Financial Stability Facility or the European Stability Mechanism that will dish out the money to Spain. If the latter, scheduled to replace the EFSF next month, then that has disturbing implications for the markets. Firstly, ESM rules prescribe - and Berlin is very keen on all euro member-states obeying the rules - that the “credit line” will take primary position in the event of default, therefore forcing those bondholders who thought they were first in line into a secondary and much more riskier position. Then, as sure as night follows day, the value of those holdings will immediately start to decline when it dawns upon the investors - who always check the small print - that Spain has done little if anything to improve its overall financial situation. Suspicion is also growing that Rajoy, maybe even the EU officials, were not aware of such an outcome when they agreed the deal - hardly inspiring market confidence.

Secondly, and much more obviously, is the brutal fact this new line of credit - no matter what the conditions turn out to be - is simply going to be added to the Spanish government’s debt: the country’s debt-to-GDP ratio has substantially increased overnight. In that sense, Spain’s ‘bailout lite’ has just acted to hasten the day when another - and larger - bailout will be needed by Madrid.

No comments: