Another day of vertigo for the markets. Growth throughout the world gives rally signals. The United States isn´t creating jobs and the stagnant real estate market worsens while the Fed?s monetary stimuli are about to run out.
In China heads of state don´t want revolutions like those that occurred in the Middle East and that means an appreciation of the Yuan that gives citizens purchasing power, which will rally their economy. In Europe, fear about Greece, Portugal and Ireland continues, at a time that the CEB and the Germans are confronting how to lower excess debt.
Trichet is asking that there isn´t a credit event or non-payment, or that the bank isn?t covered. But Germany demands that private creditors participate. Lastly, debt is not sustainable unless it shrinks, and a default is likely, though it will likely be called by another name.
The markets are pricing certain doubts and have lowered considerably since 2009, so they are trying to cover right now. This implies a liquidity constriction globally, something extremely dangerous if it affects Spain.
Are we on the way to what happened in May of last year? If there isn´t a new adjustment, it can happen, especially with a capable government and various pending IPOs. Until companies as solvent as Telefónica y Santander go through it.
And as Spanish risk premiums lower, this should emphasize the significant breach between what investors offer and the prices at which the issuers want to get even more, especially when they don´t hand over some company control.
