this article<\/a> published yesterday by the Wall Street Journal regarding contagion and devaluations versus the potential new German framework:<\/p>\nThe crisis is feeding on itself. Last week, yields on Austrian and French ten-year bonds rose by 0.6 percentage points compared with Germany. Even in the case of the Netherlands and Finland, the spread has widened by 0.2 percentage points. However slight they may seem, these changes are significant in the bond market.<\/em><\/p>\nThe spillover to the Netherlands and Finland is particularly worrying. In 2010, Finland had a deficit of just 2.5% of gross domestic product and a debt-to-GDP ratio of 48.3%. One explanation could be that investors who have sold southern European debt at a loss are buying Dutch and Finnish bonds \u2013 which have yielded 7.2% and 5.3% respectively so far this year, according to Bank of America and Merrill Lynch \u2013 to balance their books. This suggests that the sell-off will ultimately create an attractive investment opportunity \u2013<\/em>(if the markets stabilise even slightly, because in any case we would be talking about an investment in a future that is, to say the least, uncertain)\u2014.<\/p>\n![\"\"](\"http:\/\/homeweb.entelchile.net\/home_img\/internet\/123_cl\/img\/portal\/img_adm_cont\/201007\/18166.jpg\")
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Another, more worrying explanation is that the divergence in yields reflects growing fears of a break-up of the eurozone and the reintroduction of national currencies. In that case, the trend could continue, as the new currencies \u2013 even those of AAA-rated countries \u2013 would likely depreciate against a new German mark: assuming a 25% probability of a 10% depreciation of the currency, a two-year French bond yielding 1.67% would return only 0.3%, according to Citigroup\u2019s calculations.<\/em><\/p>\nPerhaps the growing turmoil will lead to more decisive action by the European Central Bank. But the root of the problem lies in the persistent imbalances in the eurozone economy, which can only be resolved once and for all through permanent fiscal transfers or through a break-up \u2013 neither of which is within the ECB\u2019s power. The more the market realises that the ECB cannot offer a permanent solution, and the more politicians waver, the more likely it is that uncertainty will increase.<\/em><\/p>\nI do not wish to conclude without mentioning the Eurogroup\u2019s announced intention to oblige credit rating agencies to give 24 hours\u00ab notice before downgrading the ratings of the countries concerned \u00bbso that they can defend themselves\u00ab. Let\u2019s once again consult the \u00bbpolitically correct\/reality\u00ab and \u00bbreality\/politically correct\u2019 dictionary: this amounts to nothing more and nothing less than allowing them to use inside information to manipulate the markets and\/or secure economic, political and\/or unsavoury gains. This is clearly illegal and subject to criminal prosecution, yet magic and desperation are also intent on legalising it. The fact is that political surrealism is taking us further and further away from economic reality in a suicidal manner.<\/p>","protected":false},"excerpt":{"rendered":"
Lo que debe tan s\u00f3lo Italia es mayor que el agujero que tienen Irlanda, Grecia, Portugal y Espa\u00f1a juntos.\u00a0Alemania no puede pagar la deuda de los PIIGS, y el resto de econom\u00edas a\u00fan a flote (l\u00e9ase Francia, B\u00e9lgica, Austria, etc.), bastante tienen con tratar de simular una solvencia que cada d\u00eda se deteriora m\u00e1s y […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38,45,41,42,37],"tags":[],"class_list":["post-1500","post","type-post","status-publish","format-standard","hentry","category-actualidad","category-asesoramiento-deportistas-artistas","category-economia-y-finanzas","category-estrategia","category-reflexion"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/1500","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=1500"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/1500\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=1500"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=1500"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=1500"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"\"](\"http:\/\/1.bp.blogspot.com\/-Vu97ADvkMbM\/TbkADl1H28I\/AAAAAAAACAQ\/9zjGs8hfk_U\/s1600\/mcdonalds_monopoly_money.jpg\")
Italy\u2019s debt alone is greater than the combined debt of Ireland, Greece, Portugal and Spain.\u00a0Germany cannot pay off the PIIGS\u2019 debt, and the other economies still afloat (namely France, Belgium, Austria, etc.) have their hands full simply trying to feign a solvency that is deteriorating more and more with each passing day. The only way to repay the market (institutional and private investors and speculators) the money owed by Italy and the other PIGS is to print it in the purest banana republic style.<\/p>\n![\"\"](\"http:\/\/www.gagful.com\/uploads\/2011_11\/1321261798_monopoly_money_gag.jpg\")
But today we are still a long way from this possible, highly complex and, at the same time, bold solution. So what could be the way out of the current situation? Is there none at all? Well, we will have to find one before the world descends into chaos, with state and banking collapses that would wipe out all the wealth created over the last 50 or 100 years. And some bright spark goes and contemplates the possibility of pulling a rabbit out of the hat, with a \u00absolution\u00bb that has left me astounded. As there is no currency issuer who either has (with apologies to the emerging economies) or is willing to print enough money to plug the holes in the European periphery, they propose, as if by magic, to create a new, ad hoc currency. But of course, for this new currency to have enough credibility to be exchanged for \u00abreal\u00bb currencies such as the euro or the dollar and to repay the debts, whoever issues it must have sufficient standing, at least temporarily. Who can pull off this magic trick without already being up to their ears in debt themselves? Tick, tock, tick, tock\u2026 the IMF! And what could this new, exchangeable currency be called so that the deception isn\u2019t too obvious? Well, let\u2019s christen this issue with a technical name that already exists, in the purest style of financial engineering. Didn\u2019t all manner of securitisations slip discreetly into the system under this guise over the past decade? Exactly. We\u2019ll call it \u00abSpecial Drawing Rights\u00bb. The intended use of this is utterly mad and surreal,