Tuesday, February 9, 2010

It's Blame the Speculators Time in Spain

Irresponsible fiscal policies in Spain are resulting in a huge plunge in the value of Spanish debt.

The downward pressure is being accelerated by various hedge funds, who are attempting to bring the price of Spanish debt in line with where it should be, i.e., the toilet. This is market efficiency in action. The hedge funds are forcing the debt down so that the less careful investors don't buy in to the debt thinking it is a strong value.

The hedge funds are heroes.

Spanish government officials see things differently.

Spain is the victim of an international conspiracy focused on destroying the country’s economic standing and via that the euro says Spain's Development minister, Jose Blanco.

And, he is naming names. Moore Capital, Brevan Howard and Paulson & C0 are behind the operation according to Blanco.

Again, it must be emphasised that the ONLY reason these hedge funds can conduct these operations is because Spain's debt truly is junk. They don't have the money to pay it back. The hedge funds by their trading are signalling to the world that there is trouble with Spanish debt. It is how free markets operate. Who are you going to believe, the markets or Jose Blanco?

1 comment:

  1. Am not familar with Spain's govt. budget or debt but market action is always more reliable than govt rhetoric. But Wenzel needs to choose his words carefully, the investment funds have no power to "force the debt down." The power is all in the hands of the government. The funds are simply acting in accordance with their own analysis.