Monday, September 6, 2010

Dangerous EuroZone Money Raises in September

Eurozone governments will try to raise €80bn ($103bn) in September compared with new bond issuance of €43bn in August. Spain is expected to attempt to borrow €7bn in September compared with €3.5bn in August, according to ING Financial Markets.

Keep an eye on money raises out of Spain, Portugal and Ireland for signs of trouble. Last week, Ireland saw the extra premium it has to pay over Germany jump to a record 356 basis points.

A money printing bailout by the European Central Bank is a possibility. Such an ECB bailout could mean higher inflation if the new money is not sterilized by ECB money drains from other sectors of the economy. If it is sterilized, the money drains mean crowding out of the private sector, in favor of money flow to the government sector, which is all about non-productive welfare type expenditures, when it is not going directly to the favored  elite.

Bottom line: Whatever happens, the debt raise is about slowing these economies by cutting off debt for the private sector and growing the ever-growing state.

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