‘Spain is (still) different’ or the Ostrich trick

Hobbes, let’s continue on the topic of Spanish delusion. Let’s see what we can learn today from our sage of the net (Wikipedia):

Stagflation, a portmanteau of the words stagnation and inflation, is a macroeconomics term used to describe a period of inflation combined with stagnation (that is, slow economic growth and rising unemployment, possibly including recession).”

Apparently, Mr Ben Bernanke, chairman of the Federal Reserve and Mr Mervyn King, governor of the Bank of England, are losing a war (especially Benny) that could and will not affect Spain. It is like they are still living (left and right) during Franco’s autocracy. They think they are immune to global financial storms because, somehow, the Spanish economy is decoupled from what is happening around the world.

In yesterday’s newsletter, Bill Bonner (The Daily Reckoning) commented on the ineffectiveness of the Fed’s rate cuts and its obvious but unintended effects:

“Prices rise, but so does unemployment. It wasn’t supposed to work that way. Inflation was supposed to spur consumers to spend money and businesses to hire people. But people eventually catch on to the trick. They eagerly get rid of money…and prices do rise. But they also come to realize that it’s not a real boom…but a phony boom… So, businesses do not expand…do not hire…and do not earn more money. They raise prices, but their costs go up too.”

It seems that Madrid is rejoining the Habana, Rangoon, Harare and Pyongyang club, living in a world of their own. Is this the economic equivalent of burying their heads in the sand? What really makes it difficult to digest, is the fact that the average Spaniard keeps leaving in their sheepish world, as if it wasn’t with them.

But is not all gloom in the horizon, thanks god that the average José saves money, not much left at the end of the month, but José and María have net national savings of 8.08% (2005) of Gross National Income, against 3.61% for UK and whooping 0.78% for USA. Nonetheless, they should probably be investing more in capital, instead of building properties that nobody can afford at current bubble prices.

Will they ever learn what everybody is saying and, worst of all, telling them out loud?

Until tomorrow,



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