Wall Street Never Learns: Spanish Bailout Edition

When the Spanish bailout was announced last Sunday night, it was expected that this action would cause the markets to surge higher.

 This belief was predicated on the idea that markets hate uncertainty. Well, if the markets uncertainty, why is this bailout reason to go on a stock buying spree?

The bailout does not solve Spain’s debt problem. All the bailout does, is buy Spain some time to formulate a plan to deal with its’ debt.

 Since the market doesn’t know whether Spain can formulate such a plan, I can’t understand how these markets who hate uncertainty can see a bailout as a prudent reason to go crazy buying stocks, since we could be in the same position six months from now?

Sounds like the same short-sided, live for today attitude that nearly led us into a global financial collapse to me. Readers?

Europe: Too Big to Fail

In the aftermath of the 2008 U.S. financial crisis the phrase “too big to fail” became a part of Americans social vocabulary.

The recent bailout in Spain and the turmoil in Greece, give me heart that “too big to fail” isn’t just an American thing.

As a general rule, I don’t like the notion of giving bailouts to countries that spent like there’s no tomorrow during good times, and now find themselves knee deep in debt.

Private citizens would not be afforded such opportunities, why should governments be so special?

The interconnected and global nature of the world economy is what makes governments special. If Spain and Greece go belly up, they take economic interests in Europe and the United States with them.

I don’t think people can understand that point enough. Having a globalized economy means that our fates are interconnected, whether we like it or not.

What we should be rallying against throughout the United States and Europe is the culture and circumstance that have made “too big to fail” institutions okay.

Lessons from Spain’s Battle with the ETA

The Spanish terrorist group ETA, who has been fighting for an independent Basque territory against Spain and France, announced an end to its’ violent terrorist activities that have killed at least 900 people over the last twenty five years. They further called for a political solution to address the legitimate grievances of the Basque people.

 Though some Spaniards are leery because members of  ETA have made similar promises before only to resume terrorist activities at a later point. Let’s assume for a moment that the ETA is genuine in this announcement, Spain has provided a useful blueprint for defeating terrorism.

Spain and France put a great deal of police pressure on elements of the ETA. Further, they’ve allowed pro-Basque independence parties contest seats in municipal elections, giving Basques an alternative to ETA’s terrorism. These parties have garnered greater support over the last few years, starving the ETA of their base of support.

 ETA’s undoing may have been its’ own failure to honor a similar promise to cease violent hostilities in 2006 as it was negotiating with the Spanish government. That overreach is important because it had a large part in discrediting the organization, among its' base population. If a terrorist organization loses its' legitimacy, it's relegated to the fringes of society, or eliminated altogether.