ECB outplays Harry Potter in magic

  After the surprisingly successful Greek bond sale now new data appeared on "increasing interest"  in... Spanish debt. But in Spain almost nothing has changed since the times the country bankrupted and had to use help from EU bailout funds. Yes this default was not official like with Greece. Instead a direct help for banks was given without formally passing through government. Anyway it was an external aid on non-market basis, i.e. it was de facto a partial default. And now - just like with Greece - an enormous interest in Spanish debt.

    When the crisis erupted the governments started to blame for it financial speculators that decided to profit from the pain of the people. They pointed that at lower interests there will be no problems with serving the debt. The logic was that creditors are obliged to lend at low interest because this is a basic right of the society.
    So now politicians look right. As soon as the difficult moment passed the interests went down and everyone is happy without real reforms passed and spending cuts implemented. It is a kind of magic...
    But has someone bought the empty flats and houses built in the Spanish bubble that brought the banks to crash? Is there real money to solve this problem? No. Is the Spanish debt going down? No.
    But why we are asking all this? Haven't we always said we are discussing a magic? So it is a magic and that is the only reliable answer.
    So the only remaining question is who the magician is.
    His name is Mario Draghi, helped by Jens Weidmann and the band of EU central bankers known as masters of making something from nothing. I.e. money from thin air. ECB is lending to Spanish banks and they are lending to the government. Everyone is happy, excluding the pariah that earns his money with hard working. He is obliged to share the product he expects in exchange for the money with the holders of the magic money.
    By the way, even in Harry Potter series it was said you cannot make money by magic. This is impossible. Obviously the great minds of ECB have surpassed Harry Potter in magic...

Dobri B.
April-22-2014

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