Nigel Farage, head of the U.K
Independence Party, appeared on Fox News yesterday. The Independence Party describes itself as libertarian. I don’t
know if it is my admiration for plain speaking British politiicans or libertarianism, but it was a hoot
watching his interview. A worthwhile six minutes.
Mr. Farage goes through the problems
of the eurozone, which he compares to the Titanic. He is colorful when
he refers to the current state of affairs in Europe as “Noddyland.” He
points out the “nonsense” of $120 billion going to rescue Spain’s banks at three percent interest while Italy will
have to borrow 20% of that at seven percent. At the 2:10 mark Farage
identifies the eurozone as “begins to resemble Communism, that in terms of its belief that the state and government
creates jobs, it doesn’t it destroys them.”
Spain’s Prime Minister Mariano Rajoy
decided to extend unemployment benefits for the long term unemployed. Rajoy cited the potential for social unrest
if payments were not continued. There is no doubt Spain has a problem with unemployment as it is the eurozone’s
highest at almost 25%, but they have another problem. They are broke.
Spain’s regular jobless benefits
program is contributions based and extends for two years. The last government extended the benefits by six months
with the government picking up the tab. The extended program was expiring today and Rajoy was facing falling
popularity and threats from the country’s unions of a “hot autumn.”
The country’s two largest unions
have scheduled a nationwide protest march that will converge in Madrid on Sept. 15. National polls show Rajoy’s
Peoples Party is losing support, down to 36% from last fall’s 45%.
The Spanish government recently
negotiated an agreement with the European Commission to extend deficit targets one year to give the government some
breathing room. Among the $78 billion dollars is austerity measures Rajoy agreed to was to cut the unemployment
benefits costs. He has now raised the costs of jobless benefits.
Two weeks ago (Aug. 2) the European
Central Bank’s Mario Draghi said the ECB was prepared to do whatever was necessary to save the euro. The proposal
from Draghi was that countries would have to apply for support from the eurozone’s rescue funds and accept strict
Spanish interest rates have
moderated somewhat since Draghi’s statement. Rajoy and Italy’s Mario Monti are waiting to apply for aid, but it is
widely believed they will in September. Germany’s Constitutional Court rules on the Eurozone Fiscal Pact on Sept.
12 and Eurozone Finance Ministers will meet on fiscal conditions that would be imposed on countries seeking
Rajoy’s actions send a signal to the
ECB, Germany and the eurozone he is not serious about austerity measures. What do you want to bet Spanish interest
rates will move higher to get his attention? Bloomberg speculates Rajoy may upset the bureaucrats he needs to support his government with
The market continues the low volume
meandering trade today. CPI came in lower than expected this
morning. This is interpreted by the market as leaving room for the Fed
to initiate QE since inflation is not showing in “official” numbers. TIC
Net Long-Term Transactions fell out of bed at $9.3 billion compared to June’s $55.9 billion. We should get some headlines tomorrow as Angela Merkel will be making
news. U.S. Building Permits, Housing Starts and Initial Jobless Claims
will be released before market open.
It looks like time to start watching
precious metals again. George Soros and John Paulson increased their
stakes in GLD in just released 13F filings. They see more money printing
on the horizon…in Noddyland.
America is... is no longer, uh, what it... it, uh, could be, uh, what it was once was... uh, and I say to myself,
'uh, I don't want that future, uh, uh for my children.---Barack
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