Panic spreads

Here's another article about the Greek financial cancer that is spreading across Europe.

Here's one about how it has spread from Greece to Portugal to Spain.

My theory for many months now has been that it will spread from the weakest countries through eastern Europe to Japan and the UK to the US. This view has been widely ridiculed by the (always wrong) experts for months. I guess a prediction is always wrong until the day it happens.

The fundamental problem is called the mispricing of sovereign risk. That is what I call it anyway. The bond markets have not been acting like all these profligate sovereign countries like Spain, Greece, Ireland, Latvia, Hungary, Bulgaria, France, Italy, UK, Us, etc. are acting crazy and spending more than they can ever repay. The bond markets have been acting normal, though the countries have been acting insane. At some point, apparently right now, people will have to look the situation right in the face and say "Stupid European socialists, Japan, and stupid newly socialist Americans have spent more than they could ever pay. There is no way out of it, so if I am going to lend them money it should be at a very high interest rate if at all. I will probably never get repaid."

The problem is that once interest rates are higher there is really no hope for countries to come out of it. But that's how it goes when you try to solve your problems using something as idiotic as Keyenesian economics (that is, spend more money no matter what).