Writes Paul De Grauwe: “It is difficult to understand … why the market (and the rating agencies) forecast a default of the Spanish government debt, while they do not forecast trouble for the UK, which has a debt build up similar to Spain’s and a more serious banking problem.” Via Arthur Goldhammer, whose “‘racial’ component to the bias (blond bonds carry lower risk premia)” is actually I suspect a rational reaction to the don’t ask, don’t tell relationship from which Spain’s banks believe they are benefiting at the moment (someone forgot to tell Miguel Sebastián). The UK is apparently global no 1 for budget transparency at the OBI), while I’m told some in Brussels have ceased to regard Spain as a functioning state. British banks have effectively become nationalised entities in a fairly public process, while the Spanish sector’s problems are still the stuff of speculation. And while British local authorities are in deep shite, none of seem to think the most logical way out of it is to finance new Alitalias, which has been the Catalan public authorities’ major response so far.
(Are the Irish blond? The ones accumulating debt generally are, so maybe Arthur’s thinking of Galway.)
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Maybe also related is that a reasonable proportion of traders *live* in the UK, and reducing the place to anarchy would make day-to-day life there awkward for them. Kind of the complement of the approach of those CIA strategists who focused for decades on technocratic approaches to spying that make for agreeable well-salaried jobs in New England, neglecting, to their operational disadvantage, previously well-understood techniques that involved dysentery as a way of life and speaking Moorish for 50 weeks out of 52.
Maybe they’d all emigrate on the profits they’d made in the process. We may find out!
Probably part of the explanation lies in the unfathomable state of Spanish Cajas. With no shareholders to deal with and a regulator ( Banco de España ) not above all suspicion, is perhaps a small dose of realism suppose them in deep trouble.