I am pretty sure I copied this from Mish’s blog.
(re my blogroll for link).
You know the end of the line has been reached when the borrowing rate for the government starts to rise precipitously.
There is no way out of this box through borrowing more money.
There is only a return to spending within one’s means.
Nothing else will work. There is no avoidance path for the pain that must be accepted.
The flaw in all of these arguments about a – rescue – is that all are simply an attempt to find a way to not adjust behavior
In short this is nothing more than a desperate attempt to avoid the oncoming and very unpleasant withdrawal.
There is no means to do so that will work.
Spain, and the rest of Europe, need a payments clearing system.
Europe, and Spain, (and the United States) do not need the specific banks they have today.
What is important is that you can clear a payment — not the name on the door.
And the deflationary impact of defaulting all of the bad debt will be good, not bad,
as it will cause over-levered asset prices to collapse, making them affordable again.
Yes, those overlevered banks will blow up. So what? The next day a bright-eyed entrepreneur will open a new bank.
Oh sure, those who have a vested interest in overlevered prices of “assets” don’t want to hear this.
But that a bunch of rich and powerful people will be financially destroyed, doesn’t change what the right path forward is.
Stop the *stupid* before the fraudulent edifice you keep overloading with more and more debt collapses on your head.