Right Pulse

Where’s Rudd’s anti-market, pro-government, pro-debt neo-liberal conspiracy theories now?

Flow data shows an abrupt withdrawal of German and Asian capital from Club Med debt markets. The EU’s refusal to offer Greece anything beyond stern words and a one-month deadline for harsher austerity – while admirable in one sense – is to misjudge how fast confidence is ebbing. Greece’s drama has already metastasised into a wider systemic crisis. The world risks a replay of the Lehman collapse if this runs unchecked, this time involving sovereign dominoes.

Barclays Capital says the net external liabilities of Greece are 87pc of GDP, or €208bn (£182bn). Spain is worse at 91pc (€950bn), and Portugal worse yet at 108pc (€177bn); Ireland is 68pc (€123bn), Italy is 23pc, (€347bn). Add East Europe’s bubble and foreign debts top €2 trillion.

And its immediate relevance:

Britain, France, Japan, and the US are all vulnerable. All must retrench. The great “reflation trade” of 2009 is over.

Bail-outs, socialist and debt fueled ’stimulus’ spending are coming back to bite much sooner than I thought possible. Good luck trying to re-finance all that government debt,  especially with tighter banking rules covering lending and investment. That means higher taxes to punish the independent and make them government dependent.