ECB Admits: “We’re the Magic People” in a Clown Show
[font color="blue"]Negative-Interest-Rate absurdity is another rabbit out of the hat.[/font]
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
For the second time this year, Spains caretaker government just managed to sell 50-year bonds in a 3 billion ($3.4 billion) deal. Despite maturing in the year 2066, when many of us wont even be alive and the duty to pay back the debt (assuming it still exists) will have been handed down to our childrens children, the bonds will pay an annual interest rate of just 3.45%. Not only that, but the issuance was over-subscribed by 7 billion.
This is a mind-blowing turn-up for a country that just four years ago needed an unprecedented bailout from the Troika to save its saving banks and avert total financial collapse. It is also a resounding testament to the power of central bank policy to turn economic reality on its head.
Less than three years ago, when Draghi had only just begun doing whatever it takes to save the single currency, the Spanish government had to pay a 5% yield to get investors to buy their one-year bonds. Now investors are willing to take 50-year bonds off the governments hands in exchange for an annual interest rate of 3.45%, despite all the attendant risks involved.
While the Spanish economy has improved somewhat since then, that is largely due to the fact that the government has sacrificed long-term stability for short-term growth, going so far as to plunder half of the nations social security reserve fund in order to keep spending at its current levels. The remaining half is exclusively invested in Spanish bonds. Even Brussels now admits that Spains public debt is out of control.
To make matters worse, Spain doesnt have an elected government to speak of and could struggle to form one even after the next round of elections, on June 26. .................(more)
http://wolfstreet.com/2016/05/14/ecb-admits-were-the-magic-people-in-a-clown-show/