Thursday, 18 August 2011

08:45 – Pity the poor European Central Bank, which has the tiger by the tail. Two weeks ago, the ECB began buying Spanish and Italian debt. That intervention worked, driving down Spanish and Italian bond yields from considerable more than 6% to the 5% range. That still isn’t good, but it puts off the crash a bit longer.

The problem is, having started, the ECB can’t stop buying Spanish and Italian debt because no one else will buy it. With Spain and Italy no longer having access to the capital markets, if the ECB doesn’t buy their debt, the yields will jump catastrophically. We saw this happen with Greece, Portugal, and Ireland, and it will most certainly happen with Spain and Italy. Rather than 5% yields, we’d soon see yields climbing into the 10%+ range, and eventually probably into the 20% range, as happened with Greece.

That means the ECB must buy essentially all debt offered for auction by Spain and Italy. Considering rollovers, interest payments, and new debt already scheduled to be auctioned, for the remainder of this year that comes to something like $50 billion per week. Call it $1 trillion between now and the end of the year.

And, in an incredible irony, Finland announced yesterday that it would require full collateral from Greece if Greece expected Finland to participate in the Greek bailout. In other words, Finland wants Greece to cough up enough cash to allow Finland to buy AAA bonds as collateral against Finland’s share of the bailout. Of course, if Greece had any collateral it wouldn’t need the bailout. Later yesterday, Austria, Slovenia, and Slovakia also announced that they’d require collateral from Greece before they participated in the bailout. The Netherlands is expected to require the same. In other words, all of these countries, and others likely to make similar demands, are running as fast as they can away from the Greek bailout, which means the Greek bailout may never happen.

The real irony, of course, is that everyone is pretending this is a liquidity crisis, when in fact it’s a debt crisis. And Greece is small potatoes compared to Spain and (particularly) Italy, and eventually Belgium and France. The simple truth is that these countries owe far too much to have any chance of ever repaying what they owe, and that bill is quickly coming due.


I have to order a new Pentax DSLR. The one Barbara took to work was damaged by a power surge, and her firm is reimbursing us for the cost of a new camera. The damaged camera still functions, but the power surge killed its USB port, which is essential for using it on a microscope. Her firm will keep the damaged camera, which still works for shooting images. It’s no problem for them to transfer images by removing the memory card and putting it in a card reader.

I plan to order a Pentax Kr, which is the nearest current model to the one we’re replacing. One thing I insist on is the ability to use AA cells. The Kr comes with a lithium-ion battery, but AA-compatibility is now optional, via the $40 D-BH109 adapter. I’ll order it with the kit lens, which is an excellent 18-55mm zoom. I’ll also order a fast memory card or two for it. I haven’t looked at memory cards lately, but I’m assuming that 4 GB and even 8 GB cards are pretty inexpensive nowadays. At 12 megapixels, a 4 GB card would probably give me roughly 200 image files in RAW format per card. The last time I bought a memory card, fast cards were roughly twice the price of slower ones, so I might be able to get a fast 4 GB card for what I’d pay for a slow 8 GB card. Any advice would be appreciated.