Spain has turned critical.

The crisis in Europe is coming to a fast boil. It is the turn of Spain to feel the brunt of invester displeasure:

http://www.telegraph.co.uk/finance/financialcrisis/9301270/Spain-faces-total-emergency-as-fear-grips-markets.html

The article by Ambrose Evans-Pritchard details the numbers and the response of governments to them. The situation can be summed as such: Spanish banks are broke and unless they are rescued by large bailouts, they are toast. Seeing this, investors demand higher returns on Spanish bonds, the last report was 6.7%. One official is quoted that if Spanish bond yields go to 6.8% then there will be a rapid sell off of the bonds. It would mean that the ECB has refused to bail out the banks. The 'austerity' demanded by Germany is not happening in Spain or Greece. So, these countries edge ever closer to default on their bonds.

Will the ECB print the money to do a rescue? That is the immediate question. The ECB remonstrates that it does not have the authority, but it in fact it did print 1 Trillion Euros and lent it out a while back. Everybody knows that the money will not be repaid. (Hint: if these countries could come up with the funds, they would not have needed the 'loans').

Europe is caught in a vicious circle. Reducing deficits reduces their GNP, because a lot of the economy is either run by the govt or is dependent on govt spending. The result is a recession and an even higher deficit. The deficit must be made up from bonds, on which the governments must pay higher yield - again this makes the deficit rise.

PM Cameron wants Europe to increase its productivity but how? Productivity will not increase unless industry is privatized and the govt stops handing out "free" services. And the unions are dead set against this.So, the alternatives are getting rid of soft Socialism or default or print money.

In the face of all this implosion we see that gold is holding its own, while the US Dollar is rising as panicked Europeans are buying Dollars. I am betting that at some point both the ECB and the FED will have to print.