European crisis intensifies.

The most immediate sign of the fiscal crisis is the bond rates Italy and Spain have to pay. Yesterday, Spain's rate jumped to 6.67%, a near record. PM Rajoy had appealed to the ECB to step in and stem the crisis. Meanwhile, at the Italian auction of 1-year bonds, interest rates jumped from 2.34% to 3.97%! Italy has another auction of 10-year bonds on Thursday.

There was an article on KWN yesterday chiding the Germans for their fear of the inflationary effects of money-printing by the ECB. The post claimed that after the hyperinflation of the Weimar Republic (the event that made Germans reluctant to accept inflation), it recovered and that the subsequent rise of Hitler (and National Socialism) was due to the Depression, not the money printing.

German banks are stuffed full of bonds of Greece, Italy and Spain and if any of these countries defaults, German banks are toast. Clearly, austerity is not solving the crisis and dribbling out a few billion Euros here and there is not doing it either. So, the crisis intensifies.