Daily commentary: On Spain’s death spiral and the nationalism of depression

Spain is involved in two stories today that point to the difficulties that surround sovereign governments that are overindebted in foreign currency. There are a ton of Spanish-language links for that reason.

In Argentina, the story is about Spain’s oil giant Repsol having it’s stake in Argentina’s YPF being forcibly taken by the Fernandez de Kirchner government in Argentina. This is a populist move which brings Argentina ever closer to Chavez in Venezuela and definitely reminds us that the country is still a ‘banana republic’.

Argentina is not the model. Argentina shows one very clearly that the move toward economic nationalism and unilateral action is part of a whole psychology of nationalism that pervades all parts of the political economy of a country in a debt deflation and depression. Clearly this has implications for the EU. The euro zone needs to handle the periphery including Spain carefully because Argentina is showing us what happens when national socialism becomes the governing raison d’etre.

In the second piece of news, Spain’s yields are spiralling ever higher. They are now above 6%. To me, it looks like a death spiral. When and how does Spain pull out of this?

That’s it. Here are the links.