Memories take time. Like history. Or wine. Or cement.
At first, they are loose, fluid and watery. Then, over time, they dry up and develop more body, more shape, more substance.
Our recollections from our trip to Argentina are still congealing, setting up like a stone wall. We'll show it to you in the days ahead.
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But today, let's turn from the pampas to the developed world to the world of money. That is, let us turn our attention from the vivid world of real things and real people to the absurd blah blah world of economics.
What happened in the two months we were gone? Anything important? Not that we can tell from the papers. The headlines are almost the same as they were when we left.
The Great Correction, for example, hasn't gone away. Instead, it seems to be intensifying.
In America, 11 million homeowners are still underwater.' Every one of these houses is a candidate for foreclosure... and every one puts downward pressure on the housing market, which has been falling for the last five years with hardly a let-up.
Yes, dear reader, this month marks the 5th anniversary of the Great Correction. It began in April '07, when its weakest link subprime mortgage debt snapped. Since then housing has been losing value. And with 11 million houses still priced below the amount of their mortgages, this housing bear market could last for another five years before it finally comes to an end.
When housing goes down, so do the balance sheets of America's households. And without improving balance sheets, it is very unlikely that households will substantially increase spending. This will leave the economy hobbling along about as it is now with the lowest growth rate of any post-war recovery' and completely dependent on more loose change from the feds.
No, that hasn't changed either. When we left, the feds were still trying to sort out a debt crisis by adding more debt. Nothing has changed since. America's feds keep lending money they don't have to borrowers who can't pay it back.
This time, students are the subprime borrowers. Can you imagine a more subprime group? Students don't have jobs. They've never proven they can earn money. Their credit histories are as thin as their resumes. And yet the feds have extended $1 trillion to this group. How long will it be before that blows up? Probably not too long.
Meanwhile, in Europe, subprime debt is concentrated at the government level. The subprime borrowers were the countries at the periphery of Europe Ireland, Portugal, Greece and Spain who would have a very hard time paying their bills when the lending stopped. When we left, Greece was struggling. Now, it's Spain.
Seems Spain was able to borrow more money this weekend. But its costs rose; Spanish debt now yields over 6%.
At 6%, according to the experts, European nations can still keep going. If the debt rises to 7%, on the other hand, their goose is cooked... cuit... cocinado...
It's amazing to us that Spanish debt isn't already at 7% or more. These countries should have gone broke years ago. The only way they avoid it now is by promising to do things they can't do. Cutbacks austerity measures are solemnly put into budgets. They lower GDP, lower employment, and raise opposition parties to new levels of absurdity and notoriety. And never quite reach their objectives.
But thanks to central banks, they never go broke.
And more thoughts
In America, the deal is pretty straightforward. The Fed prints. The feds borrow the counterfeit money and spend it.
In Europe, the central bank prints up money too. It lends it to the banks. The banks lend to the marginal governments around the periphery. This puts the banks in a bad situation. They're holding a lot of sub-prime government debt. But the central bank keeps lending them money to buy more!
Bloomberg has the story:
April 18 (Bloomberg) -- Spanish, Italian and Portuguese banks are loading up on bonds issued by their own governments, a move that shifts more of the risk of sovereign default to European taxpayers from private creditors.
Holdings of Spanish government debt by lenders based in the country jumped 26 percent in two months, to 220 billion euros
($289 billion) at the end of January, data from Spain's treasury show. Italian banks increased ownership of their nation's sovereign bonds by 31 percent to 267 billion euros in the three months ended in February, according to Bank of Italy data.
German and French banks, meanwhile, have cut holdings of those countries' bonds, as well as Irish and Greek debt, by as much as 50 percent since 2010 in some cases. That leaves domestic firms on the hook for a restructuring such as Greece's last month and their main financier, the European Central Bank, facing losses. Like Greece, governments would have to rescue their lenders with funds borrowed from the European Union.
The jump in sovereign-debt holdings by Spanish and Italian banks has been fueled by the ECB's 1 trillion-euro long-term refinancing operation, or LTRO, initiated in December, to provide liquidity to the region's lenders. Encouraged by their governments to take the money and buy bonds, banks borrowed 489 billion euros on Dec. 21 and 530 billion euros on Feb. 29.
For lenders in so-called peripheral countries -- Spain, Portugal, Ireland, Greece and Italy -- profit also was an inducement: They could borrow at 1 percent to buy government bonds yielding between 6 percent and 13 percent.
In Europe as in America, nobody goes broke until they all go broke.
Meanwhile, in Greece, farmers are organising special "food relief" programmes to help children in the cities who are said to be almost starving. The government, meanwhile, is preparing to head off "food riots".
In France, the communist party, which was practically dead a few years ago, is coming back to life like the zombie it is under the leadership of Jean-Luc Melenchon. Unlike the responsible' politicians in Europe, Melenchon wants no cutbacks in government spending. Just the contrary. He wants to increase it. For example, the minimum wage would go up from about $1,600 per month to $2,300 per month. And the top marginal income tax on rich people, those who earn more than about $500,000 per year, would go to 100%.
Melenchon's star is rising. His left coalition could get 12% or more of the vote on Sunday. Which is only natural. Promise the mob that you will give them free money; few will resist it.
Alone among the developed nations, America has something the others don't have and by the look of things, something they don't want. The US population is growing!
Yes, dear reader, when it comes to having babies or importing babies from other countries, America still has what it takes. The UN says that US population will increase by nearly 27 million people by 2020.
Twenty-seven million people is about 40 cities the size of Baltimore. If each one of these people lives in a household of four people, it's more than six million new houses and, assuming they are all two-car families, about 12 million autos. And, of course, each family needs a dishwasher, a toaster oven, a refrigerator, and so forth. A lot of stuff, in other words.
Compared to the rest of the developed world, America is still enjoying a major population boom. After all, Japan's population is shrinking. So is Germany's. Europe as a whole is still growing, but not by much. And after 2020, it begins to shrivel up too.
But American population growth may not be as strong as it is advertised. Why? Because more and more people are sneaking out.
As we reported yesterday, illegal immigrants are going home as well as the children of legal immigrants. And now comes word that native-born Americans are slipping away too. Yes, according to our sources, 742 US citizens leave the country every hour and don't come back.
So many are leaving that Sen. Barbara Boxer has proposed legislation a law that would make it impossible for Americans to cross the border until they settle up with the IRS.
The noose tightens...
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