Virtually every country in the world spends more money than they collect in taxes, and no group of countries has done a better job at this than those that formed the Euro-zone.
This collective group has so much debt, that a recent study by the Bank of International Settlements concluded it would take 20 consecutive years of surpluses to simply bring debt loads back to levels previously reached prior to the current crisis.
Considering that this has never happened before, we have little confidence that this type of spending constraint can be accepted and implemented by any of the respective governments.
There is only one way possible for any person, company or government to spend more money than they earn – they must borrow to make up the difference. And as long as the Euro-zone countries are able to borrow, they’ll be able to extend the charade a while longer.
This is the point when many investors and pro-Euro supporters will argue that all of the Euro-zone countries are able to borrow, and in fact each country is able to borrow at the lowest interest rate in history for each individual country.
This is indeed true. However, this is the point when IceCap reminds investors that there are two types of debt markets.
The first is the one where the price or interest rate you pay is determined by the open market, with no interference or influence by other forces.
In 2012, the Euro crisis reached it’s latest crescendo and each country’s ability to borrow was at the mercy of the open market…
This post was published at Zero Hedge on 09/09/2014.