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Tuesday, 31 January 2012

Portugal is next Euro problem

Portuguese bond yields remain at more than twice sustainable levels:  19.3%, 22% and 16.3% for two, five and ten year maturities, far in excess of the 7% levels which trigger alarm bells for Greece and Italy.  On top of Italy's and Greece's needs for significant new borrowings, stabilisation of Portuguese debt will demand more of Europe's bail-out funds, further locking in the likelihood of massive global money printing, the ultimate effect of which will be very high inflation after the velocity of money increases again.

No nation can survive borrowing money at those high prices.

I acknowledge the Wall Street Journal's article "Portugal's bond yields remain at rarefied levels".

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