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These short-term rescues are dumb

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by Peter Switzer

Okay, okay, we know the Yanks have had the worst month for shares since last September and our S&P/ASX 200 index gave up around seven per cent, which is huge. And you can blame Europe — fair and square — they have ignored their problems, avoided serious solutions and now we’re paying the price!
The only good news that helped Wall Street was that the IMF was talking to Spain about a rescue plan for its banks. Problems need to be identified and plans for solving them need to be articulated clearly.

The market has proved it won’t tolerate the stupidity which masquerades as leadership and policy in Europe, and inevitably it will make Europe’s leaders see sense.
The Dow ended 26.41 points or 0.21 per cent lower to 12,393.45 while the S&P 500 dropped 2.99 points or 0.23 per cent to 1310.33.
Next week the IMF and Spain will talk but we will be hanging out to dry until the Greek election is over and a credible plan for Spanish banks emerges.

Sure the Yanks will watch important jobs data over the next two days but the main game is Europe generally and Spain as well as Greece specifically.

Everything else is a sideshow and until the eurozone leaders recognize that a big, Ben Bernanke-style money printing, bank-protecting plan is in place, stock markets will be spooked, business and consumer confidence will be rattled and the chances of a severe global recession will be on the cards.

On the other hand if the EU comes up with a smart plan to deal with Spain and Italy that worries the bond bandits out there, then yields on European government bonds will fall and stocks will spike higher — a whole lot higher.

But I fear we’re in for a wait because the current crop of EU leaders are slow learners.

We don’t need piecemeal, short-term rescues but one hell of a big bang escape from the debt dramas we have dealt with for four years.

Published on: Friday, June 01, 2012

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