Cassandra's legacy publishes this post by Antonio Turiel that appeared first on Nov 18, 2011 on "The Oil Crash" blog (in Spanish). Here, Turiel examines the Spanish situation, seen a few days before the recent elections that saw the victory of the right wing "Partido Popular". In this lucid analysis, Turiel compares the present situation of Spain - and of the other states in trouble in Europe - to the apparent calm that arrives just before the great tsunami hits. (translation from Spanish by Ugo Bardi)
By Antonio Turiel, 18 Nov, 2011
"People willing to trade their freedom for temporary security deserve neither". Benjamín Franklin.
among the most interesting phenomena that are part of the fields of oceanography and geology, there are tsunamis. A sudden vertical displacement of a fault at the bottom of the sea, by the enormous energy it releases, can displace all the mass of water above it for a not too big height, maybe 50 centimeters, maybe one meter. The problem is that the displacement affects the whole water column, which may be four or more kilometers of height. The wave generated simply by gravity propagates at speeds of hundreds of kilometers per hour; in some cases - if the earthquake takes place in very deep waters - it may arrive to supersonic speeds. When the wave gets close to the coast, the slope of the sea floor creates an effect known as shoaling.
The solitonic wave breaks up and decomposes in several packets which propagate at much lower speeds (some km/h) but, because of the accumulation of water, their height grows and grows. Because of this, it is much safer to wait for the tsunami at sea, where the wave, of some centimeters, will pass without generating major damage; but its height on the coast will arrive to several meters; in some case as much as 15 (there are documented historical cases of monster tsunamis of almost 50 meters of height) and able to penetrate inland for several kilometers, razing to the ground everything with their enormous power and pressure. Just before the first wave of a tsunami arrives to the coast, the sea retires rapidly of several kilometers; revealing a rocky seafloor of unreal aspect. Some people are fascinated by the phenomenon and find themselves looking at it, captivated, without understanding that, if in that moment they had started running inland, perhaps they will be able to get far enough, or reach a ground sufficiently high, to survive. It is a question of a few crucial minutes; those few vital minutes before the arrival of the first wave. Another fact that people often ignore is that the first wave is almost never the largest one; and sometimes it happens, as in the case of the tsunami in Hawaii of April 1st 1946 (day of the innocents), that people go to the beach to see what had happened during the half hour that separates the first and the second wave, horribly increasing human losses when the second wave, usually is larger, unleashes all of its violence over the unfortunates.
Yesterday, the spread of the Spanish treasure bonds with respect to the German ones arrived, according to what we are told, to about 500 basic points. That means that the yield given to these debt issues is about 5% larger than that of equivalent German titles. As the information given by the media is always brutally incomplete and antiquated, I never know for sure to what it is referred to: whether we are speaking of one year bonds, or five or ten, or all together. I understand, anyway, that this spread with respect to German titles is being observed in the secondary market - that means, the individuals who possess Spanish debt are selling it to other individuals with a certain discount (because, obviously, they couldn't renegotiate the conditions expressed on the bond issue). That, if you think about it a little, is even more serious than if it were Spain to sell its debt with a larger kind of interest (which happens, because the debt issue usually follows the secondary market: Spain cannot obtain cheaper money than what the market perceives). It is more serious because, in summary, those people who keep Spanish money and are selling it are accepting a certain percentage of loss (perhaps no real losses, but surely on their expectations of gain) and that means in the end that the credibility of Spain as a trustworthy debtor state is falling.
But, in the end, this is not a blog dedicated to the economy and there is no need to spend time on these questions. The interesting part of what we observe is that the Spanish debt is arriving to levels that have motivated the "rescue" of Greece and which forced a "change of government" in Italy, last week. Here in Spain, we are just two days before the general elections which all polls indicate will be won by the conservative Partido Popular with a large majority. The party's leader, Mariano Rajoy, has already anticipated that they will take appropriate measures to try to heal the Spanish accounts, hinting that we'll see more reduction in the social services and salaries than anything that was seen in the past year. In addition we could say, as a matter of coherency, that for being an amateur in applying these measures, the Italian prime minister, Silvio Berlusconi, was shot down by the entity that the media sometimes call the "European Troika."
We are facing, then, general elections which will radically change the orientation of the governing party, from socialist to conservative, in a country were the perception is that the right is a better manager and that, as a consequence, will be able to ride out better the difficult economic situation. In reality, the result will be the same, because after having seen what has happened to the fatuously democratic European union during the past few week, with Greece and Italy, it is clear that decisions are not taken in single countries and much less reside with the people: our new leaders will do what they are told to do - full stop. This situation will lead to a growing disillusion of the Spanish people; a disillusion that will turn into rage when the new recession which we are starting to see will increase the jobless level from the present 21,5% to 25 o 26% in a couple of years. And, no doubt, the only thing that we are doing is to follow a known path: collapse. It is sure that, about collapse, Dimitri Orlov recently revised his model of the five phases of collapse (financial, commercial, of the state, of the community and of the family) and his conclusion can't be more disheartening; according to him, it seems that the great effort of states to stave off financial collapse - which should have occurred in its full magnitude during the past 2-3 years - will cause the real financial collapse to arrive at the same time as the commercial one and, eventually, that of the state - this latter entity being dragged in by the giant weight of the debt incurred with the financial rescue. In summary, Orlov's model was too gradual and suave when compared with the abrupt road where the BAU (Business as Usual) is dragging us. It is another piece of evidence of the fact that the descent along the right side of the Hubbert curve will be dominated by non linear effects. And the present events in Greece indicate that, indeed, the financial collapse will take place at the same moment as the commercial one. Greece had no choice but turn to Iran as its major supplier of oil (thanks to Ángel, for the reference), since the other countries don't trust the Greek solvency. The descent that us, the Spanish, are starting, following the same path of Greeks, Irish, Portuguese and Italians, will take us from our pretended "First World" condition, where arrogantly we believe to belong because of our merits, to the Second or the Third in which we are being pushed down without the rest of the planet giving a damn; and it will help us little that until a couple of years ago we considered ourselves to be with the rich and the powerful; they have their own concerns and right now we are just a hindrance for them.
These days before the elections are like the sea which retires before the first tsunami wave. There is a strange and unreal calm while a vague and ominous shade is appearing at the horizon. In reality, if we know a little of history and how economy has been practised in the 20th century, we know what it is going to pass in Spain. Starting with Monday, they'll start saying that now it is the time to keep quiet, that it is urgent to find the means to contain the damage, that it is intolerable that the Spanish deficit doesn't stay within the established bounds (fixed by the government for this year at 6%, which could reach 8%). It is possible that the socialist government, in function until January, will be forced to take already some drastic measures; measures that in any case will be adopted by the Partido Popular when it will take charge: immediately lowering the salary of public workers - once more; perhaps 10% in this occasion - cutting even more health services, education, and, ouch, public works, because Germany and France are very sensitive about those multi-million airports without passengers and other stupid infrastructures build during the golden age of concrete. There will be, possibly, an increase in the VAT and surely a generalized reduction of the subsidies and help (that is affecting me, research grants and projects). All that will bring a larger economic contraction and more unemployment, with the result of lower tax revenues and there will be a general tendency to pay more in subsidies - at some moment there will be talk of reducing the unemployment subsidy and the minimum salary. All that in a context where basic goods will see an increase in price while the non basic ones will become cheaper while stocks are being liquidated, to return to high prices, later on. In the end, we'll become poorer, much poorer....
The sun is darkening, the wave is obscuring it, it is here already. I wanted to write somewhere a number of truths in the midst of so many lies as we are being told now. What is being done to countries are not "rescues", they are liquidations; they are not "changes in government for technocratic governments", they are coups that give control of the state to our creditors; it is not austerity, it is increasing financial ruin; it is not order, but repression, it is not for the common interest, but for the private one; it is not returning to growth, but it is the road to poverty; there is no growth, but the end of growth. We are left only with the poor satisfaction that these waves will arrive, eventually, also to Berlin and to New York.
The water is arriving already.
Postscript: This post is not about energy, indeed, but I wanted to write it.