Economic Storm This Way Cometh

There is some wicked economic mojo going on out there -

The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.

Hans Redeker, currency chief at BNP Paribas, said Greece will face "great trouble" if it has to pay 7pc rates for long. Athens must raise €53bn this year, mostly in the first half. It has a been relying on cheap short-term debt to fund the budget deficit of 13pc of GDP, but this raises "roll-over risk".

And in the U.K. -

The collapse in the value of the pound has left a £1.3billion black hole in Britain’s defence budget, MPs have been warned.

In California -

State Controller John Chiang issued a stern warning Friday about California's cash reserves, telling legislative leaders and Gov. Arnold Schwarzenegger they must act on nearly $9 billion in budget cuts the governor is seeking by March — or the state will run out of cash to pay its bills.


...Chiang is calling for an additional $2 billion in cash-flow "solutions." Looking at previous cash crunches, that could mean some payments, like income tax refunds, would be delayed for a few weeks to keep the cushion intact.

Darn those financial dudes, always wrecking a gubanahs good time! On a tangential note, Schwarzanegger has decreed - If we spend lots of mon-ey in kaleehfornyah we will have more, so I have ordered a million pizzas for everyone to stimulate kaleehfornyah.

The Real Effect
Considering the market is totally ignoring the 5.7% GDP growth increase, I think they are looking at two possibilities -

1. The GDP numbers are transient and partially bogus for recovery concerns.
2. The situation in Greece is FAR WORSE than the positive news warrants.

Either way, it doesn't bode well for the global consumer. Look for default to begin causing defaults across the globe as this crescendos into a global sell off.