...and always bring a towel.

Good advice from a stencil on the Jackson Square rooftop, Hamilton, Ontario.

Once again, the European Union is spiraling toward oblivion. Not only are Greece’s re-elections a week away, but Spain is now in need of another bailout and Italy is beginning to sputter again. As the dangers involve swing once again from “quagmire” to “clusterfuck”, even the Toronto Stock Exchange is feeling the brunt of it. In response, one very clever graffiti artist has decorated the roof of Jackson Square with two choice words which would serve the EU’s leaders and bankers very well right now: “don’t panic”.

No, that’s not deja-vu you’re feeling, this really has been happening every couple of weeks for over a year now. At the core of the problem lies the way national debt is traded on bond markets, much like stocks or futures. Demand in these auctions and markets determines the interest rate on the debt, therefore fear of a debt-crisis-spiral (like seen in Greece) can easily drive a country’s interest rates through the roof (as they did to Spain and Italy today). The standard response is to cut debt and deficits (“austerity”), but since it’s far easier for interest rates to double than to cut a national debt in half, this usually does a lot more harm than good (as it has in Greece, Spain, Britain, and most of the Third World). Worst of all, the only thing really needed to kick off this cycle is to announce that you’re planning a bailout or austerity measures to send investors panicking, even if the national economy in question is relatively “healthy”.

They will, of course, panic, sooner or later. There is no way out of this crisis without a “correction” of some kind or another. Economies will topple like a row of dominos line up around the globe. When this happens, and it will, we’ll have one task that’s more important than any other: not panicking.

Good luck with that.

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