Notes From Underground: Rajoy’s Party Retains Power in Galicia

Posted at 7:47 PM (CST) by & filed under Yra Harris.

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Notes From Underground: Rajoy’s Party Retains Power in Galicia
Yra Harris

In what was a very slow new weekend the most significant story is that Spanish PM Rajoy’s political party held on to power in the PM’s home state of Galicia. This was considered to be an important test for Rajoy for if his support in his traditional support base had turned against him, there would be no chance that the PM would have proceeded down the road of further austerity. Now Señor Rajoy may be emboldened to surrender to the demands of German-imposed CONDITIONALITY so as to receive the proposed bailout from the ESM. This should be short-term bullish for the EURO as it will remove one of the obstacles that was blocking a massive dose of liquidity into the Spanish financial system. The trade-off game of financial support for enacting more austerity should help the markets as near-term fears of a Spanish collapse should be postponed.

This week’s calendar is heavy with politics and central bank meetings. The Bank of Canada will announce its rate intentions on Tuesday, followed by the FED and the RBNZ on Wednesday. I am not looking for any surprises from any of the banks and expect the status quo to be maintained.

Monday night will bring the last of the Presidential debates and will deal with foreign policy. From my perspective, this issue is of significance in this regard: If the U.S. is becoming more energy independent then it should be possible to begin cutting the military budget. I am at first a deficit hawk and believe that reining in the free spending ways of a profligate Congress is the most important issue facing the nation. In a very non-political way I have always been opposed to DEFENSE SPENDING for it is the basis for much of the misappropriation of U.S. funds. Defense spending has been the third rail of Congress because so many districts are affected by its impact and the military-industrial complex gets massive support because of the largesse of defense dollars spread to so many congressional districts.

If the defense industries were to get their ox gored, many other appropriations would be cut resulting in the beginning of real budget reform. David Stockman has recently been in the media citing the need to cut defense expenditures by 25% in order to get serious budget reform. If, as both President Obama and Mr. Romney proclaim U.S. energy independence, then it should logically follow that the U.S. military needs will be reduced. The rationale has been a large navy as the bastion of protecting the sea lanes for the flow of the lifeblood of the global economy–oil.