A trigger to deconstruct the XXth Century

It is well known that the 1930s depression lead to WW2 and that Spanish Civil war was its prelude (and an experiment for the Nazis). The global war was then an opportunity for American investors who rebuilt the US economy . Reconstruction of Europe along with socialist winds blowing from beyond the Iron Curtain produced relatively prosperous societies in many countries. Now Spain might trigger a global war that might finish globalization. Only that this time it will be another kind of war.

As we know now, war industry fueled the American economy and eventually most of the other economies. With a WW3 out of the question - thanks to Oppenheimer and his fellow researchers - investors will always seek other ways to line their pockets.

In the last decades the way has been called globalization. Tariffs have been virtually supressed just as they were before the beginning of the XXth Century.

But globalization did not make Spain more competitive. Competitiviness of Spain was in 2007 the same Austria had in 1978. Although most economies are currently growing (with the aid of central banks) it does not seem that Spain will be able to create jobs in the next years nor pay back its public and private debts. Internal devaluation as it is called (reduction of public expenditure and raise of taxes like VAT) will not be enough to pay the growing debts of this country.

In last Thurdsay's auction Spain was able to sell 3 bilion euros in bonds. This week Spain will bypass the auction of bonds by selling them, at a higher interest rate, to a syndicate of banks. I wonder what will be the solution for the rest of the auctions as the government needs credit for 90 bilion euros this year alone.

On the other hand, It will be difficult to pay the public debt with an unemployment rate approaching 25% of the active population.

Even if stronger European economies approve a bailout package, Spain will not be able to pay it back because the stress in the Spanish economy will not improve competitiviness nor decrease debt in the long run. So the only solution will be a devaluation. Then we can only expect a breakup of the euro.

Some analysts say that paying off debts in euros or dollars with a devalued currency would be crushing. However, the problem is that without a devaluation Spain - and possibly the other PIGS -just cannot return the debts. It is very simple: their low productivity and lack of competitiveness will never pull their accounts out of red figures. The more they lower salaries and raise VAT the worse, since their economies shrink even more. So if euro folds at least their balances will go into positive numbers and then will be available to return at least an important part of their debts.

Breakup of the euro and the default of such an economy as Spain will undoubtedly have extremely harmful consequences for the global economy.

Emerging markets like Northern Africa or Turkey might be an alternative to replace the failing PIGS economies, but I wonder if the world will continue as if nothing had happened.

Moreover, a breakup of the Euro might not only affect the PIGS, but obliterate the idea of European common market.

In my humble opinion, a possibility is that by then global transactions will be limited by tariffs. A commercial war between the west and China might create milions of new jobs in North America and the E.U. This could be considered, as Ralston Saul said, the end of globalization.