“The inevitable coming of the sovereign debt panic finally engulfed Europe this week as the derisively (or perhaps affectionately) named PIGS spilled their slop on the continent.
But Portugal, Ireland, Greece, and Spain are hardly worthy of so much attention.
In truth, they are little more than the currently favored proxies among the leveraged speculator community (cough) for the larger problem of all sovereign debt.
Indeed, the credit default swaps on these smaller European satellite states were not alone this week in making large moves higher.
UK sovereign risk rose strongly, and so did US sovereign risk. With a downgrade warning from Moody’s to boot.
“Notable among three of the PIGS are their relatively small populations, and small contributions to either world or European GDP.
While Spain has a population over 45 million, Portugal and Greece have populations roughly equal to a US state, such as Ohio–at around 10 million.
And Ireland? The Emerald Isle has a population similar to Kentucky, at around 4 million.
While the PIGS are without question a problem for Europe, whatever problems they present for Brussels are easily matched by the looming headache for Washington that’s coming from large, US states such as California, Florida, Illinois, Ohio, and Michigan.
“My seven states of energy debt represent a full 35% of the total US population.
As with other US states, they face looming policy clashes between protected state and city workers on one hand, and the growing ranks of the private economy’s underemployed on the other.
The recent circus at the LA City Council meeting was a nice foreshadowing that the days of unlimited borrowing by governments–against future growth based on cheap energy–is coming to an end.
Washington can print up dollars and fund these states for years, if it so chooses.
But just as with the 70 million people in Portugal, Italy, Greece and Spain, the 108 million people in these seven large states are probably facing even higher levels of unemployment as austerity measures finally slam into their cashless coffers, and reduce their ability to borrow.”