This is another adroit piece of analysis on the Eurozone’s misery, written by Michael Pettis of the  Peking University’s Guanghua School of Management – what a change of civilisations we see as such analysis is written from China – in language most of us can think we understand.

It focuses on Spain, predicting that Spain has to leave the Eurozone sooner or later – and (for Spain) better sooner.

Read especially his explanation of why darn thing leads to another once things start to get worse, which concludes thusly:

It is important to recognize the almost wholly mechanical nature of credit deterioration once a country is caught in this kind of spiral. Deteriorating creditworthiness forces stakeholders to adjust. Their adjustment causes debt to rise and/or growth to slow, thus eroding creditworthiness further…

In other words, ‘rational’ calculations of many different parties change completely once the underlying outlook stops being positive – one side’s caution necessarily causes others to react in a similar way, and so on, cumulatively and downwards…

Then there’s a brilliant explanation of economics in Alice in Wonderland terms by then presidential candidate Franklin Delano Roosevelt:

“I see,” said little Alice, “they will buy our surplus with our money. Of course these foreigners will pay us back by selling us their goods.”

“Oh not at all, “said Humpty Dumpty. “We set up a high wall called the tariff.”

“And,” said Alice at last, “how will the foreigners pay off these loans?”

“That is easy, said Humpty Dumpty. “Did you ever hear of a moratorium?”

And so alas, my friends, we have reached the heart of the magic formula of 1928.

His conclusion?

It will be horrible for Spain to leave the Eurozone. But that will happen. Staying in it will be horribler.