Spain Succumbs to Populist Rhetoric

Having just returned from 10 days in Spain (Basque country and Barcelona), two things stand out:

Christopher Groenhout | Lonely Plant Images | Getty Images

1) people are pretty much the same everywhere. The Spaniards, like the Italians, think that austerity is the main reason for the current downturn. If you press them, they will admit that a real estate bubble and dramatic overspending by the federal and regional governments were the root cause of the downturn. But they don't think too much about it.

Instead, the Barcelonians are enthralled with Artur Mas, the Catalan premier, who has become a kingmaker by simply insisting that Catalonia sends more to the central government than it gets back and that seceding from Spain is the answer. A majority of the Catalan parliament now support secession; Mas says he is submitting a resolution to the regional parliament today that would give Catalan the right to decide if they wanted to remain in Spain.

Madrid says this is illegal; Mas says he will act in accordance with the law, and if it isn't in accordance with the law, he'll do it anyhow.

Really. That's what he said.

In other words, when things get rough, people start listening to all sorts of populist rhetoric. The Barcelonians are no different; and

2) while the "official" unemployment rate is 25 percent, not a single Spaniard I spoke to believed this was accurate. To a person, they all said the black market was huge and many people worked under the table (the landlord who rented the apartment to me for a week asked to be paid in cash).

Spain will announce a new budget this morning, expect more austerity measures, and the results of its bank austerity tests tomorrow. (Read More: Spain Gears Up for Budget Cuts After Violent Protests.)


1) Everyone keeps talking about the "faded rally," but it looks to me more like a single down day. Just back from 10 days in Spain. When I left on Sept. 17, the S&P 500 index was at 1460; on Monday it was roughly 1457. On Tuesday, it dropped 15 points on worries over Spain, and then another eight points yesterday. (Read More: Expect More Market Drama in the Coming Days.)

So the five-day decline everyone is talking about is really just a two-day drop. Remember, we had big gains on Sept. 6 (Draghi bond buying) and the 13th (FOMC meeting).

Bottom line: We are 2.1 percent off the Sept. 14 4.5-year closing high, and the S&P 500 is still up 1.9 percent for the month. Hardly a debacle!

1) Futures dropped two points after the final read for second-quarter gross domestic product came in at 1.3 percent, below the 1.7 percent expected; August durable goods were down 13.2 percent versus expectations of a decline of 5.6 percent (ouch!), the worst showing in 3.5 years.

2) The China Securities Regulatory Commission might do something to boost stocks. That's the vague rumor today. What strikes me about this: It doesn't matter if you are a Communist, a Socialist, or a Capitalist. It doesn't matter if you're a Democrat, a Plutocrat, or a Totalitarian. It doesn't matter who you are these days, what your economic or political ideology is, or what part of the world you are in: Those in power are all interventionists now. (Read More: China Central Bank Makes Record Weekly Cash Injection.)

—By CNBC’s Bob Pisani

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