Let's suppose you had a gang of friends. You're a Sloper, so I realize this is a stretch, but go with me on this.
You and your friends agree to stick together through thick or thin, for the collective good.
One day, one of your gang – let's call him Aristotle – is having financial trouble. He's lived recklessly, has racked up a gargantuan debt, and has blown off his taxes for years. In keeping with your agreement, you and the rest of your gang bail him out.
Not long after, another friend, Seamus, is having similar difficulties. Those in the gang who are able to help heave a sigh of resignation, gather up the necessary funds, and bail him out as well.
Following that, your friends Madeira and Juan start hinting that they may be having some financial difficulties as well. They might need…….a bail out.
You'd start to get a weary of this, wouldn't you?
The fact is that a bail out is a bad thing. If you get thrown in jail for drunk driving, and a friend bails you out, that's no cause for celebration. You screwed up, and you had to rely on the kindness of someone else to save your butt. There's only so many times that's going to be permitted to happen.
This is why I scratch my head when – on every subsequent Sunday, it seems – some nation gets Bailed Out, and the market zooms higher with exultation, only to have it slowly dawn on them that anyone requiring a bail out is in sorry shape. It was kind of amusing watching the EUR and the ES explode higher yesterday only to wither away, hour by hour, as this obvious simple fact seems to slowly sink in. Didn't that happen last Sunday in an identical fashion?
So, contrarian freak that I am, I say again: bail outs are bad, and they only worsen the inevitable.
