“Oooaaaaarr farrrkkk…”

“Reality is starting to overtake hope,” remarked Texas Congressman Jeb Hensarling late yesterday. Actually, he was referring to the farce that is the 12-man congressional deficit committee, but he might just as well have been talking about the world. In both cases, I think it would be fairer to say that reality has now lapped hope several times. Trust me, hope is out of the running for any medals, because hope has stopped. Hope is a collapsed heap  of sweat in the outside track.

The men in Beijing are running, however – for the hills. So you can assume that things are bad. Wang Quishan, China’s financial commissar, said his country was planning for “a prolonged global recession”, and many regional observers are seeing this as the signal for fiscal loosening. China, they say, will from here on be looking for domestic demand. Let’s hope the proespecting pays off, because if the mainly very poor Chinese don’t do any serious demanding, who’s going to buy Chinese output when the eurozone is in a slump, and America is still arguing about whether to just sort of sink a little more into the debt quicksand, or disappear rapidly from view?

Beijing’s major concern for 18 months now has been that the 97% of not even slightly rich Chinese might move on from demanding a fridge, and begin demanding the local Party chief’s balls as some form of minor compensation. In the FT, Jamil Anderlini pointed out that the Chinese still have a ramshackle infrastructure of their own in chronic need of investment. Why, he asked, would the Chinese help out fat eurocrats when their own people had hospitals with worse staff and less glass than a bus-shelter in Nottingham? Why indeed?

This searching question “Why the f**k would they?” is an especially pertinent one to ask in the light of Das MerkeSchauble’s rigid “Nein!” to any form of eurobond….ie, a collective debt bond guaranteed severally by all the eurozone States. I mean, it’s pretty obvious why the Doppelakt have resisted it: they rightly fear that the bond will, before long, have only one (very German) guarantor. But in that case, why on earth would China  share the risk, now we’re even further down the line?

And the trouble is, we’re now a lot further down the line. When the likes of Wolfgang Munchau first floated the idea several months ago, not only might it have calmed the markets, this in turn would’ve kept Italy and France clean – and perhaps even Spain too. But that window is now firmly closed….largely thanks to Berlin’s intransigence. Do I blame them? With Nicolas Sarkozy as the main fellow-guarantor, personally I’d rather stand bail for Robert Mugabe.

Hilariously, the Sprouts have just got round to analysing the eurobond idea. An EU Commission report thinks a eurobond would be ‘most effective in delivering stability’…but the  treaty changes required would take years to complete. This is, of course, another example of Robocrat speak: if you put a gun to all the heads concerned  it could be effected within minutes. There again, if you’d put a gun to the head of all the eurodreamers a decade ago and fired it, we wouldn’t be in this mess. But doing that would be frowned on by the authorities. It’d set an unfortunate precedent, from their viewpoint.

Talking of precedents, I had a touch of the wobbles this morning when I opened the Wall St Journal site and read ‘Markets concerned about new Spanish Premier’s policies’. Aye, aye, I thought, here we go again: which technocrat will we get this time? Other sources and sites confirmed throughout the day that the markets were unimpressed with the Right’s victory; the Spanish debt premium rose 470 basis points. Thank God the Left didn’t win, otherwise the markets by now would be organising an invasion force armed to the teeth with tactical nukes and napalm.

Mariano Rajoy’s landslide victory gives him a mandate – but only based on the ridiculous expectation that his government will quickly roll out structural reforms to stimulate growth, alongside deeper public spending cuts to rein in the fiscal deficit. If this succeeds, Senor Rajoy will go on to tackle the lesser problems of cold fusion on the sun, and time travel via Italian gelati neutrinos.

The yield on Spain’s 10-year sovereign bonds rose to 6.6%, nudging up alongside Italy and towards Greece. It’s not sustainable, and it reflects the bond market’s belief that the unique cocktail of Spanish problems will be a poisoned chalice for Rajoy. Elena Salgado, the outgoing finance minister, may well maintain that Spain will meet this year’s targeted budget deficit at 6% of gdp, but I don’t know anyone in the credit sector who gives that any credence at all.

So in the end, it was left to billionaire investment genius Warren Buffett to sum up yet another truly awful day. Wily Warren opined that Europe’s debt crisis had “shown up a major flaw” in the 17-member euro zone system – and it would “take more than words to fix it”.

He’s a straight-talking guy is our Warren. Well actually, he isn’t a straight talking guy at all: everything he says comes with an agenda up his sleeve. But mainly these days, I’ve decided that Buffet is a busted flush. Not only was this observation so far behind the wave he must’ve said it from Tennessee, the old buffer went on to say that there’d be “bargains in the euro equity space thanks to problems  there”. Amazing. When asked which ones, he said “Tesco”, which operates 97% outside the eurozone.

After his pronouncement, Tesco and Berkshire Hathaway dropped 1.2% and 0.43% respectively. There may well be a vital correlation between the global economy winning out in the end, and Warren Buffet losing the power of speech.