Espana en Fuego
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Puerta del Sol- Madrid (Spain) c.1908 What’s really left to say about Spain, anymore? This 12th largest economy in the world now finds itself as close
[See the full post at: Espana en Fuego]What’s really left to say about Spain, anymore?
Its sad to see a community that is dying.
Many a community has had to re-invent itself after the main driver of its economy had been closed/wound down/depleted.
I’m thinking of mining towns. It starts with the discovery, then it goes into exploration and evaluation, setting up exploitation, peak production followed by winding down of the operation.
Eventually, everyone that was associated with the mining has moved on to other operations and the remaining community has been downsized to a sustainable level based upon a variety of other re-invented enterprises.A comparison with the winding down of a mining community is only a small picture of what will happen when a whole country must re-invent because of a winding down of its economy.
This requires a culling and a “leaving dodge city” that is not manageable.
Why!
We cannot even handle the present problems of “illegal immigrants” that are leaving their “dodge city”/country.In the past cullings, (french revolutions, WWII, etc.), many of the 0.01% managed to escape to another country and lived another day as “illegal immigrants” with their bag of gold in their possession. Therefore, they probably expect to escape this time.
This time its going to be different. There will be no place to escape.
There isn’t a mechanism, that will not affect the 0.01% which can be used to cull the extra mouths to feed and to handle the “illegal immigrants” when the whole world economy needs to wind down and reset?
Nobody will be able to sit back eating popcorn and watch it happen.
We are entering uncharted economic and social territory.@jai There are still hiding places for the 1%. Switzerland, Germany Norway, etc. South America not in too bad a shape yet either. Brazil, Chile, Ecuador, Canada in North America has it’s quiet spots. Don’t get me wrong, things are real bad, but not for the mega rich. You will notice the politicians are still doing well for themselves also. Plenty of chauffeur driven meetings in the fancy hotels with great wines and chateaubriand. They decree Austerity for others but are much too important and special to engage in it themselves.
Ashvin wrote: When a financial institution such as Bankia is bailed out, make no mistake – there will be no one able or willing to bail out the Spanish Treasury.
Are you SURE about that Ashvin? I think Helicopter Ben could Swap out $1T with Super Mario Dragon in a nanosecond, and then SMD could go ahead and create the Spain Healthy Investment Tool (S.H.I.T.) to float his Krony Kapitalista Spic Buddies a microsecond after that.
Are these boys really going to let a piddling $50B Bank Failure pull down the whole Ball of Wax so easy? They are all TERRIFIED of the cascade and counterparty risk here involved.
Maybe this one is the one finally Too Big to Save, but I am not yet convinced of this. If the Spanish Banks and their Goobermint can Circle Jerk money creation to paper this over for a year, on a yet bigger scale so can the CBs.
This sucker doesn’t come down until the CBs themselves capitulate, and its not all that clear they are ready to do that yet. This may not be under control of the Krauts either. I think it is a canard to see the Krauts as controllers of the ECB. They are a big player to be sure, but they are not the ones in real control over this. A political decision here to Print or Not Print is supranational, and its occuring not in the Bundesbank, but in the back room of the BIS.
RE
>> bold and decisive measures
Funny – earlier in this macro-fiasco (maybe a year ago), someone called for “bold and decisive”. It didn’t happen then and it won’t happen now. The reason is that oddly enough, there are still people who are making money off of the status quo (see US Banking Profits); and those are the people who are in a position to implement “bold and decisive” reform. That, or they OWN the people who are in a position to implement bold/decisive. When anyone in this layer of “the system” loses the ability to profit then they have also lost the ability to make changes.
So this is why things don’t change – the only ones who can, won’t, and the ones who would, can’t. As “short-bus” as the whole occupy movement was, it was THIS hard to describe THING that they were protesting.
Steven in Dallas
@ RE Superb post RE. It is obvious that the Germans are being coerced IMHO. To be a fly on the wall at the REAL meeting would sure be something. You can bet the generals are there. No doubt Dr Fu Manchu has a seat at the table. That bank does not figure in this; it is a penny candy store. We are talking about a world wide financial collapse and panic here gentleman. These few half assed countries in Europe and their banks are some sort of distraction, the MSM spouts that nonsense all day; we are supposed to know better than to listen to their propaganda.
Reverse Engineer post=3246 wrote: Are you SURE about that Ashvin? I think Helicopter Ben could Swap out $1T with Super Mario Dragon in a nanosecond, and then SMD could go ahead and create the Spain Healthy Investment Tool (S.H.I.T.) to float his Krony Kapitalista Spic Buddies a microsecond after that.
Are these boys really going to let a piddling $50B Bank Failure pull down the whole Ball of Wax so easy? They are all TERRIFIED of the cascade and counterparty risk here involved.
Oh, no doubt they are terrified. And no doubt there will be immense pressure by US/EU/IMF officials on Germany to let the ECB monetize, even more than there has been already. But I don’t see how unilateral monetization could either a) happen or b) make any sense without that consent.
If Germany isn’t on board for the EFSF/ESM (a Spanish bailout would probably require at least half of funds pledged), and/or ECB monetization, then you are going against one of your biggest (and most credible) sources of capital, who may just choose to leave. What sense does the Eurozone make without Germany behind it?
That’s not say Merkel’s government will not cave in to the pressure – they might. But that itself raises other political/legal issues with the German people and the German Parliament, which the German Const. Court has said must be involved in all such decisions. Then you also have countries like the Netherlands who may resist, but I am less hopeful that they will hold out.
Maybe this one is the one finally Too Big to Save, but I am not yet convinced of this. If the Spanish Banks and their Goobermint can Circle Jerk money creation to paper this over for a year, on a yet bigger scale so can the CBs.
They have been papering it over, but the real economy has been deteriorating the whole time. Now Spain looks a lot like Greece in that regard, and the Eurocrats are having a hard time keeping GREECE within the bailout/austerity paradigm. If Greece ends up leaving, then the surplus countries have just thrown a lot of money down a black hole. What are the chances that they will agree to do the same for Spain, which is many times bigger?
This sucker doesn’t come down until the CBs themselves capitulate, and its not all that clear they are ready to do that yet. This may not be under control of the Krauts either. I think it is a canard to see the Krauts as controllers of the ECB. They are a big player to be sure, but they are not the ones in real control over this. A political decision here to Print or Not Print is supranational, and its occuring not in the Bundesbank, but in the back room of the BIS.
If financial/monetary officials of the $IMFS decide to unilaterally set up ECB monetization facilities for Eurozone peripheral countries, then I think they will need to make damn sure they have control of national military forces that are ready and willing to launch coups and suppress sociopolitical dissent. The only other way is do it all in secret, but I don’t see how that’s possible.
Of course, the Fed can beef up its currency swap operations with the ECB, and the ECB can launch another LTRO, and they can keep floating rumors about printing and/or Euro bonds, and countries can try to insulate their own national banking systems from contagion, but all of those things are unlikely to have much effect. We must also consider the possibility that the IMFS Owners actually want the Eurozone to break up, because they rightly or wrongly believe it will benefit them in terms of consolidating wealth/control in the medium to long-term.
ashvin post=3250 wrote:
Oh, no doubt they are terrified. And no doubt there will be immense pressure by US/EU/IMF officials on Germany to let the ECB monetize, even more than there has been already. But I don’t see how unilateral monetization could either a) happen or b) make any sense without that consent.
If Germany isn’t on board for the EFSF/ESM (a Spanish bailout would probably require at least half of funds pledged), and/or ECB monetization, then you are going against one of your biggest (and most credible) sources of capital, who may just choose to leave. What sense does the Eurozone make without Germany behind it?
I have a hard time envisioning how this could happen either, and unless the Krauts in some way acquiese to a monetization it seems impossible as well. However, I DO think it is still possible for large scale transfer payments to be done back door through proxies. I could see a methodology where Swap funds are pushed through the ECB and into the hands of Kraut Banksters at say Deutche Bank, with the proviso they support the Spanish Bond market a while longer. This could be done without the direct consent of Kraut Parliament, as it likely would take a bit of time for them to find out about what was being done here. Remember, ECB transactions are pretty much as opaque as Da Fed’s are.
That’s not say Merkel’s government will not cave in to the pressure – they might. But that itself raises other political/legal issues with the German people and the German Parliament, which the German Const. Court has said must be involved in all such decisions. Then you also have countries like the Netherlands who may resist, but I am less hopeful that they will hold out.
Merkel is on the ropes already, and she likely has little choice here but to cave, and same for the smaller Goobermints like Netherlands who easily can be pushed around with money threats. The Kraut Parliament then gets to debate the issue, dragging it out some more, but do you really think Kraut Pols are any better than their compadres down in Greece. Thumbscrews will be twisted, and if monetization is what the BIS wants, that is what they will get.
They have been papering it over, but the real economy has been deteriorating the whole time. Now Spain looks a lot like Greece in that regard, and the Eurocrats are having a hard time keeping GREECE within the bailout/austerity paradigm. If Greece ends up leaving, then the surplus countries have just thrown a lot of money down a black hole. What are the chances that they will agree to do the same for Spain, which is many times bigger?
No doubt, the continuing downward spiral of the Real Economy and the political issues pursuant to that play heavily into this equation. However, not being “on the ground” inside Spain right now I cannot make a determination just how BAD it really is for them yet. When I look at the FSofA Economy just by the Numbers, I say to myself “SHIT! How come there aren’t RIOTS everywhere already?” On the other hand, when I periodically hop a jet down to the lower 48, most of the cities I visit seem on the surface to be operating fairly normally. I suspect this is similar in Spain, in the sense if I flew into Madrid this week, the city would appear fairly normal to me most of the time. Systemically, they have not broken down yet completely. Probably see more Strikers and trai schedules might be messed up, but that has been the case in Spain always.
I still do not know what the TIPPING POINT is for a general population, how many and how far off the economic cliff do they have to fall before you get a real Political Firestorm, complete with the Coup d’Etat etc? Plitically, i do not know where Spain is for this, and I can’t make a good determination for it either just based on Numbers. Based on that, they should have gone Ballistic a year ago at least.
If financial/monetary officials of the $IMFS decide to unilaterally set up ECB monetization facilities for Eurozone peripheral countries, then I think they will need to make damn sure they have control of national military forces that are ready and willing to launch coups and suppress sociopolitical dissent. The only other way is do it all in secret, but I don’t see how that’s possible.
Of course, the Fed can beef up its currency swap operations with the ECB, and the ECB can launch another LTRO, and they can keep floating rumors about printing and/or Euro bonds, and countries can try to insulate their own national banking systems from contagion, but all of those things are unlikely to have much effect. We must also consider the possibility that the IMFS Owners actually want the Eurozone to break up, because they rightly or wrongly believe it will benefit them in terms of consolidating wealth/control in the medium to long-term.
I reviewed how I think it could be done “secretly” at least for a short time, but certainly it is true that in order to aintain Civil Order here as it spins down worse, they will need to play the military card.
I don’t know for sure what the “Plan” is, it may very well be to force the breakup of the EU. its quite possible those at the top see just what I see, which is that the only way to retain some power is to break up the conglomerate. Its quite reasonable to assume the NWO crowd has given up on a One World Goobermint and is now just in the process of carving it up to hand off the fiefdoms.
Regardless of whether it is planned or not, to me it is clear that this is not salvageable by any means, and the EU will fracture. What results from that is an open question.
RE
There is no credible lender remaining in Europe. All loans made are bad loans: there is effectively no collateral so any loans made from this point forward by ECB of the national central banks are unsecured. What this means is there is no real lender of last resort … and bank runs.
People are removing their euros from banks: the act of removing the euros erodes their worth. Enough removed and there is no euro. Left in the accounts and there are effectively no euros.
The answer to every question posed before 2008 was ‘jump in the car’. The answer to every question now is ‘no euros’.
The Europeans have brought this upon themselves by not closing insolvent banks and restructuring. Now, the countries themselves are insolvent and there is no entity able to provide capital. Who is going to make a good loan?
Norway.
It is too late for the sovereigns themselves to issue currency as the collateral is simply more empty promises. The stage after bankruptcy and ruin is not ‘Iceland 2.0’ for these energy deadbeats, it is complete collapse. Not even dictatorship can save them.
The European inter-temporal balance sheet is a mess. On the resource balance sheet, there is nothing but expanding liabilities as resources are ‘used’. Meanwhile, the asset side of the socio-economic balance sheet is eroded. A trillion barrels of fuel gone and a half-trillion tons of coal have produced nothing of lasting value, just some used cars and smog.
steve from virginia post=3252 wrote:
The Europeans have brought this upon themselves by not closing insolvent banks and restructuring. Now, the countries themselves are insolvent and there is no entity able to provide capital. Who is going to make a good loan?Norway.
It is too late for the sovereigns themselves to issue currency as the collateral is simply more empty promises. The stage after bankruptcy and ruin is not ‘Iceland 2.0’ for these energy deadbeats, it is complete collapse. Not even dictatorship can save them.
If a Dictator can’t save the Eurotrash, why would a 3rd Party be able to Save Amerika? For those who haven’t been there yet, review the Topic for Discussion commentary on Economic Undertow.
The collateral here in the FSofA isn’t any better than in Eurotrashland, just the Circle Jerk between Treasury and Da Fed here makes it more possible to paper over the problems a while longer and outlast them.
The pace at which the Euro is imploding now though is pretty impressive. We’re not even getting the Daily Briefings from the latest round of FinMin meetings in Brussel Sprouts. You get the feeling here the Euroclowns have already capitulated and they are just running for cover. No more Merkozy Kissy Kissy, now its Merkollande Divorce Bickering.
Just waiting for the next shoe to drop and Societe Generale to go Belly Up. if they don’t pump in liquidity soon, its going to cascade quickly. What is Libor at now anyhow? Is there any interbank lending going on at all?
Anyhow, this should be pretty good by the time the Conventions start now to Crown Obama-sama and Catcher’s Mitt Romney as the respective Champions of the 1%. I am breathless with anticipation to see how that campaign develops. Not.
BAU. Until its not.
RE
Just for fun I looked up Bankia’s balance sheet. The most recent quarter I could find was March 2011. At that time, they had 190 billion euros in loans outstanding (138B in mortgages, 51B in MBS), against 150 billion euros in depositor money (15B in senior debt) and another 58B in debt securities.
I’m just gonna guess that the 19B in losses is just the down payment. NAMA, the Irish “bad bank” had all in losses for their mortgage portfolio somewhere around 40%, so call the total cost perhaps 76B euros if we assume the losses in Spain will rival that of Ireland.
Bankia has 10% of Spain’s deposits. Rough back of the envelope – there are perhaps 750B in losses yet to be taken in the Spanish banking system assuming Spain = Ireland in terms of bubble expansion (and now contraction). Spanish sovereign debt is 1T.
It would appear that there isn’t enough senior (risk) debt out there to resolve this sucker without immense loss to the depositors. Roughly 60B of depositors are insured. The rest are not.
https://www.bankia.com/Ficheros/CMA/ficheros/Cuentas_definitivas_firmadas_en.PDF
davefairtex post=3255 wrote:
It would appear that there isn’t enough senior (risk) debt out there to resolve this sucker without immense loss to the depositors. Roughly 60B of depositors are insured. The rest are not.Meanwhile, the ECB and the PBoC say they are not gonna print.
This should get interesting.
RE
Meanwhile . . . side-show politics, news stories and pop-idol shows mask the continued selling of the world by corporate-beholden governments: https://www.organicconsumers.org/articles/article_25508.cfm
FT had an article which suggested repossessed homes were selling for 52 cents on the dollar in Spain. I read elsewhere that Spanish banks had written down about 10% of their loan book to date.
24% of Bankia’s origination was to the construction & development industry. From what I understand, these loans are the most toxic and will likely have the highest losses. Given a repossessed property sells for 52 cents on the dollar with a whole lot of shadow inventory yet to be sold, how much do you think you can get for land, and/or unfinished houses today? 15 cents on the buck? Less?
Watch Spanish 10 year bond yields. Above 6.5% is bad news, above 6.8% (the high reached last November, prior to the ECB’s LTRO) is extremely bad news.
https://www.marketwatch.com/investing/bond/10YR_ESP?countrycode=ES
No one is discussing the gold they have in their possession, Is not the current state of affairs the reason they own it. The asset of last resort. It is my humble opinion that their pile of the shiny metal will start to grow brighter and brighter as the clouds darken.
I fail to understand the true gist of your thrust in this discussion, Dave. Since you are so very liquid as you described, and so eager to work at making the world into what you envision as a better place, are you so closely following the misfortunes of Spain’s developers through your own personal schadenfreude, or do you intend to make a smart killing/investment on those 52cents on the dollar unfinished projects. What is it I detect in your avid analysis following Market watch and all? Are there better buys in Spain than the US. Would that be a good place to buy a second home like the English and others are thinking? Are you a real afficionado of Spanish culture? Would you have ridden to Spain’s rescue during the Civil War as did so many brave Americans helping to resist Franco? Or is this a new interest, following the misfortunes of other countries so closely in the early twenty first century.
Karpatok –
I’m not interested in trading Spanish bonds or the Spanish stock market either long, or short. I use the bond yields as a rough market-derived thermometer on how bad “the experts” think trouble their banking system is; the higher the yield, the worse the problem is. I am not planning on buying a home in Spain. I would guess property prices will be lower than they are now once the banking issues get resolved. I have visited the country, but by no means am I an expert.
By using the price of repo-ed homes, and multiplying by the number of loans on the books of a company, you can get a rough estimate of how bad the losses are likely to be when the bad bank eventually gets resolved. So when the Spanish government says “23 billion will fix the problem”, I like to check their math myself. My (very rough) math says they’re probably off by a factor of 3 – it will likely end up costing $60-$70 billion euros.
From: GoldMoney – Gold Research
https://www.goldmoney.com
Gold reserves as collateral
https://www.goldmoney.com/gold-research/newsdesk/gold-reserves-as-collateral.htmlLondon Good Delivery gold bars Yesterday’s big news as far as gold was concerned was a Telegraph report stating that Germany could be about to get into the “cash for gold” business in a big way. Angela Merkel is said to be increasingly favourable to the idea of countries pooling a portion of their sovereign debt into a redemption fund, with the eurozone then taking on a collective obligation to honour this debt. Member states would be obliged to pledge gold and currency reserves as collateral in case they are unable to make good on their obligations.
This so-called “European Redemption Pact” gets around German courts’ constitutional objections to “Eurobonds”. It would also allow PIIGS governments to in effect share “Germany’s credit card”, thus lowering borrowing costs in the eurozone periphery and so taking the pressure off of embattled governments in Spain, Greece, Italy and elsewhere. And a big plus point as far as Germany is concerned is that this is no free lunch: if countries cannot honour their commitments, then they will lose their collateral.
But of course, things are never as simple as that. The fly in the ointment here is the always-emotive subject of gold, with many in southern Europe sure to object to the idea of pledging their gold to such a venture. Italy’s sovereign gold reserves stand at 2,451 tonnes – worth €98 billion as of March – while France sits on a hoard of 2,435 tonnes, and Portugal 383 tonnes (Portugal actually owns around 72 tonnes more then the European Union’s second largest economy, the United Kingdom). Having thus far resisted pressure to sell gold in order to shore up state finances, many in these countries will no doubt be wary of this EU take on a “cash for gold” shopping mall kiosk.
This idea bears close attention. If it looks like taking off, it will be yet another indicator that gold is slowly but surely re-entering the financial calculations of governments around the world.
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