PDA

View Full Version : Eurozone- up next Spain



Peter1469
04-30-2012, 03:28 PM
Greece partially defaulted and the markets barely noticed. Why? Because Greece's economy was too small.

Up next is Spain. And with the 4th largest economy in the Eurozone, it cannot be ignored.

The headline economic data points for Spain are the following:

Spain’s economy (roughly €1 trillion) is the fourth largest in Europe and the 12th largest in the world.
Spain sports an official Debt to GDP of 68% and a Federal Deficit between 5.3-5.8% (as we’ll soon find out the official number)
Spain’s unemployment is currently 24%: the highest in the industrialized world.
Unemployment for Spanish youth is 50%+: on par with that of Greece
On the surface, Spain’s debt load and deficits aren’t too bad. So we have to ask ourselves, “Why is unemployment so high and why are Spanish ten year bills approaching the dreaded 7%?” (the level at which Greece and Portugal began requesting bailouts).


Its unemployment is over 24% (over 50% for young adult). And it has another problem. A system of unregulated banks, off the books-

The caja system dates back to the 19th century. Cajas at that time were meant to be almost akin to village or rural financial centers. As a result of this, the Spanish country is virtually saturated with them: there is approximately one caja branch for every 1,900 people in Spain. In comparison there is one bank branch for every 3,130 people in the US and one bank branch for every 6,200 people in the UK.
Now comes the bad part…


Until recently, the caja banking system was virtually unregulated. Yes, you read that correctly, until about 2010-2011 there were next no regulations for these banks (which account for 50% of all Spanish deposits). They didn’t have to reveal their loan to value ratios, the quality of collateral they took for making loans… or anything for that matter.

http://seekingalpha.com/article/541951-the-secrets-of-the-spanish-banking-system-that-99-of-analysts-fail-to-grasp

Peter1469
04-30-2012, 05:36 PM
Ah, the DNC bucket carrier, Paul the lib!

I read everything he writes. The last three years he has only written two articles that I agreed with in each year. Last year it took him to December to not disappoint me.

Yes, Paul will always say that when government spending fails to stimulate the economy, the problem was that the amount of spending was too little.

His recipe = currency collapse.

When debt is at unsustainable levels try not to increase the debt.....

Peter1469
04-30-2012, 05:37 PM
I should correct myself. I read Paul's published articles. I don't necessarily read all of his blog posts.

MMC
04-30-2012, 05:39 PM
So I heard today Pete that Spain officially declares they are in a depression. How do you think this affects things now.

Peter1469
04-30-2012, 05:44 PM
So I heard today Pete that Spain officially declares they are in a depression. How do you think this affects things now.

It puts more pressure on the Eurozone.

I wonder if Germany will just bail. They are printing Deutschmarks and they have passed a law to allow German banks to divest themselves of Eurozone sovereign debt. The German people are furious at having to support the PIIGS deadbeats.

Vilifier of Zombies
04-30-2012, 05:58 PM
I should correct myself. I read Paul's published articles. I don't necessarily read all of his blog posts.

Krugman is right about half the time, sometimes more, sometimes less - when he's wrong it spawns an entire "debunking Krugman" genre of high school economics teachers scathing about it on the internet.

Peter1469
04-30-2012, 06:04 PM
You give him far too much credit.

MMC
04-30-2012, 06:09 PM
You give him far too much credit.

Agreed there. Course they could check his own pieces of writing in the 6 month cycle. As Krugman tends to go back on some of the things he says economically. Maybe he should stick to writing just about those on the right.

Oh.....wait. Thats all he is good for anyways. Well.....and to beat on.

Vilifier of Zombies
04-30-2012, 06:14 PM
It puts more pressure on the Eurozone.

I wonder if Germany will just bail. They are printing Deutschmarks and they have passed a law to allow German banks to divest themselves of Eurozone sovereign debt. The German people are furious at having to support the PIIGS deadbeats.

The Dutch shortfall only complicates matters - even it's PM offered to resign - France's economy is expected to stagnate - Italy's economy is already slumped and doesn't look like it's gonna improve any time soon - ironically central and eastern European countries outlook seems to be better off - at least the United Kingdom has the Olympics to look forward to - add to the fray that our economy may be stagnating as well...

Vilifier of Zombies
04-30-2012, 06:18 PM
You give him far too much credit.

I'm not gonna nitpick.

There's not to many living Nobel laureates that think less of themselves - I'd think it's the opposite.

MMC
04-30-2012, 06:19 PM
Hmmmm.....what you think Pete? Hows things working out for Austria, Poland, and Eastern Europe?

Peter1469
04-30-2012, 06:20 PM
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9234926/Hollandes-Growth-Bloc-spells-end-of-German-hegemony-in-Europe.html

And Sarkoszy is about gone.... More reasons for Germany to bail.

MMC
04-30-2012, 06:24 PM
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9234926/Hollandes-Growth-Bloc-spells-end-of-German-hegemony-in-Europe.html

And Sarkoszy is about gone.... More reasons for Germany to bail.

That could be trouble.....as the West wont won't have anybody in the UN to involve themselves into everyone else affairs.

Vilifier of Zombies
04-30-2012, 06:29 PM
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9234926/Hollandes-Growth-Bloc-spells-end-of-German-hegemony-in-Europe.html

And Sarkoszy is about gone.... More reasons for Germany to bail.

I agree that Sarkozy is all but gone - although it might benefit Germany to bail I don't think it will, Germany doesn't buckle to France - it's the other way around - France buckles to Germany.

MMC
04-30-2012, 06:41 PM
The EBRD has reduced its economic growth forecasts for 2012 for central and south eastern Europe, as well as eastern Europe and the Caucasus, and warned that a further deterioration of conditions in the eurozone could have a substantial further impact on the whole of the EBRD region.

The report sees a significant overall slowdown in growth across the EBRD’s 29 countries of operations from central and south Europe to central Asia – to an average 3.1 per cent in 2012 from 4.8 per cent in 2011.

It says a worsening of the eurozone turmoil would pose a systemic challenge to emerging Europe because of the deep integration of its banking sector with eurozone-based banks, particularly if compounded by the re-emergence of uncoordinated national policies, with negative cross-border spillovers. The EBRD region would also be negatively affected by a resulting slowdown in the U.S. and elsewhere and from linked declines in commodity prices.

It notes that central and south-eastern Europe is particularly exposed to eurozone stress and it points to Slovenia and Hungary as countries that are likely to see a return to recession in 2012. But it says Russia and other CIS countries that are less integrated with western Europe are continuing to enjoy respectable growth, partly as a result of elevated commodity prices.

The report revised the 2012 forecasts for central Europe and the Baltic states down to 1.4 per cent from the 1.7 per cent seen last October.

At the same time, the outlook for eastern Europe and the Caucasus, the closest to western Europe within the eastern transition regions, has somewhat worsened, with 2012 growth in eastern Europe and the Caucasus now seen at 2.6 per cent, compared with a previous 3.2 percent. The largest economy in the region, Ukraine, is likely to be quite affected by the eurozone crisis, with the most recent industrial production data already suggesting a slowdown.

The report forecasts that the economy in Ukraine will expand by 2.5 per cent in 2012, down from an estimated 5.0 per cent in 2011 and compared with an October forecast of 3.5 per cent for 2012.....snip~

http://www.ebrd.com/pages/news/press/2012/120124.shtml

What ya think Pete?

Peter1469
04-30-2012, 07:38 PM
I think that Europe and the Eurozone is sinking into a depression. The Eurozone, at least, can't manage a depression because the member nations cannot manage their own unique fiscal problems. I see a Eurozone breakup.

Hopefully they won't return to their historic methods of managing economic collapse- war.

MMC
04-30-2012, 07:39 PM
They were saying Eastern Europe was experiencing a housing bubble like we are. Think they will come out of theirs before we do?

Peter1469
04-30-2012, 07:49 PM
They were saying Eastern Europe was experiencing a housing bubble like we are. Think they will come out of theirs before we do?

It depends on whether they try to prop up their banks or not. Iceland was the model to follow.

MMC
04-30-2012, 07:58 PM
It depends on whether they try to prop up their banks or not. Iceland was the model to follow.

I was listening to some Women out of Vienna that they usually talk to most of the time. They expect things to worsen even if Czarkosy was to pull a rabbit out of his hat an win. As Portugal might not have to recieve Austerity measures for a Quarter or two. But then will have to deal with their situation. Then Italy didnt think they would be adding any jobs or growth either. But that they still had Capital. Moreover what will take place with the UK? As they want no Part of the EU togetherness Club.

Chris
04-30-2012, 08:33 PM
Why would anyone expect austerity measures to work after social democracy has put Europe on the edge of collapse. Depriving people of the dependency on government they've grown used to will only lead to violence. The government bubble's about to burst.

Europe's Gathering Storm (http://www.realclearpolitics.com/articles/2012/04/26/europes_gathering_storm_113961.html): "With Socialist leader Francois Hollande likely to become the next president of France, Europe's hot populist anger is about to confront the cold austerity measures required by the eurozone, with a predictable result: a storm that rattles the foundations of the European economic house."

(I find it hard to read Krugman anymore, it's hard to get past all the political vitriol.)

MMC
04-30-2012, 08:43 PM
Why would anyone expect austerity measures to work after social democracy has put Europe on the edge of collapse. Depriving people of the dependency on government they've grown used to will only lead to violence. The government bubble's about to burst.

Europe's Gathering Storm (http://www.realclearpolitics.com/articles/2012/04/26/europes_gathering_storm_113961.html): "With Socialist leader Francois Hollande likely to become the next president of France, Europe's hot populist anger is about to confront the cold austerity measures required by the eurozone, with a predictable result: a storm that rattles the foundations of the European economic house."

(I find it hard to read Krugman anymore, it's hard to get past all the political vitriol.)

:but: Chris.....Krugman won a Nobel Peace Prize. For Economics.

Chris
04-30-2012, 09:04 PM
I started a thread with him arguing with Ron Paul so we don't get off track here, it's one of his better less vitriolic moments.

Vilifier of Zombies
05-01-2012, 12:34 AM
I think that Europe and the Eurozone is sinking into a depression. The Eurozone, at least, can't manage a depression because the member nations cannot manage their own unique fiscal problems. I see a Eurozone breakup.

Hopefully they won't return to their historic methods of managing economic collapse- war.

MMC's EBRD article indirectly brings up another point - it's not Germany that'll fell the first domino, it'll probably be Hungary as it's becoming ever more increasingly fed up with the EU or rather the consensus is that their fear is colonization - a loss of national sovereignty. Hungary is at odds with both the IMF and the European Commission - Hungary's PM Mr. Orbán even going so far as to compare the latter to the Soviet Union, but instead of uniforms with patches they're [European Commission] donning three piece suits...

It's all rather incredible, some of the items being discussed whether or not Hungary deserves the line of credit it's asking for from the IMF revolve around the Venice Commission imposing that the government of Hungary recognize churches - as if that were a reason in and of itself much less the European Commission demanding a compulsory retirement at age sixty two for judges - not economic policies nor budgets - shortfalls or otherwise but fuck'n nagging from spiteful bureaucrats from Brussels (just so happens the EU has a lot pull with EBRD) over petty nonsense.

Incidentally or hypocritically depending on one's point of view, the EU is cool with the regime in Azerbaijan, even though the press gets harassed, beaten up, or murdered there - it's citizens oppressed constantly living in fear - Azerbaijan for the most part does what it's told and doesn't rock the boat - with the press subdued they're in like Flynn.

MMC
05-01-2012, 05:41 AM
Good post Voz.....I think you read it correctly. Especially with Hungary. I heard the Poles were not to happy with the issue over Sovereignty too. What do you think about their housing bubble as compared to ours?

MMC
05-01-2012, 07:15 AM
Why would anyone expect austerity measures to work after social democracy has put Europe on the edge of collapse. Depriving people of the dependency on government they've grown used to will only lead to violence. The government bubble's about to burst.

Europe's Gathering Storm (http://www.realclearpolitics.com/articles/2012/04/26/europes_gathering_storm_113961.html): "With Socialist leader Francois Hollande likely to become the next president of France, Europe's hot populist anger is about to confront the cold austerity measures required by the eurozone, with a predictable result: a storm that rattles the foundations of the European economic house."

(I find it hard to read Krugman anymore, it's hard to get past all the political vitriol.)

How do you think their housing bubble compares to ours Chris?

Vilifier of Zombies
05-01-2012, 12:12 PM
Good post Voz.....I think you read it correctly. Especially with Hungary. I heard the Poles were not to happy with the issue over Sovereignty too. What do you think about their housing bubble as compared to ours?

I think it'll all depend on whether or not the IMF extends Hungary a €20,000,000,000 line of credit. They get it and they'll toe the line for awhile, they don't and chaos will ensue at some point in the near future.

Peter1469
05-01-2012, 05:37 PM
Our housing bubble wasn't a problem. It was Wall St.'s scams that caused the problems.

Supply/demand works fine, until it gets artificially manipulated by scum. See gas prices.

Three main things caused the housing bubble:
1. Wall Street scams as you point out
2. Government willful ignorance while demanding more home ownership (regardless of ability to pay) (all levels of government)
3. Some people who willfully gamed the system and bought way to much house.

Peter1469
05-01-2012, 05:38 PM
How do you think their housing bubble compares to ours Chris?

Spain's housing bubble makes our look like spilled milk. China's is much worse.

Chris
05-01-2012, 08:27 PM
Three main things caused the housing bubble:
1. Wall Street scams as you point out
2. Government willful ignorance while demanding more home ownership (regardless of ability to pay) (all levels of government)
3. Some people who willfully gamed the system and bought way to much house.

You may have seen this before, but it's worth reposting: The Political Implications of Ignoring Our Own Ignorance (http://www.american.com/archive/2011/december/the-political-implications-of-ignoring-our-own-ignorance)
A common post-crisis narrative is that banking was de-regulated in the Reagan-Greenspan era. Some pundits make it sound as if regulators behaved like parents who hand their teenagers the keys to the liquor cabinet, leave for the weekend, and say “Have a good time.” In fact, regulators believed that they had stronger regulations in place in 2005 than they did in the pre-Reagan era.

—Before 1980, mortgage loans held by banks were illiquid assets subject to considerable interest-rate risk. These problems were alleviated by the shift toward securitization.

—Before 1980, insolvent institutions were opaque because of book-value accounting. This problem was addressed with market-value accounting, enabling regulators to take more timely corrective action to address troubled institutions.

—Before 1980, banks had no formal capital requirements and there were no mechanisms in place to steer banks away from risky assets. This problem was addressed with the Basel capital accords (formally adopted in 1988), which incorporated a risk-weighted measure of assets to determine required minimum capital. In the 2000s, these risk weightings were altered to penalize banks that did not invest in highly rated, asset-backed securities.

Thus, it was not the intent of regulators to loosen the reins on banks. On the contrary, from the regulators' point of view, it was the environment prior to 1980 that amounted to leaving the teenagers with the keys to the liquor cabinet. The post-1980 regulatory changes were believed to be in the direction of tighter supervision and more rational controls.

It turned out that the regulators were radically ignorant of the consequences of their decisions.

Peter1469
05-01-2012, 08:46 PM
The main deregulation problem that I have identified was the repeal of Glass Steagall. That allowed regular banks to turn into casinos. Without really telling the average American that is what was occurring.