One has to wonder where all the bright people have gone. It seems like we go from one economic disaster to the next and the theme from every one of these tragedies is "print more money." Whether it is Greece, the US or now Spain, that has been the same answer. Turn on the presses and that will solve all of our problems.
That could not be further from the truth. As we learned in the 20's in Germany, one cannot print your way out of a financial mess, it only makes it worse. Yet that is the way all these current crises have been "solved."
In the latest one, the fourth largest bank in Spain "Bankia" is going to be bailed out by a giant $24 billion windfall. We use that word as it makes about as much sense as the other things governments are doing these days. It does not make financial sense, it is only a temporary band aid that will soon come off as we go further down the road.
All governments seem allergic to taking the medicine that they need. Take the hard hit, solve the problem and recover. Instead we see things being pushed into the future where "someone else" can solve it. The problem is that the size of the issue continues to grow exponentially to a point where we see nothing good happening. We fear a global economic depression of a size and scope that most cannot even imagine.
We sure to hope that we are not right, however, we hold little hope that the political classes, their "smart financial advisers" and the people of the effected countries will wake up in time to forestall the tsunami that will result from an upcoming tremor.
Conservative Tom
Inquiring minds just may be asking "Just where is this money coming from?" That's a good question.
Reuters reports Spain may recapitalize Bankia with government debt.
Got That? A Spanish government source says the plan is to float what amounts to junk bonds, pawn them off to the ECB and use the proceeds to "recapitalize" Bankia.
Of course the ECB (bankrolled by Germany) is at enormous risk were this preposterous scheme to actually happen.
This is what I want to know: When does Germany say it has had enough of these preposterous schemes?
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
That could not be further from the truth. As we learned in the 20's in Germany, one cannot print your way out of a financial mess, it only makes it worse. Yet that is the way all these current crises have been "solved."
In the latest one, the fourth largest bank in Spain "Bankia" is going to be bailed out by a giant $24 billion windfall. We use that word as it makes about as much sense as the other things governments are doing these days. It does not make financial sense, it is only a temporary band aid that will soon come off as we go further down the road.
All governments seem allergic to taking the medicine that they need. Take the hard hit, solve the problem and recover. Instead we see things being pushed into the future where "someone else" can solve it. The problem is that the size of the issue continues to grow exponentially to a point where we see nothing good happening. We fear a global economic depression of a size and scope that most cannot even imagine.
We sure to hope that we are not right, however, we hold little hope that the political classes, their "smart financial advisers" and the people of the effected countries will wake up in time to forestall the tsunami that will result from an upcoming tremor.
Conservative Tom
When Does the Ponzi Scheme Collapse?
Inquiring minds are interested in the recapitalization plans for the Bankia. Please consider this chain of posts.
ABC News reports Spain's Bankia set for massive bailout.
ABC News reports Spain's Bankia set for massive bailout.
Spain's fourth-biggest bank Bankia says it is certain of securing the 19 billion euros ($24 billion) in state aid it is seeking in the largest bank bailout in the country's history.Devil in the Details
Bankia is considered key to the country's financial system, and a failure would contaminate the entire banking sector.
The plight of Bankia - which holds some 10 per cent of the nation's bank deposits - has added to the concerns over the massive debt crisis gripping Spain and the rest of the eurozone.
Bankia president Jose Ignacio Goirigolzarri has sought to reassure investors and the public about the future of the struggling bank at a press conference called the day after it announced huge losses, and asked for a government rescue.
"I am certain that the Spanish state will obtain the financing so we will receive the 19 billion euros. That's the commitment," said Mr Goirigolzarri, adding that he expected to get the funds in July.
Inquiring minds just may be asking "Just where is this money coming from?" That's a good question.
Reuters reports Spain may recapitalize Bankia with government debt.
Spain may recapitalize Bankia with Spanish government bonds in return for shares in the bank which last week asked for rescue funding of 19 billion euros ($24 billion), a government source said on Sunday.Ponzi Financing
Bankia could use the sovereign paper as collateral to get cash from the European Central Bank, forcing the ECB to get involved with restructuring Spain's banking sector, laid low by lending to property developers in a boom that ended in 2008.
ECB policymakers, who have pumped over 1 trillion euros into Europe's financial system in recent months, are resisting pressure to do more to shore up the euro zone.
"The biggest problem here is that the ECB could object. That's a legal issue, but technically it is possible," said Jose Carlos Diez, economist at Intermoney Valores.
Got That? A Spanish government source says the plan is to float what amounts to junk bonds, pawn them off to the ECB and use the proceeds to "recapitalize" Bankia.
Of course the ECB (bankrolled by Germany) is at enormous risk were this preposterous scheme to actually happen.
This is what I want to know: When does Germany say it has had enough of these preposterous schemes?
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Here is a summary of the austerity programs in Spain and other periphery countries of Europe. If austerity in recessions works, why aren't we seeing positive results?
ReplyDeletehttp://www.bbc.co.uk/news/10162176
-- David (Keynesian)
P.S. We agree on the banks. Bailouts serve only to encourage them to keep acting in the same irresponsible ways. In just the last couple weeks, we have had the JP Morgan derivatives deal and the Morgan Stanley greenshoe options scandal in the Facebook IPO. More will come.