Europe's Maquina Infernal has crippled Spain

The Telegraph ^ | 5/27/2012 | Ambrose Evans-Pritchard

[bruinbirdman]

Spain is spiralling into the vortex of debt-deflation. This has nothing to do with Greece. It is not the result of fiscal extravagance over the past decade, or other such Wagnerian myths.

The country’s collapse is the mathematically certain - and widely predicted - result of ferocious monetary and fiscal contraction on an economy struggling to deal with a housing bust.

In Spain, unemployment has reached 24.4pc, or 32pc in Extremadura. More than 1.5m households have no earner at all

Monetary tightening by the European Central Bank caused Spanish real M1 deposits to fall at an 8pc rate in mid-to-late 2011, guaranteeing crash into double-dip recession that we now see.

Indeed, the ECB even let the broader M3 money supply contract for the whole eurozone late last year, badly breaching its own 4.5pc growth target. This was not purist hard-money discipline. Let us not dress it up with the bunting of ideology, or false authority. It was incompetence, on a par with the errors of 1931.

Spain’s Bankia fiasco has merely brought matters to head, though the details are shocking enough. A €4bn bail-out in mid-May. A €23bn bail-out two weeks later. You couldn’t make it up.

Investors have noticed that Deloitte exposed the rot, not the regulators. Bankia is the creation of the ruling Partido Popular, thrown together from regional cajas under its control. It was a sink for €30bn of bad debts from property developers, an instrument to "extend and pretend", to cover up the systemic awfulness of the housing crash.

Clean-up chief José Ignacio Goirigolzarri says Bankia is unique. The debacle tells us nothing about the rest of the Spanish banking system. Let us hope so. Standard & Poor’s is not waiting to find out. The agency downgraded five banks to junk

[Walmartian]

At the press conference in Madrid, Goirigolzarri stressed that after the recapitalisation, Bankia would be “solid, efficient and profitable”.

[ScaniaBoy]

Another excellent piece by AEP

[ScaniaBoy]

At the press conference in Madrid, Goirigolzarri stressed that after the recapitalisation, Bankia would be “solid, efficient and profitable”.....and I have a bridge across the river Tajos to sell you....

[douginthearmy]

Interesting to watch the fall of Western civilization. Capitalism+Freedom->Prosperity->Arrogance+Folly->Socialism->Misery+Dependence->Totalitarianism. Interesting, but not fun.

[Ken H]

At the press conference in Madrid, Goirigolzarri stressed that after the recapitalisation, Bankia would be “solid, efficient and profitable”.

All righty, then. I'm calling my broker first thing in the morning.

[whitedog57]

This economist wrote about the Spanish banking crisis last week.

http://confoundedinterest.wordpress.com/2012/05/25/spanish-banks-bankia-banco-popular-bankinter-cut-to-junk-housing-blues-continues-to-inflict-damage-on-spain/

[Prospero]

Interesting, but not fun.

Interesting, except that it's a remake. We've already read this book.

[blam]

WAD

We Are Doomed...we're just in line waiting our turn.

[ClearCase_guy]

Interesting to watch the fall of Western civilization.

Yup.

I'm at the point where I don't see any value in propping up or trying to save any failing institutions. Greece? Spain? JP Morgan? California? Bank of America? Fannie Mae? Let it all burn.

There is no solution except going through fire and destruction. I want it to happen, because I want the solution. Electing politicians so that they can fiddle with a tax code so that they can make a union pension fund limp along for 9 more months is just pointless.

I want the solution. Electoral politics isn't it.

[Dick Vomer]

all tyrants face "this solution".... live by the sword..etc....

[onedoug]

When I was in Madrid some years ago I went to the Museo Del Ejercito (Army Museum) which was interesting but dully represented by the attendants until...I asked if there was any representation there of Hernan Cortez. Suddenly it was as if the place had come alive, with the attendants (veteranos todos) escorting me to the third floor and speaking proudly of the rather small statue there of the great conquistador. My then partial knowledge of Castellano could only get part of what they were saying, but it was obvious I had made their day.

¡Viva la historia!

[1010RD]

It doesn’t end well.