BRUSSELS—Spain's finance ministry said Finance Minister Luis de Guindos would hold a news conference shortly to explain the country's bank-recapitalization plans, as the euro-zone currency union hustles to contain its worsening financial crisis.
The announcement followed a conference call among euro-zone finance ministers to discuss a commitment to provide as much as €100 billion ($125 billion) in support for Spain's ailing banking sector Saturday, euro-zone officials said.
Of course the problem here is two-fold:
Where's the money going to come from? Presumably the IMF, ESM and EFSF. Note that there's a wee problem with the current funding capacity of these mechanisms.
How does providing these funds, assuming they can be found, actually fix the problem? Filling a capital hole with more borrowing simply makes it less likely that the economy will recover as the interest has to continue to be paid.
The only solution that can be found to too much debt is to stop borrowing more money.
This means that those who lent out said money without any reasonable expectation of repayment (which is why they're in trouble in the first place) go out of business. They go "poof." Those who claimed cash flows that don't exist lose their investment. Those who borrowed lose their collateral (such as it is) and are bankrupted too.
This is good, not bad. It enforces market discipline. It shrinks the credit supply to be more in line with GDP. It causes contraction in prices, which makes everything more affordable. And it allocates losses where they should be allocated -- to people who did stupid things.
But this is clearly not the path the EU and Spain are taking.
Nor is it the path we have taken.
And until we, and they, do so there is no resolution. The "can-kicking" in fact makes the problem worse since it leads to more interest demands and further puts rollover risk on the table front-and-center, as if (when?) the market discerns that where you shuffled that debt off to (rather than getting rid of it) won't pay either the demanded interest rate skyrockets.
This is what happened in Greece and what will be repeated -- including here -- until the stupidity stops.
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Stiglitz on CNN Your Money just now opining that austerity doesn't work because it contracts the economy. Says it has only worked in small economies where .gov spending is replaced by something, like exports. Doesn't seem to understand that a contraction is necessary...
I suspect that the US Government will ante up into the bailout fund without disclosing such to the US taxpayers just like it did at the inception of the 2008 meltdown when it funneled monies to the international banks without our knowledge. But such an action would never reach your eyes or ears, especially in an election year. The can keeps getting kicked despite the fact that they've run out of road. They are just kicking the can up the embankment now and it keeps rolling back down the hill so that they can give it another boot until which time the can either splits wide open or they break their legs.
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"Ammunition beats persuasion when you are looking for freedom." Will Rogers, 4 Nov 1879 - 15 Aug 1935
Meanwhile, we will go from the worst week for stocks to the best month in the last few years. We should have seen this coming: Bad week for stocks = weekend news of a sovereign bailout = massive short squeeze = massive rally on Monday = all is good again
The current above-the-fold Reuters article cracks me up. Check this bull**** out:
Quote:
The process is likely to involve bonds from the EFSF being injected into Spanish banks with no new capital raised, a euro zone official said on Friday. The bonds can then be used as collateral, allowing the banks to access ECB liquidity.
Now quick, which shell is the pea under? ****tards.
"God knows who is a counter-party to whom in the mammoth international cluster**** of accounting fraud that passes for a commerce in capital." Kunstler, 13 June 2011
At some point, the laws of thermodynamics have to kick in, right? Or has the global financial system finally discovered the perpetual motion machine?
Of course not - the friction is still there. It has merely been shifted.
I look forward to the day when doubling down finally meets its match and we can look to the other side of the hill. I just wish I knew when that day is.
It'll work for a little while -- a few weeks or so.
If Greece says "**** you" then suddenly the amount in question here will look rather insignificant...
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I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
IF You happen to ( be ****ing dumb enough to ) be holding Spanish Bonds You might feel a slight reaming sensation in your *******.
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DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides “During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell
Mortgageguymn
Posts: 1566
Incept: 2009-03-09
North Coast
Noodleman said it. Bernanke's going to engineer something where the Fed secretly "invests" in... IMF bailouts shares or...Spanish bonds or... Italian bonds...etc.
Doing such things (allocating losses to those who deserve them) would take the people who are currently in power and remove their financial power. It would fundamentally shift the entire world power structures. As such the people who are currently in power will do all in their power to prevent such a thing from happening.
Trust me, the German people are damn mad about this. The average German must work until he or she is 67. The average Greek or Spaniard retires much earlier. And the German people are forced to throw in a disproportional amount of bailout money to save the ones who play by a completely different set of rules than the Germans play by. If Merkel gives thumbs up to this crap I think she's gone. I am surprised that the Germans haven't taken to the streets yet. This is like one of you subsidizing your next door neighbor who retired at 55 and lays on a hammock all day long while you're 65 and still work for the man 8 hours a day 5 days a week. Sorry, that don't float.
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"Ammunition beats persuasion when you are looking for freedom." Will Rogers, 4 Nov 1879 - 15 Aug 1935
Widgeon
Posts: 13481
Incept: 2007-08-30
Region formerly known as the United States
Quote:
Why is this not obvious?
Consider "the facts" from POV of TPTB & pols;
For the last 30 years they've successfully borrowed themselves out of every quandary. For the last 30 years, the more they've borrowed the lower their borrowing costs have gone. What's not to like?
How does falling prices contract the economy? It expands the economy.
Quote:
This is like one of you subsidizing your next door neighbor who retired at 55 and lays on a hammock all day long while you're 65 and still work for the man 8 hours a day 5 days a week. Sorry, that don't float.
We're doing it right now in the US and in fact the majority of people who aren't even benefiting applaud it.
Jstanley01
Posts: 8182
Incept: 2008-07-30
San Antonio, Texas
Quote:
Trust me, the German people are damn mad about this.
Boo hoo. They did it to themselves, just like twice before during the last century. Why? Because the Germans are blonde-haired blue-eyed dumbasses. Twice through war now once through peace, it don't mean nothin'. Except that they have been as wrong as they could possibly be THREE TIMES. Oh yeah, utter and complete dumbasses the Germans are. You can take that one to the ****ing bank RUN. Meanwhile whatever we do, KEEP THOSE ****ING KRAUTS IN THEIR ******N BOX.
I think the June 5th election results show differently, Graphopa.
In San Jose about 90% of the electorate voted for some pretty strict pension reforms for government workers. In San Diego about 70% voted in favor of pension reform. Landslides. In the mayor's primary race in San Diego the guy who is the biggest advocate of pension reform got the most votes. And in Wisconsin the unions failed in their bid to get Walker recalled. So the voters are starting to wake up when given a viable choice. People are beginning to understand the underlying problem on some (but not all) of the issues. So the tide is beginning to turn. The larger problem not being addressed by the electorate is their failure to vote lying politicians from office. The large majority of the public were strongarmed into TARP and other bailout schemes even though 80%-90% were fully against it - and then the voters turned around and reelected the same thugs back into office. Go figure. Until that is fixed nothing really changes.
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"Ammunition beats persuasion when you are looking for freedom." Will Rogers, 4 Nov 1879 - 15 Aug 1935
