A wave of relief buying swept across financial markets on Monday after a rescue package of up to USD 125 billion for Spain's banking sector eased some concerns about the euro zone debt crisis. Spanish banks have been hit by a collapse in the real estate sector and a surge in bad loans but their stocks gained on news of the bailout and the euro and commodities also rose. The rally after the weekend deal between euro zone finance ministers may be short-lived, however, as investors turn their focus to Greek elections on Sunday that could put Athens on a path to leaving the currency bloc. That would then renew the market pressure on Spain and Italy, which is also facing scrutiny of its public finances. "It's a big number, much bigger than what people had been expecting. It reduces the systemic risk, so it's hard not to be buying this morning," said David Thebault, head of quantitative sales trading at Global Equities. http://www.google.com/url?sa=t&rct=...3ty2Aw&usg=AFQjCNH5qiGTTvCeLRCPrpzR2Wvz_09Ogg So here's my question about this newest bailout, where do they get those Euros from? Since there's only so many Euros in circulation, which makes them more valuable, then the only way they can give Spain a bailout is with making or printing new Euros. That, like in America, will only patch a very weak dam that is going to one day break apart because you cannot keep printing more and more currencies anywhere without serious ramifications somewhere down the road. So as in America Europe is just kicking the can down the road once again without even trying to solve the financial problems that are causing this disaster to begin with. That problem is the illegal lending of money from the banks to others that should never be given those loans to start with as well as a few other problems that hurt the economies everywhere.
Notice how this is barely news anymore? Another week goes by, another bailout, more money printing, more debt, more spending, more trade deficits, more stimulus, more youth unemployment...more lives circling the drain. Meanwhile, nobody calls for an end to private banking...and even a modest reinstatement of the Glass-Steagal act (Volker Rule) is watered down to whatever. Welcome to oblivion.
Probably from the same source as any other money spent on any other purpose. I doubt that it's traceable to a single source of revenue. Not necessarily. Probably this is all electronic. You're talking about money supply. In times of crisis such as this, liquidity is the key to breaking the gridlock. It's been proven to work, which is why it's being employed here. The idea is that the dam is not weak at all - the world, especially the US and Europe, are wealthy. Maybe if this took on an academic inquiry into economics you could address that issue as an economist might. We could at least seek insight from the field of economics. Good point. I've forgotten the number, but if I recall correctly, something like 13 trillion dollars evaporated out of the world economy within perhaps a week of the announcement that AIG was in trouble. It's mind boggling. Yes here's an opening to try to discover what economic policy actually is battling. Obviously, devaluation of currency would be expected when governments just "print too much" as the pundits would have it. But since this is a multivariate problem, one which tries to optimize results against competing constraints, we can't do the question justice without talking about what those constraints are and why the policies are established in ways that sometimes seem counterintuitive, such as bailouts, or - more notably, the idea of stimulus. Depends on your news source. I think what you mean is that this not so unusual to us anymore. My answer is this: I think that if the world had listened more closely to the economists who were attempting to install a Keynesian policy for recovery from the crash caused by toxic mortgage assets, then we could at least say that everything humanly possible has been done to prevent the dominoes from falling. Under that mindset, there would be sigh of relief, that the Spanish banking system won't be the next thing that falls. Another crash was averted. That remains to be seen. I doubt it though. Undoubtedly this is electronic, done in a way that carefully weighed against alternative ways of engineering the world economy. Or less, if the debts from a Spanish banking crash have been averted. Not necessarily. Usually spending refers to items budgeted by the US Congress. I don't know where this fits into US federal spending. I suspect that spending has been reduced by averting a Spanish banking crisis. Between what nations? Presumably Spain will have hell to pay in its future trade negotiations unless it's able to put back what it's taking out of the European economy. Which is a good thing. Without Keynes' discovery of how stimulus actually works, the world may not have been had it as a tool to avert a total crash. Presumably many economies would severely retract after a Spanish banking crash and young people would be the first to be thrown off the payrolls. So this seems to have been mitigated by the bailout. Again, hopefully this averted such a scenario. I'm not sure that that has any bearing on the more complicated problem that even honest bankers found themselves holding toxic assets, or indirectly holding assets of some other equity that was damaged by toxic assets. However, banks that accept bailouts are under the microscope, so the action takes away some of their independence. How much remains to be seen. Unsound banking practices may not be at fault here like it was years ago. That wouldn't apply to Spain. I haven't been able to determine if Spanish bankers are the good guys or the bad guys in this scenario. And I have no reason to believe that the Spanish treasury department would have managed those banks better even if the govenment stepped in an took them over. Or, (cup half full): oblivion averted.
For how long this time, this is a third bailout. It a verted a crash this time by weaking the value of the Euro overall which puts more strain on the entire EU community. Please Register or Log in to view the hidden image! The bankers are the poroblem and if they aren't jailed or removed the problems will only get worse. I guess those bankers are working with the government by paying the officals off to keep giving them more and more bailout money until there's none left.
The orginal problem was not bad loans. It was gambling with corporate money in the derivative markets. Europe has a three fold problem, a weak central government, a weak central bank, and a weak banking system. Until they fix all three, they are going to continue to have trouble. Instead of sweaping change they insist on baby steps.
Yes, liquidity has been proven to work in a liquidity crisis...but this is a solvency crisis. Big difference! http://dailyreckoning.com/how-central-bankers-attempt-to-cure-insolvency/ "Many European governments, for example, are spending much more money than they can possibly confiscate through taxation. These guys are broke… plain and simple. But so is the United States, based on any intellectually honest assessment of the facts. According to the US Treasury’s own data, the US ended 2011 with total debt of $15.2 trillion, which means the US debt-to-GDP is now more than 100%! Move over Greece! Make way for Uncle Sam. Bankrupt governments usually default…at least they used to. In the modern era of faith-based currencies and Ivy League educated central bankers, bailouts and shell games are the cogs and wheels that drive the global monetary machinery. But this machinery does not actually power anything…other than a massive fraud. It merely sputters along, chugging out massive plumes of toxic theories and misguided manipulations."
Wrong on a number of fronts. Do you know what solvency means? Do you know the differnce between a liquidity crisis and a solvency crisis? Banks are monitored by government agencies and if they fail solvency, they are taken over by the government and resold. That has not changed. One of the problems with Europe is the bank is larger than the state. Case in point, Irish banks are are larger than the entire Irish state. So there is no way the state can guarantee bank deposits should there be a run on the bank. Again, the EU's problems boil down to: 1) A weak central bank 2) A weak political union 3) A failed banking system Two, bankrupt governments have never traditionally defaulted, because they can print more money to pay their debt. As previously stated, EU states have by treaty given up the right to print and manage their currencies - something The United States and Canada have not done. So comparing the US to any of the EU nations is just ignorance or fraud. Three, that figure of 15 trillion dollars in debt for the US includes debt the nation owes to itself. You cannot compare that to the debt of other nations like Greece where the debt is entirely to others. That 15 trillion includes about 2 trillion held by the Fed and several more trillion held by the Social Security Trust and and other US federal programs.
A handy infographic to put matters into a tangible perspective... http://demonocracy.info/infographics/eu/debt_piigs/debt_piigs.html
The strain has been there since 2008. The EU are the ones who authorized Spain to bail out its banks. As for the Euro, consider how it would suffer if this action were not taken. How is a banker today responsible for the deterioration of equity that secures bad debt undertaken years ago? The only corruption charges I'm aware of involve extending loans to insiders which presumably can be called. None of that would reach the EU which made the decision. And it wouldn't have any bearing on the recession itself and the real estate crisis which is the fundamental underlying issue. I was responding to your remark about printing currency. The increase in money supply is another dimension of the larger problem of global recession. When economists advocate expanding the money supply, or increasing liquidity, they are not operating in a vacuum. They're well aware of the downside. The problem is, in spite of the the pitfalls, it remains the proven cure. What Europeans spending policies are amiss? And how do their taxes amount to confiscation? They're democracies, able to vote, after all. It's not plain to me. Europe is extremely wealthy in relation to most of the world. And I don't think economics is simple either. I look around me and everywhere I see wealth. I think you could start a thread on intellectual honesty and it would take a while to reach a conclusion as far as what that means in terms of determining whether the US is broke. Is debt-to-GDP the figure of merit for measuring wealth? How does US and Greece compare in terms of these two measures? How does it relate to collapse of an economy? What do you mean? If the US is broke as you say, then does that mean we are also bankrupt? And where have you seen defaults since the 2008 collapse. The ones I remember were cases like Argentina under the shadow of the World Bank. All currency is based on faith that the paper exchanged for the goods or services will buy the equivalent value for the seller. I can't speak for the universities represented among "central" bankers, but I understand the common theory applied by economists originates at least as far away as University of Chicago. As for the cogs and wheels that drive the global monetary machinery, I think you might want to distinguish between popular perception and the more dry subject of economic theory. Fortunately we are all in on this huge conspiracy, which is apparently why it works. We are equally eager to stuff our packets with all that ill gotten and worthless paper. That is...unless you'd care to pass your stash over to me, given of course, that I would apply in for strictly non-fraudulent purposes. So far ideas like bailout and stimulus have worked, and laissez-faire has failed. That seems to establish what's toxic and what's healthy. And sputtering, as discouraging as that may seem to you, is such a far greater fate than hurtling over that cliff that opened in the road in 2008, that I wouldn't pay it any mind. It's the stall that economic policy strives to avoid.
