Today on Berman’s Call: Spain Likely to Default…Again!


Author Larry Berman

Posted: 7 May 2012 re-posted from etfcm

Throughout the documented history of debt markets over the past 800 years (Reinhart and Rogoff), Spain is by far the biggest visitor to debtor’s prison. Unfortunately, it appears they are heading there again and it will likely rock the Euro region and perhaps the rest of the world until they do.

Consider some of the following facts (Source: Phoenix Research, Spanish Government). Spain is too big to fail and too big to save. The only plausible way out is for the weaker countries in the Euro to leave, default, and restructure with weaker currencies. This likely takes years to fully play out and won’t happen before the ECB realizes that it is really the only way to fix the problem.

  • Total banking loans are equal to 170% of Spanish GDP.
  • Troubled loans just hit an 18-year high.
  • Banks are drawing a record €316.3 billion from the ECB.
  • €65 billion left the banking system in March.
  • Over half of all mortgages are owned by Spanish CAJAS. (Credit Union).
  • The CAJAS primary lending market during housing boom were subprime
  • Banking system is saturated with toxic mortgage debt that makes the US in 2008 look good.
  • Worldwide banking exposure to Spain is well over €1 TRILLION. Leverage is 26 to 1.
  • Unemployment is almost 25%, it’s 50% for those under 25.

 

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