Spanish anti-austerity Protests.

Almost 2 million unemployed in Spain who do not receive dole of any kind. A country is never more than 3 square meals away from a revolution springs to mind.

SpaceTime wrote: »

It all seemed very much too good to be true when I saw it first hand. Everyone seemed super-positive about everything but, when you think about it, nothing really added up.

The one positive is that the bigger Spanish commercial banks BBVA, Santander, Sabadell etc tended to not be as accessible or as involved in that side of the market and they're 'relatively' healthy.

The various Cajas were rolled up into bigger entities under Government-pushed mergers and underwent really dramatic rationalisation with a hell of a lot of job losses.

It was referred to in the industry as "Cold fusion"

Bankia = Caja Madrid, Bancaja, La Caja de Canarias, Caja de Ávila, Caxia Laietana, Caja Segovia and Caja Rioja
(Now partially nationalised due to a bailout).

CaixaBank/La Caxia absorbed : "Banca Cívica" which was a merger of Caja Navarra, CajaCanarias, Caja de Burgos and Cajasol.

and so on..


Just to give you an idea of the complexity of the spanish banking market:

Major banks:
CaixaBank
Fiare Banca
Banca March
Bancaja
Banco Atlántico
Banco Esfinge
Banco Fimestic
Banco Guipuzcuano
Banco Herrero
Banco Urquijo
Bankoa
Evolvebank
ING Direct
Patagon España
UNO-e
BBVA
Banco Pastor
Banco Popular Español
Banco Sabadell
Banco Santander
Banco Zaragozano
Banesto
Bankinter
Triodos Bank
Fibanc
Openbank
Fibane
E-Cortal
Banco Espíritu Santo
Banco Inversión
Bankpyme
Barclays Bank
BCH Broker
Citibank
Deutsche Bank
Merrill Lynch
Ibercaja
InterCaja Social .ES
Salomon Smith Barney
Schroders
Global Trust Bank

Cajas (incomplete list)
Bilbao Bizkaia Kutxa (BBK)
Caja Madrid
Cajastur
CAM
Caixa d'Estalvis i Pensions de Barcelona, "la Caixa"
Caixa de Catalunya
Caixa de Manresa
Caixa de Terrassa
Caixa Penedès
Kutxa
Caixa Galicia
Caja de Arquitectos
Caja Duero
Caja España
Caja de Ingenieros
Caja Murcia
Caja Vital
Caja Circulo
Caja Navarra
Caja de Burgos
Caja Cantabria
Caixa de Balears, "Sa Nostra"
Cajasur
Unicaja
Caixa Tarragona

That's fooking bonkers. I have my account at La Caixa and I'm tempted to take all my money out and stick it under the mattress to be honest. Should I move my money to one of the bigger banks do you think?

There are very few work opportunities in Spain. I've been fortunate since I arrived almost 10 years ago but if I had to find a job tomorrow it would be very difficult to find anything and if you do don't expect more than 1000-1200 a month unless you're very specialised. The amount of people I know who are unemployed on reduced contracts, or working but who haven't received a salary for months is quite frankly scary.

From what I can see it will be a long way back. Even if 500,000 jobs were created tomorrow there would still be more than the whole of Ireland unemployed. I think that's what makes Ireland's plight somewhat more manageable. If you could create 100-150,000 you would make serious inroads into the unemployment problem while here it would have no significant impact to the overall figure.

My theory is that the EU is going to pull some rabbit out of a hat using the banking union system they're proposing to create and somehow wipe a chunk of the banking debt out.

Merkel will have to be publicly opposed or she'll be unelectable though!

In theory the ECB can basically 'create' money out of thin air basically printing it / using some kind of weird transactions to make those debts shrink. That might devalue the Euro a bit, but that might not necessarily be a bad thing and the US$ isn't exactly super-strong at the moment anyway and the Yen etc are all falling.

Also, the Euro's so big and is a global reserve currency, so it might even be able to do that without really significantly impacting on the currency at all.

I'd suspect that's what Spain's hoping for anyway.

I'm guessing there'll be a major ECB move done through some very complicated setup and Merkel will be scowling theatrically on the side just to prove that she's sufficiently austere to be elected in Germany.

Legs.Eleven wrote: »

Mind-boggling. I can't get my head round that at all.

It's a bit like The Matrix - You can do a lot if you are in control of the basic rules of the system.

Basically, in a monetary system like the one we all operate with these days, the money supply is controlled by the central bank. In the Eurozone that's the ECB in the US that's the Fed in the UK, that's the Bank of England etc. Essentially, nothing backs it (there's no gold behind it or anything like that). The value of the money is what people believe it to be worth and that's pretty much it! That perception's based on the strength of the economy, the size of the market etc. The EU's GDP is US$16.566 trillion (bigger than the United States 15.68 trillion USD and twice China 8.227 trillion USD) - so it's a humongous economy.

Those entities can use 'quantative easing' (a fancy term for printing money) to basically gently wipe out debts.

It means creating more bills (or increasing balances on accounts by typing tapping a few keys on a computer somewhere), causing a little bit of inflation by diluting the money supply by adding more to the system.

So, it would mean that the Euro would become slightly weaker against other currencies - that would mean our exports become more competitive though.

However, because the Euro and US$ are the world's two big reserve currencies (the dollar much more so), it's quite possible that the ECB's manoeuvres might not even have any impact on the value of the currency. It's all about perception

If you're operating a huge currency like the Euro or US$, you can get away with this kind of stuff. If you're operating a small currency like say £ sterling or even smaller like maybe Aus$, you would see your currency collapse in value very quickly.

There's a bit of the 'dark arts' in central banking and I think there's a lot of ways of using the Euro's sheer scale to get out of this mess.

Europe still thinks like a small country, we need to start thinking more like the US.

The trick is that you have to do it in such a convoluted and drawn out way that nobody understands that it's just money printing

mayotom wrote: »

Safer under the Mattress, I recently closed my Sabadell Account because they simply frustrated the hell out of me with ridiculous charges every month, so I thought open at the biggest most reliable Bank - Santander and low and behold as soon as i transfer everything over to them, they opened the doors and let Hacienda clear my accounts without warning Months later Hacienda admit that it had mislaid paperwork a few years ago so I can now apply to get my money back, but it will take 6-12 months..

Whooo

Hacienda gave me a cheque for 400 Euro there last month that I was owed and supposed to get back last year. Better late than never.

SpaceTime wrote: »

My theory is that the EU is going to pull some rabbit out of a hat using the banking union system they're proposing to create and somehow wipe a chunk of the banking debt out.

Merkel will have to be publicly opposed or she'll be unelectable though!

In theory the ECB can basically 'create' money out of thin air basically printing it / using some kind of weird transactions to make those debts shrink. That might devalue the Euro a bit, but that might not necessarily be a bad thing and the US$ isn't exactly super-strong at the moment anyway and the Yen etc are all falling.

Also, the Euro's so big and is a global reserve currency, so it might even be able to do that without really significantly impacting on the currency at all.

I'd suspect that's what Spain's hoping for anyway.

I'm guessing there'll be a major ECB move done through some very complicated setup and Merkel will be scowling theatrically on the side just to prove that she's sufficiently austere to be elected in Germany.

My own opinion on this is a bit more bleak: Europe have a bad track record of implementing any actual working recovery solutions, and I don't think that will change - Germany will have the ability to prevent anything like that from happening.

What is likely to happen: Mass defaults on unsustainable private debt are going to start happening, which is going to result in a fresh crisis resulting this time in bail-ins (peoples savings/deposits being pilfered), greater public debt, and - this is the important part - increased privatization of public services/assets, which will enrich private investors/speculators, and turn European economies into 'rentier economies'.

This is the template the IMF (and associated neoliberals within various governments and industries) used to destroy economies in South-East Asia and Latin America, and there's so much profit to be made doing this in Europe as well, that there's not likely to be any let-up.


If there's going to be any change from this, countries are going to have to start taking initiative on their own (there are available alternatives that can help economies recover, to a limited degree) - the EU is politically deadlocked because of Germany, and will likely stay that way.

We could easily be on this same path for decades, just like Japan and its two 'lost decades'.

SpaceTime wrote: »

It's a bit like The Matrix - You can do a lot if you are in control of the basic rules of the system.

Basically, in a monetary system like the one we all operate with these days, the money supply is controlled by the central bank. In the Eurozone that's the ECB in the US that's the Fed in the UK, that's the Bank of England etc. Essentially, nothing backs it (there's no gold behind it or anything like that). The value of the money is what people believe it to be worth and that's pretty much it! That perception's based on the strength of the economy, the size of the market etc. The EU's GDP is US$16.566 trillion (bigger than the United States 15.68 trillion USD and twice China 8.227 trillion USD) - so it's a humongous economy.

Those entities can use 'quantative easing' (a fancy term for printing money) to basically gently wipe out debts.

It means creating more bills (or increasing balances on accounts by typing tapping a few keys on a computer somewhere), causing a little bit of inflation by diluting the money supply by adding more to the system.

So, it would mean that the Euro would become slightly weaker against other currencies - that would mean our exports become more competitive though.

However, because the Euro and US$ are the world's two big reserve currencies (the dollar much more so), it's quite possible that the ECB's manoeuvres might not even have any impact on the value of the currency. It's all about perception

If you're operating a huge currency like the Euro or US$, you can get away with this kind of stuff. If you're operating a small currency like say £ sterling or even smaller like maybe Aus$, you would see your currency collapse in value very quickly.

There's a bit of the 'dark arts' in central banking and I think there's a lot of ways of using the Euro's sheer scale to get out of this mess.

Europe still thinks like a small country, we need to start thinking more like the US.

The trick is that you have to do it in such a convoluted and drawn out way that nobody understands that it's just money printing

It's actually pretty different: When banks make loans, they create money out of nothing.

The Bank of England has also just recently come out and said this as well:
https://www.boards.ie/vbulletin/showthread.php?t=2057167651

So, central banks do not control the money supply (only the interest rate - which doesn't really control the money supply itself), the money supply is determined based on the demand for money within the economy.


The value of money isn't subjective either: The state enforces (through taxation) a single currency that is valid as money, and real goods of tangible value (even labour - time spent working), have to be exchanged in order to receive that currency, which is what gives that currency its value - and the value of that currency, naturally will fluctuate based on the availability and supply constraints of all those goods (among other, more complicated factors).


Creating money also doesn't by itself cause inflation: Money being spent, on boosting aggregate demand, causes inflation (and this is perfectly fine: the ECB wants to hit a target of 2-4% inflation, so anything within those bounds is fine - even if the spending originates from money creation), and quantitative easing doesn't directly cause an increase in spending, it only increases the money banks have available for lending.

And - from above - this rate of lending is determined from within the economy, by the demand for loans - yet: Very few people want more loans, because private debt is already very high.

So the money put into quantitative easing, has been taken by the banks, and has been used to speculate on commodities - causing inflation in commodity prices, and in the costs of these commodities on the rest of the economy (so, in the end, it did cause inflation - but not due to money creation, but due to speculation).


QE is money printing for the benefit of the wealthy (they are predominantly the ones gaining from rising commodity prices), yet nothing of the sort to be seen for helping out the general population (such as by writing down loans - banks, and thus taxpayers who now own the banks, are still made pay for that - or for boosting aggregate demand).

SpaceTime wrote: »

Fiat Currencies (as in all modern currencies) are even weirder than factional reserve banking though!

The central banks effectively become the only people who can issue clay with pigs stamped on it.
Mr Farmer Bank Plc comes along (he's moved up in the world, bought a fleet of mercs, pays himself 10bn pigs coins a year and now owns a small island in the Caribbean and a helicopter) to the Central Bank who lend them a big pile of pig-printed clay so that they can operate their fractional reserve banking.

The Central Bank's money is based on the 'fiat' the latin for 'it shall be!'

i.e. they have a bunch of laws that say that they can print pigs.

Then the central bank gets even fancier and decides that it can just issue virtual computerised money anyway and doesn't even bother with the whole messy clay printing system

Then one day, Mr Farmer Bank Plc discovers that they're in *BIG* trouble --- they've given out WAY too much money and have nothing to back it up.

The Central Bank has a big meeting with them and tells them not to worry and prints off some extra pigs.

Everyone goes on as normal and nobody notices.

Also because the Pig has become such a huge global currency, everyone just accepts it at face value.

Where as smaller currencies like the Goat (used by the weird Island that won't agree with anything that used to be run by Mrs Thatcher) keeps fluctuating in value every time they try and pull the same stunt! They have to keep buying stuff valued in Pigs or in Cows (the currency adopted by the North American cow farmers) and it means converting their currency at whatever value it's perceived to be.

Meanwhile, the Chinese are fed up with the whole thing and want to invent the new global currency unit

It's not even the central bank who creates the money, but the actual banks themselves - new money is created, whenever a loan is given out.

No fractional reserves, just plain money creation; and this point of view is backed by the Bank of England now as well.


Creating money doesn't even have to devalue it either: That depends upon more complicated factors, such as the trade balance of a country (or in the case of the Euro, a currency region) - if exports increase, then the demand for that countries currency from the rest of the world increases, which appreciates the currency.

So how it all actually works is very different to the common myths you hear about money/banking - and dispelling those myths is at the very core of what needs to be done, to reform economics and resolve the economic crisis.

Well, yes the commercial banks do create money when they write loans almost like a magnification / multiplication effect in the economy.

However, in the current situation, the crisis hit banks are hugely dependent on central bank lending in a way that isn't really very normal.

The central banks (particularly the Fed and Bank of England) are also most definitely engaged in huge levels of quantative easing at present and there are all sorts of rather complicated lending practices going on.

The big risk to Europe tough is that Germany seems to see central banking as if it were managing a household budget and is likely to keep trying to prevent these kinds of manoeuvres.

The ECB is also hamstrung by the treaties it was setup under too in terms of what it can do. The Fed has a lot more flexibility.

The "PIGS" term is pretty useless.
I think the countries at most risk right now are Spain, Italy and then probably France (which isn't really very health).

Ireland and Portgual are probably in proper recovery and Greece is just beyond help without some kind of really serious intervention in terms of direct funding from the EU.

If Spain and Italy hit a major bump in the next few months, I'm not really sure what they're going to be able to do. I could see Spain exiting the Euro and seeing huge inflation as a better option than what they have at the moment.