This morning early news is abuzz that Spanish banks have been extended a 125 billion Euro liquidity line from the European taxpayers with no conditions whatsoever. Shades of the US TARP come to mind when Congress passed the first of many cash pumps to banks with the 700B Troubled Asset Relief Program free of any conditions, costs or consequences for the institutions and executives that had created the debacle. All culprits to date have walked off Scot-free, made whole by unsuspecting taxpayers.
The Spanish PM is refusing to acknowledge this latest infusion as a bail out. Whatever the politicians wish to call it, this is just the next installment of GMAB more ‘good money after bad” in a system that so far is still refusing to acknowledge that there is no way to pay back the money which has already been “lent”. Adding more debt zeros is the opposite of the solution needed. The bond market knows this as we see bond yields continuing to rise in Club Med countries this morning and falling in “safe haven” zones like US Treasuries. Now look for Greece, Ireland, Portugal, Italy et al. to expect more money and less conditions going forward.
Despite an agreement to bailout Spain’s banks, Europe still faces tough times ahead, including an election in Greece this weekend. Martin Wolf, Financial Times chief editorial commentator, discusses the future of the euro zone. Here is a direct link.
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I enjoy reading your blog but maybe it’s time for you and Cory to consider additional careers…..for example you would both be great high school teachers …..you could teach Home Economics, Health and Physical Fitness and Cory could teach Science Fiction.
Thank you both for sharing your opinions and links. I thought the bio-energy thingy is a very interesting read. One day, people is going to realize it is ok to just slow down a little and use a little less. JW, Langley BC
We have only to look back at how the 2008 financial meltdown in the U.S. progressed.
In March 2008, the initial $29 billion bailout of banks created a four-month stock market rally. But as the situation worsened, the $178 billion stimulus package for consumers in May was not accepted well by markets, which began selling off sharply. And from there on it was a steady stream of ever larger bailout packages that the markets looked on as band-aids that wouldn’t solve the overall problems. The $200 billion bailout of Fannie Mae in September, the additional $700 billion bailout of banks in October, the $787 billion ‘American people’ stimulus package in Feb., 2009, and so on, each one resulting in only further market meltdown as the problems increased and the piecemeal efforts failed.
Europe may be on the same course already if they don’t come up with something dramatic very soon.