Tuesday, Jan 29, 2008
ECB secretly rescues Spanish banking system Spanish corporate debt is now 112pc of GDP. The current account deficit is 10pc of GDP. These are both flashing red warning signs
gata: ECB aid to Spanish banks say it matches Rock rescue Traders say the Spanish authorities are quietly turning a blind
Spanish corporate debt is now 112pc of GDP. The current account deficit is 10pc of GDP. These are both flashing red warning signs
Posted by dangerous trading @ 07:46 AM (955 views) Add Comment
8 Comments
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1. waitingfor hpc said...
I hate to admit it but I still think that the Euro is a better bet than the pound. They have banking problems - yes, and housing problems in Spain & Ireland. BUT they have less credit card debt, better social structures, and an apparently very German / French control on fiscal policy. This along with the fact that Germany is still a power house economy & France is well France ... still leaves them overall in a better position. I would rather share the pain with all member states that be the UK with record debt, govt & private along with no manufacturing, and an over reliance on the city.
2. C'mon Correction said...
I totally agree waiting.
The europeans have been a lot more prudent than the Brit's over the last decade, yes they've got their problems and the euro structure is very far from perfect but they have much less debt than us and still actually make things. The UK goverment has over-taxed and over -spent, the public have £1.5 trillion worth of debt and we've got nothing to prevent a recession. We are much more between a rock and a hard place than the eurozone.
3. cornishman said...
The one rogue trader last week lost his bank more money than HALF of the TOTAL gold and currency reserves of France.
Just what is backing the Euro?
I tool all my cash out of Abbey last month since I don't know how secure the bank's Spanish owners are.
4. Icarus said...
..."the ECB rescue operation in Spain has been disguised". How much else has been disguised? Given all the ways the finance people have found to disguise losses (temporarily at least) one can only assume the worst (since there's no need to disguise good news). Only yesterday in the FT Wolgang Munchau was arguing that the Eurozone banking sector was "healthy and continues to supply the economy with ample funds (why the need for the huge 'liquidity injection' last month). He said there was no fall in house prices (what, nowhere in the eurozone?), no pandemic of overstretched borrowers....it is in a fiscally strong position (Spain's corporate debt is 112% of GDP, current account deficit is 10% of GDP, budget deficit?) etc. How many Spains are there in the e-zone outside Germany and France? A lot.
5. Yellerkat said...
Mr Corn, France had reserves of $112Bn as of September 2007.
http://en.wikipedia.org/wiki/List_of_countries_by_foreign_exchange_reserves
6. Icarus said...
cornishman - I was going to transfer all my ISA money to the Abbey several months ago for their good internet rate, but I decided to hang fire for the same reason.
7. cornishman said...
yellerkat - I was quoting http://www.dailyreckoning.com/Issues/2008/DR012808.html
"Last Sunday, it was discovered that a young man at an old bank had managed to get himself into $50 billion worth of positions - most of them losing positions. This was more than half of the value of all of France's gold and currency reserves. It was more than the entire value that had been built up by the bank over decades. How could it happen? What was wrong? How could banks be so fragile…and what could you think of the whole world's financial system when it was built with bricks that cracked up so readily?"
Maybe they have 'spent' some of their reserves between September 07 and now?
8. cornishman said...
yellerkat - I agree, there is something fishy with all these numbers... Maybe the losses were only about 7 billion dollars, but the 'positions' were equivalent in value to around half the French reserves.
Whatever - there is reason to be concerned!