Guest Post: While Greece Burns, Spain Test Drives A Post-Euro Future

Tyler Durden's picture

From Simon Black of Sovereign Man

While Greece burns, Spain test drives a post-euro future

I’ve stopped briefly for a quick lunch en route to Andorra, which is a
scenic three hour drive due north from Barcelona. The spot that I
picked to stop and write to you is absolutely stunning.

DSCN1332 300x225 While Greece burns, Spain test drives a post euro future

When I first started traveling years ago, I fell in love with
Barcelona and the Catalan region of Spain. Part of it is the beauty, and
part of it is the area’s staunch independence.

In a way, Catalonia is much like Quebec in relation to Canada– these
people have their own language, their own culture, and they don’t take
kindly to those bureaucrats in Madrid telling them what to do.

I tend to pass a fair amount of time in Spain and usually find myself
here for odds and ends business matters. The last time was almost
precisely a year ago when Matt and I were attending the most
fantastically bizarre function at a remote, mountainous monastery in

The rest of the group consisted of Russian gangsters, sycophantic
European businessmen, jet set playboy types, African royalty, and senior
leaders of splinter Christian and Muslim sects.

Supposedly it had something to do with diplomatic positions for a
government in exile, though to this day I have no idea how the costumes,
chanting, and rituals fit in. Think ‘Eyes Wide Shut’ without the sex.

Anyhow, since I arrived to Spain a few days ago from London, I’ve
been sniffing around to get a sense of how Spain’s crisis is unfolding.
We see the news clips and YouTube videos of protests, of governments
collapsing, of soaring unemployment, but I wanted to see for myself how
feels on the ground, and how things have changed over the last year.

The most startling change that I’ve noticed, without doubt, is the
inflation.  Literally everything I’ve looked at– food prices at the
local market, restaurant tabs, local electronics, highway tolls, raw
material construction costs, mobile phone tariffs, taxi fare, etc. are
much more expensive, to the tune of 10% to 25%.

So much for the theory that an economic slowdown would decrease prices.

John Maynard Keynes, who is consistently held up as the father of
modern macroeconomics, suggested in his General Theory that keeping
interest rates low and government spending high in order to sustain a
boom (or get an economy moving again) would likely NOT result in

This has been the underpinning economic theory behind worldwide
government efforts since the Lehman collapse… it’s the old “spend your
way out of recession” play. Politicians and central bankers alike seem
to believe, as Keynes did, that inflation is a low risk consequence.

Spain is one of many examples that proves this theory to be utter
nonsense.  Everyone on the ground knows that inflation is high; local
newspapers are even running stories about how to best deal with
inflation and preserve your savings.

As an aside, I should mention that I read one such article in a
popular newspaper called Money Market in which the reporter interviewed
several top fund managers and asked each of them how individuals should
preserve their savings.

Most of them responded with the same dangerous herd mentality– buy
stocks. How many recommended gold or silver? Zero. This is a bullish
sign for precious metals.

Among other things I have noticed is the decline in service. Part of
the reason Spain’s unemployment rate is so high is because it is so
costly and bureaucratic to keep employees. Payroll taxes are quite high,
so businesses have laid off their workers en masse.

You notice it instantly when you try to buy something at a retail
shop or restaurant; there may be one person working for dozens of
customers, and it takes forever to get anything done.

The other thing that has me quite concerned about Spain is the police
presence. I don’t think I ever went 5 blocks in Barcelona without
seeing a cop on the street. What’s more, they don’t just stand there
waiting for something to happen, they’re actively going around harassing

My assessment is that the government is intentionally having the
police turn up the heat on their intimidation tactics in hopes of
squashing any future rebellion before it happens. They want to instill a
sense of fear in the society to keep everyone quiet.

On that note, the most interesting part of this trip so far has been
passing through small towns outside of Barcelona that are starting to
circulate pesetas again– Spain’s pre-euro currency.

Apparently quite a few people have woken up to the euro’s fundamental
weakness and begun circulating an alternative within their local,
internal economies. The post-euro future is already here in Spain, it’s
only a matter of time before the rest of the continent catches up.

Overall, the situation in Spain is not as dire as in Greece, which is
literally burning at the moment. But Spain is running out of cash
quickly, and its Keynesian bubble deflating rapidly. There will be a
time, probably this year, when the country will need to secure emergency
funding just to keep the lights on, and that’s when things will really
start to fall apart.

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Cassandra Syndrome's picture

I sense a Flash Crash, its a bit like that electric feeling before a thunderstorm

Cassandra Syndrome's picture

What's up with Visa and Mastercard shares?

SeverinSlade's picture

Fed announced new debit transaction fees are going to be more favorable for banks and credit card companies.  Cap was originally to be 12 cents.  Now is going to average around 24 cents.

eureka's picture

And therein is indicated the rub - when government favors banks over consumers - and when government gives the money "its" Fed bank "prints" to banks, rather than to infrastructure, R&D, education and Capital Goods - THEN, those BANKS create inflation by giving all the nice "government" money to its wealthy/rich/non-productive clients for their "investment", i.e. gambling and leverage purposes.


"keeping interest rates low and government spending high in order to sustain a boom (or get an economy moving again) would likely NOT result in inflation..." THAT IS, UNLESS SAID GOVERNMENT "SPENDING" TAKES THE FORM OF FREE MONEY TO BANKS TO GAMBLE WITH AND "PURCHASING" GARBAGE CARD-HOUSE "ASSETS" FROM SAID BANKS.

Anyone want to do mankind a favor?  Blow up a bank, or better yet, two - or just don't put your money into them.

Quantum Nucleonics's picture

The Fed was only favoring banks over consumers if you believe that retailers will pass along the swipe fee savings to those consumers.  If you believe that, call me, I may have a bridge available for purchase.

Franken_Stein's picture


This clearly proves that Keynes is/was not German.

He wouldn't have written this nonsense if  he had lived through the Weimar inflation years 1918-1923.

Whenever one injects CB money into the economy and keeps interest rates low, one will only then have no inflation, if GDP grows at the same pace and with the same sign as as monetary base.


As soon as GDP growth gets less positive or even negative and monetary base isn't immediately adjusted accordingly, i.e. shrunk, then you automatically get an inflationary overshoot.


The problem is that inflationary effects have a built-in time lag of about 6 months, so a cooling of the economy must be anticipated in the future by a prudent CB head and already in advance must the monetary base be reduced so that it's full effect falls together with the actual GDP slump in the future.


WestVillageIdiot's picture

At some point even the world's greatest juggler would have too many balls in the air.  It's only a matter of time when the Masters lose their balls. 

Going Loco's picture

I would pay good money to watch the Central Bankers lose their balls. Emasculation is always entertaining when it is happening to someone else.

mr_T's picture

I moved to Madrid from LA a few months ago .. Things here are not cheap especially when you convert your single ply non quilted USD's to euros... I voted for none of the above.. no usd nor euros ... I feel a lot more comfy with my gold chains .. things are not great here but the situation in LA AIN'T any better... U still see the resteraunts full people and families out enjoying themselves... U learn to live with less shit...

TruthInSunshine's picture

Paul Krugman, The Bernank & William 'let them eat iPad2' Dudley all told me that what you're saying is not reality, even if you are experiencing it.

So there.

Miles Kendig's picture

I thought they already had [melted down like Fukushima that is].  Hence the reason Viagra is so en Vogue, and why Jamie "Blue" Dimon is running a major institution.

ZackLo's picture

That's why mises was a better economist he DID live through weimar and he knows how far the govabankocracy can push it...

AnAnonymous's picture

This clearly proves that Keynes is/was not German.


Keynes was probably a German. Most of the English are germans as the result of the apartheid enforced on celtic populations following the invasion by Saxons.

Keynes was thus extremelly friendly to the Germans in his own times, forcing the removal of the debt on Germans so that they could re arm and unleash WW2  backed by US funding( US citizens are mostly Germans themselves, at least in the leading positions)

Ghordius's picture

Keynes was talking sense at that time - what we are doing is not what he would at our times

Franken_Stein, as far as I know/read/see the time lag is more around two years

As soon as you have CB interest rates below 3-4% you are either in heaven or in a future hell.

Police presence in southern Europe has a different (cultural) flavor. Southern Europeans are often quite appalled when traveling in the North about what they call "no police presence whatsoever, isntitdangerous". They like their uniforms on the street. And protests look different, by having less weapons a protester in Europe can do things that would get him shot immediately in more trigger-happy countries...

css1971's picture

Germany also experiencing inflation. Rail, fuel, lebensmittel etc all up. 2% inflation my arse... I don't partake of iPad.. religious reasons.

carbonmutant's picture

Al Jazeera has been covering Spain all morning

with 21% unemployment reported money to buy food is becoming an issue...

slewie the pi-rat's picture

they still have the arnie gunderson interview from 6.16:  Fukushima: It's much worse than you think - Features - Al Jazeera English

along with dr. sawada, who was 13 y.o. and lived 1.4 kilometers from ground zero in hiroshima...  Gundersen's assessment of solving this crisis is grim.

"Units one through three have nuclear waste on the floor, the melted core, that has plutonium in it, and that has to be removed from the environment for hundreds of thousands of years," he said. "Somehow, robotically, they will have to go in there and manage to put it in a container and store it for infinity, and that technology doesn't exist. Nobody knows how to pick up the molten core from the floor, there is no solution available now for picking that up from the floor."

Dr Sawada says that the creation of nuclear fission generates radioactive materials for which there is simply no knowledge informing us how to dispose of the radioactive waste safely.

"Until we know how to safely dispose of the radioactive materials generated by nuclear plants, we should postpone these activities so as not to cause further harm to future generations," he explained. "To do otherwise is simply an immoral act, and that is my belief, both as a scientist and as a survivor of the Hiroshima atomic bombing."

carbonmutant's picture

Too bad Fiat's Fire took the day off...

Bansters-in-my- feces's picture

Keynes.was a FuckTard.....

Pain and simple.

Just like the FuckTard psycopaths running the USA govt...

WestVillageIdiot's picture

A useful idiot is still useful.  TPTB don't reward truth.  They reward people that say what backs their agenda.  Or have you never seen Carl Quintanilla, Bob Pissonme and Steve Tell Me Lies-Man and the rest of the CNBC clown brigade?

hugovanderbubble's picture

Spain is in default = SIID

falak pema's picture

spain is fine, the IMF said so some months know the guy who is now holed up in NY, he said "the Spanish banks are solid and will never cave in"...but then he caved in didn't maybe, we should wait n see what the new IMF boss will have to say on the rain in Spain.

WestVillageIdiot's picture

So many Irish were buying up Spanish real estate.  I wonder how that is going.

Going Loco's picture

In the UK a number of towns started circulating their own currency a while back, nothing to do with the current crisis, more to do with climate/peak oil and trying to keep money circulating locally instead of being sucked away elsewhere.


Is there anyone on this board who has direct knowledge of the situation in Spain? Is Black exagerating?


WestVillageIdiot's picture

I was surprised by how unimpressed I was with the food.  That is always a bad sign to me.

The funniest moment for us came at the concert we were attending.  While we were waiting I bought a beer.  It was about $5.  My wife got a Coke Lite.  That was $10. 

I saw a lot fewer closed stores there than I do here.

css1971's picture

Worth reading up on Wörgl.

Ag1761's picture

I've been working in Spain for several years now, commute from UK. There is some discontent with fuel costs, food prices et al, but I see it as no different than what's going down across the rest of the Euro Zone, even the UK.

There is definately a play on by central banks / govs IMHO to direct the sheep away from inflation. EVERYONE is talking about rising prices no matter where you go, UK, France, Spain in my recent experience.

What is total shite about this article is the reference to a police state and the police actively seeking to hasstle you.
Total fucking shite, the Spanish cops have always been like this and they know how far to push it. They also know that if they push it with the locals too much, then boom, little bits of police flying everywhere.

Now, what is worrying is that one in two young'uns are unemployed in Spain and this is a growing trend across Europe and getting worse.
It's a combination of failing and contracting businesses such as retail sector who hire a lot of young kids, frankly this is not happening any more and also, a lot of the youth have been born and brought up in the boom years, they want life on a fucking plate and are not prepared to earn it.
A lot don't know how hard it can get, aka UK early 80's.

Spain is still cool, the biggest issue I see just now is the debt in the US - Imminent death of the Dollar. Makes Europe look like a kids piggy bank.

Focus required.

Keep on Stackin

Dabale arroz a la zorra el abad's picture

I'm Catalan and I have never seen pesetas circulating, and have never before heard of such thing. Which doesn't mean it doesn't happen.

As for the police, well, since we began our protests on May 15th there has been quite a lot of police brutality as response. But outside this protests, I haven't noticed anything strange. Some more police on the streets, yes, but not harassing people.

Well, yesterday I saw something which made me really angry: as I learned later, princess Letizia came to Barcelona to give a 70,000 € prize to an organisation for its investigations in the field of oncology. That may be fine, but there was a massive presence of policmen circling the venue (MACBA museum), the square in front of it and in lots of nearby streets, including one helicopter. I'm pretty sure the cost of such police deployment is many times higher than the amount of the prize. Pretty nonsensical, therefore. Anyway, seeing that amount of policemen around gave the message to everyone around "there is someone important there that deserves a lot of protection from you dangerous and inferior people". Well, that is what seemed to me: we are seen as a sort of angry rats, therefore "important people" have to be protected. How can they be surprised that we want to stop the parliament, as the Greeks do? But of course, I forgot, they are the elites, a higher and better class. Pitty us.

WestVillageIdiot's picture

In March my wife went to Ireland.  She said the moment she got into her first cab the cabbie started complaining about the Irish economy.  From then on it was obvious that eveybody was upset.

A week later we went to Spain.  I don't know Catalan but I didn't see one bit of discontent with the economy.  I got no sense that anything was wrong.  We went to a concert at Palau Saint Jordi.  It was packed.  People were buying 35 Euro t-shirts (not me).It didn't seem ready to crash. 

falak pema's picture

they had a sound economy apart from and thanks to the real estate...thank you the banks... and now they have mass unemployment as RE was the main economic driver. How can you live off a one nut economy? When you lose it your are impotent and orphan.

kaiten's picture

perhaps third(or even half) of "unemployed" actually work - in black economy, southern Europe has huge black economy, so I wouldnt take the official unemployment numbers very seriously

jonytk's picture

well i can testify that many people under unemployment benefits work in part time jobs, mainly family jobs and repairs.

Of course there's inflation but at under 3% is better than in the boom times.

Also i can testify that you can live with just 400Eurs, i myself choose to not cash in benefits and expend half of this money in a room and with the other half  i buy food at the discount supermarket. life is good althought lonely and i can only go out on the weekends. Currently attending some course.

Thank god i finally will be able to go work abroad soon.

Any room for lend in Madrid??

Idiomasen>es GoogleDicCE emprestar, prestar, dejar, quitar, añadir, dar, prestarse, darse, añadirse
kito's picture

soveriegn man is paranoid. probably explains why he travels so much. we have relatives who actually live in spain, not just their for walking tours. nothing of which soveriegn man speaks of jives with their take on the country.

hambone's picture

Kito, you are a Tool -

4 things mentioned in the article...

  1. inflation
  2. high unemployment
  3. increased police presence
  4. reversion to Peseta's in a few villages)

And you retort "nothing of which soveriegn man speaks of jives with their take on the country".  Amazing your stupidity to craft such meticulous bullshit.

You sir, are a waste of digital space.

kito's picture

thank you for honoring me with a capital "T". have you been to spain recently, or have you had any conversations with anybody other than traveling salesmen?


hambone's picture

I lived in San Sebastian for 2 years and travel there yearly.  Doesn't mean I know more or less but your comments that nothing in the article was correct...what bullshit.  This site is for the exchange of info and ideas...spouting utter bullshit with nothing to back it up is a waste of everyones time.

I didn't think the article offered a lot as it's pretty well known to most (excluding Kito and his family living underground in Spain) that Spain's UE is through the roof and doubly so for the younger generation.  Same for inflation...I'm in Germany every  other month and can attest to the inflation (and doubly so for dollar holders) although there is almost no UE in Germany and Germans generally are quite bullish on the recovery.  Don't know about police presence or local currency. 

At least have a constructive POV - ZH needs balance between doomers and perma-bulls but at least both should bring evidence for their POV.  Give it a shot.

kito's picture

you want constructive? lets start with an article that is constructive. we have family in barcelona and madrid. the comment by mr. black indicating some stepped up police presence that has begun harrassing people is blatently false. he spews this crap about nyc police as well, a city that i happen to work in.

the idea that somehow, as indicated by his vast shopping and dining experience, stellar spanish customer service has fallen off a cliff is also ridiculous. i have been to spain numerous times since the 1990s and have stayed as long as a month. while by no means does that make me an expert, its enough to know that the spanish have never had wonderful customer service, at least by american standards. waiting a lengthy period of time for a meal is a national pastime. his articles are devoid of any helpful information.

hambone's picture

Exactly - now that's good shit...agree, author has a slant and customer service never existed in Spain to begin with.  Not exactly an indicator of anything. 

Agreed the article was fluffy and didn't really offer insights beyond a Bloomberg or similiar puff piece.  Nice picture though and a nice diversion to the real structural issues that plague us.

Highrev's picture

A hobnob snob.


And people actually make investment/trading decisions based on this kind of “information”?


Highrev's picture

Anybody who goes to Barcelona to get a read on Spain doesn't have the slightest clue.


(I really should just leave it at saying that anybody who goes to Barcelona doesn't have the slightest clue.)

kito's picture

i junk myself for spelling "there" "their".

slewie the pi-rat's picture

hahaha!  simon b.  is at his best when he is up a tree, somewhere...

thx!  esp. for the first-hand report on the "active" law enforcement. 

Juice Box's picture

The pain in Spain stays mainly in the plain.

Duuude's picture

My assessment is that the government is intentionally having the police turn up the heat on their intimidation tactics in hopes of squashing any future rebellion before it happens. They want to instill a sense of fear in the society to keep everyone quiet...


This sounds familiar...

Something about travel...


Atch Logan's picture

I lived in an apartment I owned in Barcelona for many years, in Val Pineda, just out of Sitges, overlooking the Mediterranean. I remember when Franco died and overnight, Spain came alive with borrowed/financed money from GS and their ilk. Stupendous financial events occured; people with basic incomes become middle class overnight. 

But, it was all done on funny money, a ponzi scheme.  Now, 30 years later (and many more financial events since ) Spain is just like Greece.  You can say what you want, but if you look beneath the beautiful scenic surface and marvelous culture, Spain is a house of cards. The Spanish people, like the Greeks, are going to have to decide whether to exist under the fascist hands of the bankers, or whether to "suck it in" like the Argentians and the Icelanders.  Also, remember that Sweden disciplined its bankers a few years back.

When it comes to America, we will be faced with the same crisis. Americans will fold, roll over, because they think it is "patriotic."  We are a cowardly and pathetic people.

God bless Greece and Spain and Ireland and Portugal and give them the guts and balls to make make long term decisions to save their countries.

Silver Dreamer's picture

We are a cowardly and pathetic people?  Clearly, you do not know the same people, who love their country (i.e. liberty), that I know.

taraxias's picture

You just made his point, responding the way any "patriot" would. Wake the fuck up, out flag means nothing, the constitution means nothing, patriotism means nothing, IT'S ALL ABOUT THE BANKING CARTEL and Americans have bought into the myth.

i-dog's picture

"people, who love their country (i.e. liberty)"

You need to separate the two ... "country" and "liberty" ... and recognise the difference!

The Founding Fathers were not fighting for their country, they were fighting for their freedom ... from the blood-sucking British monarchy! Ninety years later, "Americans" were fighting each other over whether they should keep their individual, loosely confederated, communities as set out in the Constitution (the Confederates) or whether they should have a central planning authority headed by Lincoln (the Yankees)!!

The push for central planning and "loyalty to the flag" started in 1808 in Germany -- when Fichte published his 'Addresses to the German People', which began the movement to state brainwashing of the people to submit to "the State". Hegel picked up this philosophy and ran with it to glorify the State as the vehicle for the dissemination of statist and materialist ideas and policies in education, science, politics and economics. Both Marx (follower of the 'Left Hegelians') and Hitler (follower of the 'Right Hegelians') were keen disciples of Hegel ... the NWO is pure Hegelian!

The Hegelian dialectic and political philosophy was brought to America by the founders of the 'incorporated' version of the Yale 'Skull & Bones' secret society in the 1850's and was spread through their strategic infiltration of the critical faculties at the other 'Ivy League' universities (even becoming the founding heads of Cornell and Johns Hopkins). The American Civil War of the 1860's was a direct result of their actions and family connections ... and by 1890 they had complete control over the direction of American education (ie. brainwashing).

Put down 'the flag' and fight for freedom from Washington!

End the Feds!! (Federal Reserve &
End the European 'Experiment'!! (EU & EUR)
De-fund the IMF!!

Here endeth the lesson.

AnAnonymous's picture

Here endeth the lesson?


Americans" were fighting each other over whether they should keep their individual, loosely confederated, communities as set out in the Constitution (the Confederates)


Cheap propaganga...Really cheap. The Confederates did not fight for that, they fought for domination, like the Unionists.

Confederates not wanting to further their own central plan? Smoking plant, they wished for a tropical empire going down to Brazil.


” Cheering him on was Jefferson Davis, then a senator from Mississippi. “Cuba must be ours,” he said, to “increase the number of slaveholding constituencies.” Once the plan to buy Cuba failed, Mississippi’s other senator, Albert Gallatin Brown, started drooling over Mexico. “I want Tamaulipas, Potosi, and one or two other Mexican states; and I want them all for the same reason—for the planting and spreading of slavery.”


So long...

And the best, is that it is the same people who say they have been brainwashed by public education and have now started on saner basis.

Brainwashed... They are simply unhappy with the flavour of propaganda they have been served and want to to spread their own.

If you understand the gangs, you understand the US. Confederates against central planning, that is a good one...