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Parsing Spain's "Hot or Not" IMF Review (Hint: "Not")
As with the patrons of any prostitute, sovereigns desirous of those unnatural caresses ministered by the International Monetary Authority must, in exchange, subject themselves to a number of indignities prior to any sort of carnal gratification, much less la petite mort (of their credit rating). And so it came to pass that Spain condescended to submit its fiscal vessel to violation by an IMF mission.
After one of the shorter encounters yet witnessed between consenting adults, yesterday the IMF issued its "Concluding Statement of the Mission," a sort of "John review," except that instead of going in a little black book to be published in a tell-all in the event of legal trouble or financial difficulty, it's posted right on the IMF's webpage. The abstract reads thusly:
Spain’s economy needs far-reaching and comprehensive reforms. The challenges are severe: a dysfunctional labor market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness, anemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness. Ambitious fiscal consolidation is underway, recently reinforced and front-loaded. This needs to be complemented with growth-enhancing structural reforms, building on the progress made on product markets and the housing sector, especially overhauling the labor market. A bold pension reform, along the lines proposed by the government, should be quickly adopted. Consolidation and reform of the banking system needs to be accelerated. Such a comprehensive strategy would be helped by broad political and social support, and time is of the essence.
For a little perspective, let us compare this assessment with the IMF Mission Concluding Statement for Moldova, which has only been free of the Soviet Union since 1991 (and will only remain so until 2014): (GDP per capita: $1514 to Spain's $31,946):
Over 2006-08, Moldova saw strong growth accompanied by rising macroeconomic vulnerabilities, and hesitant progress in its transition to a market economy. Buoyant domestic demand, financed by booming remittances, credit, and FDI, resulted in an average growth of over 5 percent but also widened the current account deficit and generated inflation pressures. The real effective exchange rate (REER) appreciated substantially and, together with exogenous shocks, dampened export growth. Despite some progress in structural reforms, the economy remained overregulated and hampered by relative price distortions. High barriers to entry and low competition in telecommunications, trade, and food processing kept domestic prices significantly above international prices of many consumer products. In contrast, utility tariffs generally remained well below cost-recovery levels, leading to substantial arrears and underinvestment.
As with most financial disclosures by agencies or quasi-government entities, the age of Farcism requires a bit of reading between the lines to tease out the truth. It never pays, of course, to wound the pride of a prostrate sovereign pleading desperately for cash infusions to avoid a decades-long spending-spree induced collapse. Our translation services might help clear things up for those not fluent in la lingua bullshit. Consider:
Slowing population growth, high unemployment, and weak investment all weigh on potential growth, underlining the importance of growth-enhancing structural reforms.
Read: Spain better tax the stuffing out of the young now, or the entire Paella is going to end up on the dusty tile floor. Also, let's find the genius who passed all those laws making it almost impossible to fire new employees, and tie his genius arms behind his genius back and put him in a bullfight or two. Your unemployment rate for the 16-24 bracket is the highest on the continent at 43%. Sure, some of that is because your youth wishes to be kept in the style to which it has become accustomed. But a larger part of it is because once hired, its impossible to fire the little brats. Look, buster, if you want to tax them to death you are going to have to hire them, no matter how loud the unions complain. That means dumping lifetime job security.
The wage bargaining system, which hamstrings wage and firms’ flexibility, is ill-suited to membership of a currency union. The government has provided some broad guidelines for reforming the labor market to be negotiated by the social partners. An agreement is expected by the end of May.
Read: Speaking of unions.... Oh, and we meant the end of May of 2013. If you want it any sooner you are going to have to send a few union leaders out for the dirt nap.
A radical overhaul of the labor market is urgent. The reform will need to be ambitious and comprehensive if it is to significantly change labor market dynamics and to avoid missing an historic opportunity.
Read: Your labor market rules make Detroit look like Milton Friedman's wet dream. You are going to have to fire about half the government workers, including yourself.
Ideally the social partners will quickly deliver such an overhaul, but if not, the government will need to follow through on its commitment to take action itself, including on collective bargaining.
Read: Of course, by "social partners" we mean "parasitic unions." Oh, and when we say "follow through on its commitment to take action itself" we mean retaining the Pinkertons and cracking some heads. No, we don't think fascism has a bad name in Spain, actually.
Risks to achieving the targets come from both the implementation of the measures and the underlying projections of a fairly rapid recovery.
Read: If Spanish reforms are implemented by the Spanish, Spain is fucked.
Read^2: Unless the RFP is published exclusively in German, Spain is fucked.
Spain faces strong spending pressures over the longer term due to aging and slower population growth. The government has outlined possible reforms, including raising the retirement age to 67. These measures, together with others (in particular, an automatic link to life expectancy) would strengthen the sustainability of the system and bring Spain closer in line with European peers that have already reformed their pension systems. As such reforms would boost fiscal sustainability without undermining growth, they should be quickly adopted.
Read: Cutting subsidized health care for the elderly (i.e. over 35) and increasing mortality rates in this bracket (see e.g., Britain) is a critical step.
Further strains may arise from the unwinding of the exceptional liquidity measures by the ECB, the ending of the funding guarantee scheme, and from the intense competition for deposits.
Read: Once the ECB returns collateral requirements to levels above the Zimbabwe threshold, your banks are screwed. Plan accordingly.
To this end and to enhance investor confidence, a comprehensive and transparent bank-by-bank “diagnostic” based on conservative assumptions on asset valuation and prospects could usefully be carried out.
Read: Bullshit stress tests seem to buck up the men.
Under the current framework, cross-region mergers still need to be approved by regional governments, the sector remains closed to external investors, and savings banks’ capacity to raise external capital remains limited, putting public funds are [sic] at risk. The legislative and policy priority should be to: (1) reduce political influence in savings banks; (2) enhance their ability to raise external capital, and (3) offer an opportunity to transform into stock-holding companies, and, indeed, requiring this for systemically important savings banks. This reform should be implemented promptly so savings banks can have the full range of options to raise capital as soon as possible.
Read: You suck at running banks. Stop it. Seriously. We're worried about you. Plus, we hate vacationing in France. It's filled with the French. (See French "Hot or Not" entry).
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Marla, you're a brilliant writer and a great thinker. I salute you.
+1!
And she fights better than anyone, maybe even Tyler.
If you ever watched the second FC disc, the greatest possible other scene line was "I want to have your abortion." That was given in place for the censors of "I haven't been fucked like that since gradeschool" (or kindergarden, I can't remember).
The gradeschool stayed, the abortion alternative was not opted for.
BTW, FC was the very first DVD I purchased. IMHO, that makes me special here. :)
I know, BFD..late night rambling. Go to bed and STFU Howard...ok.
"With insomnia you're never really awake; you're never really asleep""
I know it. Lately I haven't been as bad, but typically I'm an insomniac zombie. It'll come back again. It always does.
Another 5 Star Article
You do have a way w/ words, Marla... "...unnatural caresses ministered..." produced in my mind's eye an image of that American Minister, Janet Napolitano, ogling me with an alarming gleam in her own eyes
"Once the ECB returns collateral requirements to levels above the Zimbabwe threshold, your banks are screwed. Plan accordingly."
When will hell freeze over? Only a few weeks from the withdrawal of 'special liquidity measures' & it's a complete mess.
No, the impending depreciation of bank assets will be prevented at all costs. When central banks start monetising empty matchboxes, that's when the SHTF.
If you fold a government bond the right way, you've got your matchbox.
There are plenty of empty matchboxes, meaning McMansions, and more particularly, their ugly cousins the vancant develped lot, in my neck of the woods (NW boomtown), and all of the investment in these is now held by some bank or other. I'm pretty sure our banks are screwed, too.
Who's planning accordingly?
P.S. Marla, you are a treasure
Marla, you could call this "a Spanish chapter in the thesis of why Brussels must die".
If your taking that approach, I cant wait for your chapter on the escape clause and Deutcheslands next moves.
If I read between the lines of your comments, you appear to be calling for the liberation of the soveriegn state from the "What Ever the Fuck" you call the Euro project, so what is next?
There are great simularitys with the needed break up of Europe as we know it, and the 10th amendment movement/ Tea Party in the US. What if Euro or US States regained the right to issue soveriegn script?
What if Euro or US States regained the right to issue soveriegn script?
Would be better if the separate states established their own banks first and rode the training wheels off as they gain in confidence with actually shouldering responsibility. The old crawl, walk, run...
North Dakota already does, the model works... I am surprised Cali has not tried to slap a 10 to 1 leverage on its own cash flow by now.
Or Jersey folding in its retirement action... Money making opportunities abound that by definition would require greater assumption of responsibility.
Miles,
Stay on topic, we are talking Soveriegns that can offer script people would have to accept, if they lived there. In Cali's case the 5/6/7/8 largest economy in the world. So, should they offer paper inside of their own borders, by way of becoming a bank and being able to juice their own economys with the leverage waiting to be tapped?
Why not accept commodities in partial payment of tax or micro lending? Forwards and all the rest? There is so much that could be done to support the micro aspects of the economy and would work much better than the false philanthropy and lawful plunder currently in play. North Dakota is a great example, especially for North Dakota. However, there is so much more that could be done to help transition away from the insane asylum that is today's SOP and actually help restore markets to markets. The separate states actually stepping up and shouldering the responsibilities would go a long way to this end.
Let it be known that from this day forward "Bank Failure Friday" will be deemed "fricaso banco viernes" until further notice. That is all.
The contortions of someone thinking about their own shopping list while demonstrating that 3-D can indeed be 2-D. Naturally unnatural as another round of pimps & prostitutes gets consumed.
So deep I fell in the well.
Cool that you find the water so agreeable .. steps are off to the left & right.
I like your read better than the IMF's. It's very on point.
Much of this will be very hard to stomach...it will happen but not willingly.
Oh man... good stuff!
The pain in Spain will fall mainly on the plain [folks].
Ben Bernanke's balls bain Bobs bills [dollars]
All B's biotch.
+1
http://www.google.com/hostednews/ap/slideshow/ALeqM5iD99NAXH58EZl8QwQYEF3guQNYJgD9FT9JP00?index=2
they are going to need one hell of a charismatic leader to get all that done. too many conflicting interests to allow anything to get done. time to unify, then purge the party.
"Such a comprehensive strategy would be helped by broad political and social support, and time is of the essence."
LOL!
Marla,
Thank you for this wicked commentary. I finished reading it just as the clock struck midnight - the signal for the IMF mission personnel to turn back into mice and scurry out of Spain.
Now I have to find some suckers without access to your analysis to take the losing side of $ 10 billion USD in CDS on Spain's sovereign default.
I look forward to watching my old spanish stomping grounds have a very bad day.
A proposition for the inquisition. Spain condomscended to submit its fiscal vessel. Good stuff Marla
They need to just default and stop thinking so hard.
I would be pleased with Europe if it could just remain a sort of tourist trap. No one has to work, really. It's only under the "third solution" of pseudo-capitalism with pseudo-socialism that people are required to work, really.
Yes, Amsterdam perfected this years ago. All you need to do to get rich is be a little less biggoted than your neighbors.
Hold onto your 4 horses.. Spain.. is going to be subject to conditions for an IMF loan?? Austerity measures that would rewrite its mode of production. --Who is seriously thinking of letting the Bankers having any more control of absolutely anything? We have the major investment banks insolvent, acting like debt-sharks to Public finances at any and all levels- this isn't conjecture,the facts are more than 600 governmental entities in Europe alone; and who, really who, is suggesting that they get to re-write Spanish law?
Contrast that to the vaunted, balance sheet neutral currency swap: Central banks exchange currencies among themselves. Huh, that's handy. So.. idle question.. if there's a global situation, y'know, where most countries have debts -that all of a sudden require loans which will be difficult to pay back, why not make currency swaps and use them to pay back the sovereign debts at, I dunno, 100c on the dollar sound right?
Then the banks are really flush, so interest rates will remain near zero (in theory), civil unrest goes away (good?) and it won't cost a sou to the tax-payer. ...and expectations are strong that Central Banks will do whatever it takes -to maintain the system
Good one.
Marla - what happens to Moldova in 2014?
Putin.
Better than Romania+fucking EU!
Ah Marla Singer. You probably don't know me... I read one of your posts a few months ago and in it you suggested we have a food shortage problem and you received this information from a government meeting with key government officials.
You even suggested DBA. Well Marla, I was scared because I love food but I wanted money because I'm a greedy little bastard so I bought some. Needless to say, it has not performed very well. I'm not mad, sounded like a nice little inside tip so I went with it, took some risk and paid the price.
However, I'm still holding this position. Do you happen to have any additional information or follow up leads to your previous post (sorry, I can't remember the date, I'd say 3 months ago).
Dude,
This is not an investment service, or a debating society, this is a fight club. You pick your moments, you take responsibility for your own actions.
Marla was not giving you advice, she was answering a question of yours, most likely. I have no idea on the post, but there is no advice here. Only acknowledgement of reality. You choose to hit the enter button, its not her gig, its not her advice to you... Its YOUR Actions...
DUDE,
I understand that and it is few and far between an piece of advestment advice is given and that is why I enjoy the site.
I never asked Marla a question about food shortages or investment ETS's. Her article was focused on the potential upcoming food shortage and the governments concern and focus on keeping it quiet.
Now I'm going to find the article just to make you look like a fool. G'dammit. You piss me off. I shouldn't have to do this. Maybe you should keep up with your reading and not create your own false illusion of the event that transpired. Asshole.
Stand and Deliver...
Or shut the fuck up for a bad investment...
I'll stand and deliver my balls in your mouth you delusional bastard.
Don't try to outsmart me here. And a bad investment these days does happen, and if you read my question I simply asked if she had any new developments. Nothing more. I wasn't trying to get a technical perspective or anything else. Jesus man, get that stick out of your ass.
Weelp,
You just made me laugh hard enough to cause the damned dogs to hock some luggies and lick their butts... but I degress...
I'm not trying to outsmart a midget here, trust me... and ya, no flocken problem asking her a question, but you made it all whiny sounding like, your underwater and your unders is sticking to the wrong parts, so your wringing your hands like... well... dont take this wrong, but a weelp.
So, man up and say, Hey Marla, where the fuck is the starvation call? She will prob send you towards some stat that shows the US has ended its huge storage era and there is shit in the silo these days...
Have fun, and no it wasnt personal, but if ya want to make our fight, a regular dance, I think we could be STARS... lol
Whoa, this is not a debating society.... I wasn't debating. Oh man, I bet your one of those realy crazy conspiracy theorists. You take everything too far to quickly. Clam the fuck down and shut the fuck up.
I have no idea what article you are talking about. It doesn't even sound vaguely familiar. And... be nice in comments.
I'm sorry Marla. Um, yeah it wasn't even you. I did a search and found the post and it was actually from a guest post. I'm an idiot. Won't happen again.
I mean no disrespect and please respect mah authoritah!
Insider trading usually backfires, dude.
I don't think that classifies as insider trading. Not even close. You're reaching Apostate.
Weelp,
I have to agree with you here, I have no fucking idea what Apostate is reaching for here, with these comments... In fact I was shaking my head at the reply, before you replied.
Apostate has been on my ass for a few weeks now. He's really pissed about something. I dunno what it could be. I think he might be hippy though. I've never actually received anything other than a smart ass one word sentence. My guess, he's an artist.
Go long, I'll fake it to you.
I need to take a shower...
Hmm. I found secret footage of the meeting between the IMF and Spain.
http://www.youtube.com/watch?v=HuTV1jo6ouY
very funny. i don't have time for this crap though. i'm scouting cheap digs where olive trees grow and rents are low.
http://www.spiegel.de/fotostrecke/fotostrecke-55186.html
Shit! My Bad. I'm sorry Marla Singer! I was wrong. I have no idea why I pinned this one on you. Maybe it was the writing style, no offense but it had a girly tone.
My Lunch With the CIA Submitted by madhedgefundtrader on 01/06/2010 01:07 -0400 This is my guy!
I'm done with my stupid posts. Sorry for deviating from your story Marla. I'll go find something else to read.
Well that Sucks... come back here little man and fight.. I say Fight...
Ay! I'm not afraid of you.
You followed madhedgefundtrader?
Egads, man, the guy is a great read for giggles but never try to follow the guy ... he's mad.
The whole above thread reminds me of the old adage: "Never let the definition of an investment be a failed trade."
Be careful out there risk is off the charts! (If you catch my drift.)
Full disclosure: Nearly completely out of the equity markets (piddly little short in financials and some paper gold that I use for covered short calls but I won't do it again for a bit).
Yeah, needless to say I believed every word of his post and bought the ETF he mentioned at the end of his piece. I'm still taking it in the ass on this stupid trade. But what can I say. I deserve every penny I continue to lose on this trade.
See the news? Bernanke's in China, Netanyahu is in Canada- N.Korea has just shut off relations with S.K- and threatened to target loudspeakers spouting propaganda -good idea- looks like everything is finally cooling off at last.
This report indicates that the members of the "IMF staff" who produced it are capable of rational and clear-eyed assesment. Can the US hire them for a review? What a great piece of anti-incumbent political advertising that would be!
Spain = Greece 2.0, once it get's going.
The new Land of Liberty.......ICELAND !!!!!
The only nation on earth to tell the IMF to go to HELL where it belongs(reigns?).
3 Cheers for the New Americans (albeit rather frost covered).
I'll second that
Best opening paragraph EVER.
*lolz*
"Our translation services might help clear things up for those not fluent in la lingua bullshit."
Classic
Someone has to tell truth to power, and no one does it better. Many thanks, Marla. Can't comment on Spain, but add 16 layers of corruption, and this is a great summary of the Latin economies I know well.
Marla: you rock so hard that I can't find words for it. Marla for president!
Marla - you got your initial metaphors mixed up.