More On the Spanish Straw That Will Break the Euro's Back

My prediction regarding the breakup of the EU was obviously way early.

However, the fact remains that the EU will break up in time. And it will likely be Spain that brings this about.

The reasons? Among other things:

1. Spain’s private Debt to GDP is above 300%.
2. A huge portion of Spain’s banking system (representing over 50% of mortgage loans AND deposits) was totally unregulated up until just a few years ago.
3. Spanish banks are drawing over €400 billion from the ECB on a monthly basis (up from €377 in June) to fund their liquidity needs.
4. Spanish banks are now net sellers of Spanish sovereign bonds (leaving the ECB as the only buyer in the market)
5. Spain’s banking system has lost 18% of its deposits in the last 10 months due to a staggering bank run.
6. The economy of Spain is a disaster with total unemployment over 25% and youth unemployment above 50%.
7. Spain is now facing a constitutional crisis with various regions looking to secede if they don’t receive bailouts from the Federal Government “without conditions.”
8. Spanish banks need to roll over (meaning renew terms on) more than 20% of their bonds this year.

So Spain will suffer a collapse, most likely of its banking system resulting in a sovereign default (barring a bailout). When this happens, some €1 trillion+ worth of collateral (still rated AAA by EU banks) will be sucked out of the system.

This in turn will spur margin and collateral calls on tens of trillions of Euros’ worth of derivative trades.

And the EU Financial System collapses.

This is reality, regardless of who wins the US election. It may take a few months before it hits… but it will hit.

On that note, if you’ve yet to prepare for Europe’s BIG collapse…we’ve recently published a report showing investors how to prepare for this. It’s called What Europe’s Collapse Means For You and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

This report is 100% FREE. You can pick up a copy today at:

http://gainspainscapital.com/eu-report/

Best Regards,

Graham Summers

We also offer a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a copy of this report at:

http://gainspainscapital.com/gpc-inflation/

Comments

[waterdude]

Clearly one of the leading Iberian specialists in Charlottesville, Virginia.  Pity about missing the 47% rally in Spanish financials since end July.

[GoldbugVariation]

Hey Graham I have a prediction for you.  Dow will hit 20,000.  I'm just not saying when.

[northerngirl]

How long have we been hearing that the EU Financial System will collapse? 

[Widowmaker]

Today Spain, tomorrow the root of crony-cancer itself -- the USA.

If supporting a bunch of fat cats robbing the Treasury is the only benefit to being a state, then why bother??

The youth in the USA don't care.

[Schmuck Raker]

"The youth in the USA don't [have a clue]."

Previous generations didn't/don't care.

[Never One Roach]

Banker bonuses are looking good for 2012. most likely will have another record high year in the midst of a deflationary depression.

What a business.

[disabledvet]

I still think France is ground zero. while the economy in Spain has been utterly obliterated by the 2008 collapse...they still have assets in Latin America, etc...These are very valuable and can be sold to raise capital...although right now only Berkshire Hathaway would appear to be a buyer in the USA. Obviously HSBC and Standard Chartered are the two most powerful banks in the world right now so invest accordingly. There are a lot of euro denominated assets that could be up for sale in the coming months or year...Germany still keeps screwing up Greece i might add...which is now starting to screw up Germany. I still don't see a reason to panic in the USA which has become a "Sea of Tranquility"...RELATIVELY SPEAKING.
http://www.youtube.com/watch?v=sTBIr65cL_E&feature=related

[honestann]

Yes, France as trigger is a very under-rated possibility.  But it still could be Spain, or possibly even Greece depending on how it plays out.  But the extreme insanity of France could indeed cause a total implosion.  When that happens, the headline will probably be "Goldman Sachs takes control of France", or something equally obscene.

[lasvegaspersona]

400 billion on a MONTHLY basis??? that just can't be correct!!

[Joe A]

That really is a lot. Or perhaps it is in Pesetas ;-)

But on a monthly basis, that is non sense. Probably it is total amount borrowed. Summers makes it sound like it is happening every month. And private debt to GDP ratio also includes mortgages??

Spain is in a shitload of problems and could very well be the straw that roke the camels back. But this Summers guy is just agitating so he can sell more 'advice'. He said that the Euro would collapse months ago.

[HardlyZero]

Net average ECB borrowing dropped to 378.2 billion euros ($487.1 billion) from 388.7 billion euros in August, the Bank of Spain said on its website today. Gross borrowing was 399.9 billion euros, down from 411.7 billion euros a month earlier.

The net ECB borrowing figure of 378.2 billion euros compares with 69.3 billion euros a year earlier, a sign of how reliant Spanish lenders have become on ECB funding.

Net is probably the overall loaned out to Spain from the ECB, so the total loaned goes up and down every month.

Basically all Spainish banks (in total) owe the ECB 378.2 billion euros.

http://www.bloomberg.com/news/2012-10-11/spanish-bank-ecb-borrowing-declines-as-funding-conditions-ease.html

[tankster]

And it's not.

graham summers: virtually the only blot on this great site. Must be someones daffy uncle they took pity on...

[spinone]

promises promises