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Is Spain Running Out Of Cash?

Tyler Durden's picture


Some hours ago Spain finally bit the bullet, and after months of waffling had no choice but to hand over €4.5 billion (the first of many such cash rescues) in the form of a bridge loan to insolvent Bankia, which last week reported staggering losses (translation: huge deposit outflows which have made the fudging of its balance sheet impossible). As a reminder, in June Spain formally announced it would request up to €100 billion in bailout cash for its insolvent banking system, which subsequently was determined would come from the bank rescue fund, the Frob, which in turn would be funded with ESM debt which subordinates regular Spanish bonds, promises to the contrary by all politicians (whose job is to lie when it becomes serious) notwithstanding. And while Rajoy has promised that the whole €100 billion will not be used, the truth is that considering the soaring level of nonperforming loans in Spain - the biggest drain of both bank capital and liquidity - it is guaranteed that the final funding need for Spain's banks will be far greater. As a further reminder, Deutsche Bank calculated that when (not if) the recap amount hits €120 billion, Spanish total debt/GDP would soar to 97% in 2014 from an official number of 68.5% in 2011 (luckily the endspiel will come far sooner than that). But all of that is well-known, and what we wanted to focus on instead was the fact that bank bailout notwithstanding, Spain will have no choice but to demand a full blown rescue within a few short months for one simple reason: its cash will run out.

Before we dig deeper, a quick reminder: while everyone focuses on the cash generation by the Spanish sovereign, via the almost daily Bill and Bond auctions, what many forget is that the bulk of the proceeds is merely used to refinance existing debt. The remainder goes to fund the actual national deficit (of which there is plenty to go round), and to be deployed via various less than legitimate channels to keep insolvent financial institutions "solvent" until such time as these can become someone else's problem. Namely Germany's. Until that happens however, Spain is facing crunchtime as it has to fund over €40 billion in debt maturities in the next two months alone.

A secondary problem is that not only is Spain still facing a gaping primary deficit, it also has to pay the interest on its rolling refis  which as everyone knows, and Rajoy most certainly, are unsustainable in the 6%+ range, not so much standalone, but certainly when juxtaposed with an economy which is collapsing in nominal terms, and is "growing" at a -0.4% growth rate. In other words, compounding the refi issue, is the fact that ever more of the organic growth from the economy has to be paid out to various state creditors.

Add the fact that the economy itself continues to collapse, with unemployment deteriorating with no bottom in sight, only completes the triangle of terror.

Which brings us to Exhibit A: the chart below shows Spain's National Account monthly cash balance, broken into its two subcomponents: the deposits at the Banco de Espana, and the Treasury Liquidity Tenders (columns 11 and 12; full historical breakdown here). The reason we bring it up is that this is the chart that everyone loves to forget.

The chart shows is that in July the Spanish cash balance dropped to €23 billion after hitting a 2012 high of €54 in March. It has plunged straight line since then, unable to repeat last year's July cash surge (when the number was more than double), and if the recent deposit outflow is any indication, the government will have had to plug many bank holes using fungible cash using any means necessary and possible. In other words, once the next Spanish State Liability update is posted, we wouldn't be surprised to see this number plunge to a new post-Lehman low. Yet what is scariest is that all else equal (and it never is), at the current run rate Spain may well run out of cash by the end of the year even assuming it manages to conclude all its remaining auctions through year's end without a glitch.

What all this really means it that any debate over whether Spain needs a bailout is at this point moot. It also means that absent a direct cash injection into the Spanish sovereign, Rajoy will have no choice, but to demand a bailout. What he does subsequently - whether he stays or he goes - will determine if the Spanish transition from a sovereign state to the latest vassal entity of the Troika and, more importantly, Germany will be peaceful (as much as possible) or rather violent.

h/t Wallstreetmane

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Mon, 09/03/2012 - 21:34 | 2759168 Ahmeexnal
Ahmeexnal's picture

Spain is running out of lies.

Mon, 09/03/2012 - 21:35 | 2759173 Crisismode
Crisismode's picture

Spain ran out of "cash" (real money")


A long, long time ago.


Where is their gold?


Long gone.

Mon, 09/03/2012 - 21:40 | 2759183 I think I need ...
I think I need to buy a gun's picture

This could go on FO EVER.



Mon, 09/03/2012 - 21:51 | 2759209 Dr. Engali
Dr. Engali's picture

Or at least until they run out of ink.

Mon, 09/03/2012 - 22:21 | 2759246 LeisureSmith
LeisureSmith's picture

The people who love Running of the Bulls is now running on the bank. The Ruin of the Bulls.

Mon, 09/03/2012 - 22:25 | 2759252 Haole
Haole's picture

CTRL-P(amplona) and they'd better keep up.

Mon, 09/03/2012 - 22:32 | 2759263 economics9698
economics9698's picture

The Germans and the EU really mind fucked the Spaniards.  One of these days they will figure it out but I am not holding my breath.  

Mon, 09/03/2012 - 22:50 | 2759288 DoChenRollingBearing
DoChenRollingBearing's picture

Mr. and Mrs. Bearing are going on vacation to Italy.  That is one reason why I was unable to review Barron's this weekend (packing and all).  But I will have ample time to judge what is happening in ITALY and will report back in due course.  A piss-poor review (if that) of Barron's and what seems to happen when WE go to Europe in September...


Mon, 09/03/2012 - 23:26 | 2759327 lasvegaspersona
lasvegaspersona's picture


all the politics is a sideshow, we have been told. The real focus should be on the ECB and how it handles these issues. My guess is that there will be some funding which implies some political integration. What choice do these spendthrift nations now have?  They have made their bed and now wind up sleeping with Ms. Merkle. Draghi will not sacrifice the Precious Euro for Spain or Italy...period. Germany will ultimately give in but they will have their hands firmly on the cojones and purse of any country that comes begging. 

I suspect the ECB will act as Keynes suggested the FED act...punitive loans on good assets (good luck finding those) at a punitive rate. Socialism is about to slow down in the EZ as real bills have to be paid wilth real money...NOW!

The USA will continue on its merry way for now but when the rest of the world decides to withdraw even the structural support it now gives....then we get our turn. 

Enjoy Italy!

Mon, 09/03/2012 - 23:49 | 2759354 DoChenRollingBearing
DoChenRollingBearing's picture


Tue, 09/04/2012 - 08:43 | 2759794 GetZeeGold
GetZeeGold's picture



Go green baby!




Mon, 09/03/2012 - 23:29 | 2759332 FEDbuster
FEDbuster's picture

Be sure to bring your GOOD (Get Out Of Dodge) bag, include a couple of gold eagles (accepted more places than VISA, Mastercard and AMEX combined).

Mon, 09/03/2012 - 23:49 | 2759352 DoChenRollingBearing
DoChenRollingBearing's picture

+ $5500! (1/10th...)

I am indeed bring along several 1/10th oz Gold Eagles with me along with CA$H and euros.  Will pay the big bills (hotels) with the credit card, but we were swindled out of 80 euros in a restaurant in Naples, so we are mostly cash on the ground except the hotels.

Tue, 09/04/2012 - 00:41 | 2759416 StychoKiller
StychoKiller's picture

Got a needle and thread?

Tue, 09/04/2012 - 02:54 | 2759480 GlomarHabu
GlomarHabu's picture



If we are talking about the need of a GOOD or BOB then I'm confident we are also talking about a very bad world situation.

If that's the case electric grids will be down, no 911 calls, no running water, no nothing that runs on electricity inculding the pumping of gass ...... so whose gonna take a credit card?

It's kind mute anyway since the obesity rates are so high the fatties and those unable to use shanks mare to travel the back country will all easily get taken down ....

Tue, 09/04/2012 - 02:47 | 2759474 GlomarHabu
GlomarHabu's picture



A bug out bag is a must have item. I would however suggest junk silver since  very few sellers of anything will have change for a 1 oz gold coin ... I'm guessing a larger percentage will understand pre 1964 90% silver dimes and quarters. Dimes being the majority of your funds.

Do take some gold but if thats all you have in the early stages of a catastrophy all you'll get as change is script...not good.

Mon, 09/03/2012 - 23:12 | 2759317 FlyoverCountryS...
FlyoverCountrySchmuck's picture

Doesn't matter...

The FED will provide as much US taxpayer dollars/liquidity as required to prop things up past Election Day.

Then they could care less if it all falls apart. Obama's cronies will be buying assets for pennies on the dollar.


Mon, 09/03/2012 - 23:33 | 2759334 HardAssets
HardAssets's picture

Economist Robert Johnson IMO is right on the money with his analysis of the oligarchs - - - they are at the point where they are arrogant and don't care what we think. We'll see how that works out for them:



Tue, 09/04/2012 - 04:05 | 2759518 fijisailor
fijisailor's picture

Yea,  according to Bernie Sanders they already have to the tune of $16 trillion


Mon, 09/03/2012 - 22:55 | 2759297 Dr Benway
Dr Benway's picture

Lol they should change it to the Running of the Bears. But Ursus would rip the tourists to shreds. Bear over bull any day, baby!

Mon, 09/03/2012 - 22:28 | 2759257 Michael
Michael's picture

Or till September 13th.

Mon, 09/03/2012 - 22:31 | 2759261 Uber Vandal
Uber Vandal's picture

@ Crisismode

Well, a few months ago, they got 17 TONS back....


Two military planes laden with 17 tons of silver and gold coins scooped up from a Spanish warship that sank during a 1804 gunbattle landed in Spain today, ending a 200-year odyssey that took the treasure from an ocean floor to Florida courtrooms.

Once the treasure is offloaded from the planes it will be transported to an undisclosed location, state broadcaster RTVE said.

In Madrid, the Spanish Culture Ministry recently said the coins are classified as national heritage and - as such - must stay inside that country where they will be exhibited in one or more Spanish museums.

It ruled out the idea of the treasure being sold to ease Spain's national debt in a country grappling with a 23 percent jobless rate and a stagnant economy.

I wonder how much of this actually made it to the Spanish museums?

Tue, 09/04/2012 - 00:42 | 2759417 StychoKiller
StychoKiller's picture

That was Ag, ya cain't eat Ag!

Tue, 09/04/2012 - 00:43 | 2759420 Crisismode
Crisismode's picture

I wonder how much of it made

into Politicians Pockets. . .

Tue, 09/04/2012 - 01:21 | 2759435 Uber Vandal
Uber Vandal's picture


Tue, 09/04/2012 - 07:13 | 2759601 savagegoose
savagegoose's picture

nice to  see it returned to the  propper owners.  well it would one day  be nice. i didnt realize  loottage was considered rightful ownership.  tough luck you native americans.

Mon, 09/03/2012 - 23:15 | 2759320 El Oregonian
El Oregonian's picture

The Spaniards have now been reduced to selling their gold teeth. F'ing Banksters...

Tue, 09/04/2012 - 09:09 | 2759865 autofixer
autofixer's picture

I stood in front of the Royal Palace in Madrid several times last month and pondered, "Where did all of that gold they stole from my Wife's ancestors (Native American) go?  Where did all of that gold that Spain stole from the Portuguese--who stole it from my Wife's ancestors--go?   

Mon, 09/03/2012 - 22:21 | 2759247 goldfish1
goldfish1's picture

Running out of Cash? Pshaw.

A few well placed zeroes and - bada bing - back in business.

Mon, 09/03/2012 - 22:29 | 2759260 goldfish1
goldfish1's picture

What's a few hundred billion when there's at least $6 trillion of counterfeit US bonds out there?

Italian police seize $6 trillion of fake U.S. bonds



Mon, 09/03/2012 - 22:59 | 2759302 sablya
sablya's picture

Those countereits are just as worthless as the real ones. LOL!!

Tue, 09/04/2012 - 00:56 | 2759399 monad
monad's picture

15 Trillion Greenspans, Timmah & Lord James...


Tue, 09/04/2012 - 03:14 | 2759495 HardAssets
HardAssets's picture

A gentleman who retired from Wall Street once told me that the world was run by criminals. I thought he was exaggerating to make a point. - - - He wasn't.

Tue, 09/04/2012 - 05:28 | 2759546 common_sense
common_sense's picture

and OUT OF VASELINE, like Greece...

Tue, 09/04/2012 - 08:49 | 2759813 sessinpo
sessinpo's picture

You never run out of lies. You only run out of believers.

Mon, 09/03/2012 - 21:38 | 2759169 Crisismode
Crisismode's picture

The Pain in Spain Falls Mainly on the


Students who are at 70% unemployment.


Via Con Stupendo

Mon, 09/03/2012 - 21:40 | 2759186 I think I need ...
I think I need to buy a gun's picture

i used to care

Mon, 09/03/2012 - 21:42 | 2759194 Crisismode
Crisismode's picture

Yes, so did I.

Not any more.

You are correct.


Mon, 09/03/2012 - 22:33 | 2759265 economics9698
economics9698's picture

Just print the shit and get it over with.

Mon, 09/03/2012 - 23:33 | 2759335 Dead Canary
Dead Canary's picture

YES! YES! PRINT ALREADY! Ruin the world! Get on with it!

I have a shit load of silver and I want use it to buy weapons and mercenary's and make myself warlord of Seattle! Just get on with it ferchristsake!

( sigh )

I guess I'll watch Road Warrior one more time.

Mon, 09/03/2012 - 21:40 | 2759184 vinayjha
vinayjha's picture

Everyone is spending more then their credit limit. I wish i had such credit card or Godfather like Fed or ECB. 



Mon, 09/03/2012 - 21:41 | 2759189 Dr. Engali
Dr. Engali's picture

Time for Spain to go crawling, hat in hand ,begging Merkel's forgiveness and declaring their allegiance Germany.

Tue, 09/04/2012 - 06:30 | 2759578 NewWorldOrange
NewWorldOrange's picture

This is just one more example of how the little guy can profit off the big boy's (CB's) idiocy and the huge distortions in currency markets the CB's are wreaking. The big guys will all know when the news of the Spanish banking system's bailout is about to be released. So it will be mostly priced in, and they'll know that. So when the announcement occurs, only the relatively little guys will dump the Euro, in fear/panic, and the big guys will quickly BTFD. So the way for the little guy to play it is to wait for that dip, and BTFD (buy EUR/USD.) The dip will occur within about 30 fucking minutes of the formal announcement and it'll be back up to at least where it was before the announcement, within about an hour or two.

Tue, 09/04/2012 - 08:53 | 2759826 sessinpo
sessinpo's picture

You mean to the ECB. Despite being the strongest country economically in the Eurozone, everyone knows Germany can't bailout everyone. Only the ECB can print debts away. Germany is just a front.

Mon, 09/03/2012 - 21:41 | 2759190 This is the end
This is the end's picture

Germany will bail out. They shouldn't but they shouldn't have put $2 trillion to the debt problem in the first place. Merkel is all in. She had chances in 2010 and 2011 to walk away, no way she walks away now. She does not want the Great Unraveling to begin on her watch. She will talk tough but cave in the end and give the PIIGS whatever they need.

Mon, 09/03/2012 - 21:45 | 2759192 MillionDollarBogus_
MillionDollarBogus_'s picture

The bailout will come, but surely the sovereign debt interest rate baseline rules the EU setup will have to change.

Bernanke probably has a twitchy index (computer mouse) finger whenever he dreams at night about being given the job of manipulating the EU bond rates down near zero.

It seams like such a simple solution - near zero bond yield rates - to keeping the proverbial can kicked down the road, right...??? 

Japan has it.  USA has it.  Why not the EU, and the rest of the G20...???

Tue, 09/04/2012 - 03:36 | 2759497 Zero Govt
Zero Govt's picture

Don't we all feel stimulated by 0.00% interest rates? I know I do. Not a day passes that I'm not amazed how well this 0.00% is turning everything around.

Ben, Mervyn and Mario shovel 0.00% money to the banks and it shows up as 16.87% on my card. What's not to like about this system?

It's all coming up roses

Mon, 09/03/2012 - 21:45 | 2759199 disabledvet
disabledvet's picture

Brazil it is then!http://www.youtube.com/watch?v=dO1cAatNJIM remember...it's all about an exit strategy. trust me...if you can baffle them with this these moves...you win!

Mon, 09/03/2012 - 21:47 | 2759203 Ted Baker
Ted Baker's picture


Mon, 09/03/2012 - 21:58 | 2759218 SwingForce
SwingForce's picture

How can you morons think that somebody SANE will hand over that much money? Hello?

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