The Reign In Spain May Soon Be Over

From Mark Grant, author of Out of the Box

The Reign In Spain May Soon Be Over


"Double, double, toil and trouble; fire, burn; and caldron, bubble."


                  -William Shakespeare, Macbeth

Knock knock; wake up and smell but it will not be the scent of roses that will fill your nostrils this morning but the singe of burning flesh. “Wolf” has been cried so many times that no one is paying any attention but I think that the robed man with the scythe is at the door and that he is about to enter the room. I first warned about the Spanish banks in June 2010 and suggested exiting from the credit of Spain around that time and while firewalls were built and all matter of supporting statements were made to protect the fourth largest economy in Europe it was all to no avail as demonstrated quite succinctly by the comments of the Budget Minister in the Spanish Parliament this morning:

“There’s no money in the public coffers.”

I am on the record stating that to fix the problem in Spain will require approximately $350-400 billion dollars. This was my assessment of the regional debt and of their banking problems. This number did not include their national government which seemed to be in decent shape and which obviously is not. It may be that the bank problems and the regional issues overcame the national government but one thing is now quite clear; Spain is in real trouble and the $125 billion for Spain under discussion in Europe will not even come close to fixing the problem and by the looks of things the money will not be coming too soon so that Spain could actually default on some of its obligations.

The Budget Minister went on in Parliament, this morning, to proclaim that “There is no money to pay for public services” which is quite a statement to make after the Prime Minister had told everyone that Spain was fine and that only the banks were having some issues. Of course this same Prime Minister said bailing out the Spanish banks was a “Great victory for Europe” so we already know that he is suffering from some serious psychological deficiencies and needs some help. Poor Mr. Rajoy; where is Sigmund Freud when you need him?

“The European Central Bank intervened in the secondary market to buy public debt to avoid the European monetary system collapsing. Spain would have collapsed without this intervention.”


                 -Budget Minister Montoro in Parliament this morning in Madrid.

The Spanish ten year is back at 7.00% now in London and the auctions they held today were nothing short of dismal on every count. Germany may well be holding the next Spanish Inquisition soon and it is all but a certainty now that a full scale bailout for Spain is about to be debated. Watch for the arrival of the Men in Black in Madrid. Spain is the ultimate proof of what I have contended during this entire process; firewalls do not work and ring fencing the weaker countries has not done one thing, nothing, to cure the sickness of the troubled nations in Europe. Spain is now verging on disaster and you may expect a rapid infection spreading into Italy. Just remember, everything is always fine right up until the moment when it is not and I fear that the “when it’s not” moment is very close upon us now.

Recently two noted Spanish economists were interviewed. One was always an optimist and one was always a pessimist. The optimist droned on and on about how bad things were in Spain, the dire situation with the regional debt, the huge problems overtaking the Spanish banks and the imminent collapse of the Spanish economy. In the end he said that the situation was so bad that the Spanish people were going to have to eat manure. The pessimist was shocked by the comments of his colleague who had never heard him speak in such a manner. When it was the pessimist’s turn to speak he said that he agreed with the optimist with one exception; the manure would soon run out.