On the surface, Spain’s debt woes have many things in common with those of Greece – bad age demographics and a toxic bank system – but you’ll note that, as we tackle each of these, Spain is in fact in far worse fiscal shape than Greece. [Let’s take a look.] Words: 700
So says Graham Summers (http://gainspainscapital.com/) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Summers goes on to say, in part:
Spain’s demographics alone are setting Spain up for a sovereign debt Crisis. [Take a look:]
- Currently there is 1 person of non-working age (65 or older) for every 4 people of working age (15-64) in Spain.
- This is expected to worsen to 1 person of non-working age for every 3 people of working age by 2025 and
- an astounding more than 1 person of non-working age for every 2 people of working age by 2040.
According to Jagadeesh Gohkale of the Cato Institute, Spain would need to have 250% of its GDP sitting in a bank account collecting interest forever in order to meet its unfunded liabilities without raising taxes or cutting government outlays.
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Banking System[As bad as Spain’s demographics are] it is its banking system that really sets it apart. Let’s consider the following facts:
- Total Spanish banking loans are equal to 170% of Spanish GDP.
- Troubled loans at Spanish Banks just hit an 18-year high of over 8%.
- Spanish Banks are drawing a record €316.3 billion from the ECB (up from €169.2 billion in February).
- Spanish non-financial corporations’ gross debts outstanding are equal to 196% of Spain’s GDP (this is worse than that of Greece, Portugal [and] even Japan)
- Spanish non-financial corporations sport debt-to-equity ratios of 152% (only Greece and Japan are worse here)
- Spanish household debt is equal to 90% of the country’s GDP [which is] much higher than the EU average of 70% and roughly inline with that of the U.S. which has been running a credit bubble for 30+ years.
In simple terms, Spain is like Greece, only bigger and worse. According to the Bank of International Settlements (BIS) worldwide exposure to Spain is…[in excess] of $1 TRILLION (the U.K. is at $51 billion, the U.S. at $187 billion, France at $224 billion and Germany on the hook for a whopping $244 billion).
As I have proven in previous issues, however, the BIS estimates actually underestimate the true exposure EU nations pose to the financial system. For instance, the BIS claims German exposure to Greece is only $3.9 billion… when Germany’s Deutsche Bank alone has over 2.8 BILLION Euros’ worth of exposure to Greek debt and businesses and Germany has TENS of other banks with exposure to Greece besides Deutsche Bank…
If Spain chooses…to stage a default or a messy debt restructuring, we’re going to see:
- systemic crisis that would make Lehman look like a joke,
- the breaking up of the EU and
- a bear market in bonds (which we have not seen in roughly 30 years)
With [the above] in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse [and encourage you to visit my site and check out my track record and then subscribe. You will NOT regret it!]
*http://gainspainscapital.com/?p=1675 (To access the article please copy the URL and paste it into your browser.)
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Spain is an absolute disaster on a level that [it seems] few, if any, analysts can even grasp. [Let me try to.] Words: 428
About three months ago, shortly before Greece’s sovereign debt was restructured, I began to warn about Spain as the next Eurozone country to focus on. That has, indeed, turned out to be ‘all the news’ with reports every day on Spain’s deteriorating financial condition. Given the ongoing world economic uncertainty and volatility, however, I suggest you now begin to pay very careful attention to Italy going forward, but doing so without losing sight of what is transpiring in Spain. [Let me explain why I see ‘Italy’ eventually surpassing Spain as ‘all the news’.] Words: 485
I continue to see articles in the media claiming that Europe’s problems are solved. Either the folks writing these articles can’t do simple math, or they don’t bother actually reading any of the political news coming out of Europe [so let me present 3 data points that guarantee Europe will collapse at some point in the near future]. Words: 722
In this article I lay out precisely why the coming Crisis in Europe will be THE Crisis I’ve been forecasting for the last 24 months, why it will have dire consequences on the U.S. and why the Fed can do absolutely nothing to stop it this time round. Words: 1334
On the surface things may appear to be calm, but I don’t think the European crisis is anywhere near its conclusion. Losses still have to be taken from Ireland, Spain, Portugal and possibly even Italy…There are a number of ways out of Europe’s problems. One of them is higher inflation…[which] is going to be very positive for gold… because the central banks will be under pressure to print.
When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival…[Let me explain this further by reviewing the 7 major problems facing the U.S. (and thus the world) and how they all will lead to problem #7 – devolution.] Words: 1520