Spanish economy in crisis

LoadingFavourite

This topic contains 60 replies, has 11 voices, and was last updated by Profile photo of Anonymous Anonymous 6 years, 2 months ago.

  • Author
    Posts
  • #55843
    Profile photo of logan
    logan
    Participant

    I copied this from another public forum because I think it paints a realistic picture. It lists 9 reasons why the Spanish economy is a basket case and why the markets are getting increasingly nervous about Spanish debt. (With thanks to JimmyD a world recognized trends forecaster).

    #1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren’t working they can’t pay taxes and they can’t provide for their families.

    #2) In an effort to stimulate the economy, Spain’s socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009. That is completely unsustainable by any definition.

    #3) The total of all public and private debt in Spain has now reached 270 percent of GDP.

    #4) The Spanish government has accumulated way more debt than it can possibly handle, and this has forced two international ratings agencies, Fitch and Standard & Poor’s, to lower Spain’s long-term sovereign credit rating. These downgrades are making it much more expensive for Spain to finance its debt at a time when they simply can’t afford to pay more interest on their debt.

    #5) There are 1.6 million unsold properties in Spain. That is six times the level per capita in the United States. Considering how bad the U.S. real estate market is, that statistic is incredibly alarming.

    #6) The new “green economy” in Spain has been a total flop. Socialist leaders promised that implementing hardcore restrictions on carbon emissions and forcing the nation over to a “green economy” would result in a flood of “green jobs”. But that simply did not happen. In fact, a leaked internal assessment produced by the government of Spain reveals that the “green economy” has been an absolute economic nightmare for that nation. Energy prices have skyrocketed in Spain and the new “green economy” in that nation has actually lost more than two jobs for every job that it has created. But Spain so far seems unwilling to undo all of the crazy regulations that they have implemented.

    #7) Spain’s national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy. If they cut government expenditures in an effort to get debt under control it will devastate economic growth and crush badly needed tax revenues. But if the Spanish government keeps borrowing money their credit rating will continue to decline and they will almost certainly default. The truth is that the Spanish government is caught in a “no win” situation.

    #8) But even now the IMF is projecting that the Spanish economy is going nowhere fast. The International Monetary Fund says there will be no positive GDP growth in Spain until 2011, at which point it will still be below one percent. As bleak as that forecast is, many analysts believe that it is way too optimistic considering the fact that Spain’s economy declined by about 3.6 percent in 2009 and things are rapidly getting worse.

    #9) The Spanish population has gotten used to socialist handouts and they are not going to accept public sector pay cuts, budget cuts to social programs and hefty tax increases easily. In fact, there is likely to be some very serious social unrest before all of this is said and done. On May 21st, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan. But that was only an appetizer. Spain’s two main unions are calling for a major one day general strike to protest the government’s planned reforms of the country’s labor market.

  • #100546
    Profile photo of Anonymous
    Anonymous
    Participant

    For those who are interested in such things Spain has now slipped to 42rd place from 33rd in the WEF global competitiveness rankings. I agree with Logan, the Spanish economy is in for a long, painful correction.

    http://www.weforum.org/documents/GCR10/Full%20rankings.pdf

  • #100547
    Profile photo of logan
    logan
    Participant

    Those figures illuminate the down side risks of excessive sovereign debt. As debt levels increase their ability to service the costs reduce.
    Interesting contrary view point from Edward Hugh:
    http://globaleconomydoesmatter.blogspot.com/2010/08/on-shoulders-of-giants-how-spain-is.html
    I don’t agree with him but he’s always a good read.

  • #100549
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @logan wrote:

    Interesting contrary view point from Edward Hugh:
    http://globaleconomydoesmatter.blogspot.com/2010/08/on-shoulders-of-giants-how-spain-is.html
    I don’t agree with him but he’s always a good read.

    Well I read the post, and I think got the gist of most of it, but I sure as heck realised that unfortunately not only do I not have a sound grasp of applied macro, I in fact have zero knowledge of applied macro, so I think most of it went straight over my head.

    But I have to hand it to you guys, you are introducing me to stuff that is a whole new ball game, and whilst I struggle to keep up, it is very interesting.

    Question though; with regard to the initial post, would it not be entirely possible to write 9 entirely plausible reasons why the UK, the US or almost every single major and minor economy is a basket case?

    Are there 9 reasons why these times could also be the best of times for certain parties? Well OK, before you shoot me for being grotesquely naive, let us not say the best of times, but possibly opportune times?

    Is it to no ones advantage that…

    Interest rates are lower than they have ever been in living memory or possibly centuries.

    Property (it is the SPI after all) is selling at 40% below peak prices and sometimes 50%.

    I would venture some more, but you know what…? I don’t dare, maybe somebody else can help me out here?

    In these very dark times, is there anything to look forward to, or perhaps capitlise on?

  • #100550
    Profile photo of peterhun
    peterhun
    Participant

    @Chris McCarthy wrote:

    @logan wrote:

    Question though; with regard to the initial post, would it not be entirely possible to write 9 entirely plausible reasons why the UK, the US or almost every single major and minor economy is a basket case?

    Keep up there, Edward explained it, quite a while ago 🙂

    There is one massive reason why Spain is different from the UK/US; it doesn’t control its exchange rate or interest rate. So it cannot devalue its currency and it really needs to.

    UK has a few advantages with its debt; its largely in Sterling so can be devalued and inflated away (got to be careful with that) and its very long term debt (average term of borrowing is 14 years versus 7 for US for instance and Greece a few years). So the UK , although its has big borrowing needs will need less new bond issuance that even Germany this year.

  • #100556
    Profile photo of logan
    logan
    Participant

    Question though; with regard to the initial post, would it not be entirely possible to write 9 entirely plausible reasons why the UK, the US or almost every single major and minor economy is a basket case?

    I should not worry too much Chris, macro economics is almost as complicated as quantum mechanics. 🙂
    I think the answer to your question is probably you could write 9 negatives to describe any economy.
    However in the case of Spain the situation is far worse that any industrialised nation except Greece and deteriorating, which is why it’s causing so much concern. The unemployment figures illustrate the state of the real economy. It also lacks a strong industrial base, unlike Germany or UK which could help the country export it’s way out of trouble. In fact it has very little prospect of turning it’s economy round in the near term. Not least until other nations return to strong growth which will help their construction/housing sector, upon which the country has become so reliant. The Eurozone straight jacket mentioned above is simply forcing Spain to borrow more and more to keep up.
    The present low interest rates, and a deflationary property market are simply a symptom of a declining economy. That may be a positive but most people are not in a position to take advantage of it.

  • #100557
    Profile photo of Anonymous
    Anonymous
    Participant

    The other thing I’d add to Logan’s succinct analysis is that, as highlighted by the WEF, the Spanish economy is uncompetitive by comparison with the US, UK and many of the countries it would consider competitors. It is thus less well positioned to benefit from any recovery.

    Labour friendly laws, many of which go back to the time of Franco post civil war, are a good part of the problem. The unemployment rate is currently double that of the UK or US. I also read that the youth unemployment rate is 40%. This will be storing up all sorts of social problems.

    Spain will recover. Sooner or later economies almost always do. It is just going to be long and painful.

  • #100558
    Profile photo of logan
    logan
    Participant

    I agree. The Socialist government of Gonzales brought in socialist labour laws in their first post Franco term and have been increased ever since. Laws that have simply been a burden on business. Spain is not France and so much labour protection in an emerging economy was a disaster waiting to happen during a downturn.
    Yesterday in the Spanish parliament some of these protectionist laws were finally voted out, but it’s too little too late.

  • #100580
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @logan wrote:

    I should not worry too much Chris, macro economics is almost as complicated as quantum mechanics. 🙂

    Phew that’s a relief, I was beginning to think it was just me!

    @logan wrote:

    The present low interest rates, and a deflationary property market are simply a symptom of a declining economy. That may be a positive but most people are not in a position to take advantage of it.

    OK, I get the stuff about Greece, and I think I understand brianc_li’s position as well, I am sure getting some economic lessons and exercise for the grey matter here, thank you for your patience, however taking your last point.

    If someone were “in a position to take advantage”, and given Brianc_li’s final point also that the “Spanish economy will recover”, presumably just like all the others, just a bit longer.

    Can we then not put 9 good reasons, why the thread title Spanish Economy in Crisis for the person who is in a position, this is then in fact, an entirely reasonable and opportune time to buy, note I am not saying really great and stunning, moreso simply a logical enough decision for the person who can take advantage.

    There are people out there buying, why is that?

  • #100584
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @peterhun wrote:

    Keep up there, Edward explained it, quite a while ago

    There is one massive reason why Spain is different from the UK/US;

    With respect, if it was me you were addressing, I think you missed my point, I was not looking for an explanation of the difference between Spain and US/UK. I was thinking simply that; does not everyone have their own basket case scenario, regardless of the degree of difference, but more importantly I am trying to figure – if you see any number of points given the 9 negatives – that would make 9 positives for – certain individuals.

    I might not be au fait with applied macro, far less quantum mechanics, but in some far distant CSE physics lesson – yes sadly they didn’t do GCSE at my school – I seem to remember, that for every negative there was a positive.

    I will try and keep up there on that line. Just give me one positive to help me out here.

  • #100591
    Profile photo of logan
    logan
    Participant

    [[/quote]
    Can we then not put 9 good reasons, why the thread title Spanish Economy in Crisis for the person who is in a position, this is then in fact, an entirely reasonable and opportune time to buy, note I am not saying really great and stunning, moreso simply a logical enough decision for the person who can take advantage.
    There are people out there buying, why is that?[/quote]

    The difficulty with that senario being a positive is that although markets have fallen and interest rates are historically low, uncertainty rules. Disposable income are being squeezed and the threat of unemployment hangs over everyone. Uncertain futures face us all.
    People also know that the Euribor rate will soon start to rise as Germany and France return to growth. The ECB will be forced into rate hikes to prevent Germany’s economy from overheating.
    Add to that the likely hood of further property price deflation, especially in Spain where supply exceeds anything the markets can handle and you have the negative overwhelming the positive.

  • #100592
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @logan wrote:

    Add to that the likely hood of further property price deflation, especially in Spain where supply exceeds anything the markets can handle and you have the negative overwhelming the positive.

    Forgive me, am not trying to paint anyone into a corner into which they don’t want to go here, I get that for some folk the negatives overwhelm the positives, I absolutely do, but despite all the conditions, the 9 negatives and many more, there are people buying.

    Who are these people and what positives do they see, that either in their case are at least equal to the negatives or to whit they just don’t care – because their particular position allows them to, you say there are positives, what are they – regardless of them being overcome by the negatives?

    Again, I am not trying to be difficult, I accept there are a whole heap of negatives out there, I happen to believe there are a whole heap of positives also, but it is useless for me to list them… Can you not just give me one, despite everything else…?

  • #100595
    Profile photo of logan
    logan
    Participant

    I’ll take your word that some people are buying. Personally I see little evidence of that.
    However people do all sorts of odd things with their money, some even give it away to bookmakers. 🙂
    When I post on this forum it is from long economic experience as an investor in markets, including property. I am a market watcher and only offer the investor prospective. Folks don’t consider economics when the so called ‘dream’ is in their head. That’s not my business, I deal in realities.
    If some property is selling it is probably because the price looks cheap or the bank offers crazy terms to shift stock. I read recently that a bank in Spain is offering mortgages of up to 50 years term. 😯
    My advice for what it’s worth is if you are thinking of investing in Spain, don’t. Buy government bonds, some tidy returns are to be had. For example Greek bonds are paying over 11% if you fancy a punt. If you want a holiday home, wait. Soon the banks will be forced to open the flood gates and unleash their massive stocks of property on the market. Then watch prices drop like a stone. There’s a positive for you Chris. They will sell like hot cakes. 😀

  • #100596
    Profile photo of katy
    katy
    Spectator

    I think the people who are buying now are seeing the positive in the fact that prices are probably lower than when they first started looking. Only the ones for lifestyle not the investors.

  • #100601
    Profile photo of Anonymous
    Anonymous
    Participant

    @logan wrote:

    Soon the banks will be forced to open the flood gates and unleash their massive stocks of property on the market. Then watch prices drop like a stone. There’s a positive for you Chris. They will sell like hot cakes. 😀

    I wish that would happen, but don’t hold your breath.

    Also, we have to be careful what we wish for. I would like property prices and rents to be lower, at least so young people can start families. But I don’t wish for the banking system to collapse, which might go hand in hand with recognising the real value of their assets. The banks have to pretend that it’s all worth much more than it really is, and governments have to go along with it.

    Blessed are the bankers, for they shall make lots of money at our expense.

  • #100602
    Profile photo of logan
    logan
    Participant

    Agreed Mark to a point. However the banking system in Spain is bloated, over blown and unfit for purpose. Spain could afford to lose at least a dozen fringe banks without a ripple.
    The IMF has forced the Spanish government to change it’s potty employment laws and in turn the Bank of Spain has tried to push the banks into owning up to their losses and bring their off balance sheet assets into the main stream. It is clear this should happen before further financial help follows. However as long as the ECB continues to give them blank cheques which is providing their current liquidity nothing will happen.
    The Basel Committee on banking capital requirement is likely to substantially increase the capital percentage banks must hold in relation to their debt. That is likely to force further pressure on the Bank of Spain to force it’s banks to come clean.
    It is hard to imagine this situation continuing indefinitely without consequences, especially given the staggering amounts the country itself needs to borrow to keep afloat.

  • #100606
    Profile photo of angie
    angie
    Spectator

    Chris, why are people buying now in Spain you said, I agree with katy, only those buying to live there, for lifestyle I think?

    Not in great numbers though, maybe from other Eurozone countries. Personally, despite large price falls, I wouldn’t buy for sound investment yet, it still might have further to fall and there’s that large oversupply to sell-off first.

    I think the same applies to lots of other countries too.

  • #100607
    Profile photo of Fuengi (Andrew)
    Fuengi (Andrew)
    Participant

    @logan wrote:

    I agree. The Socialist government of Gonzales brought in socialist labour laws in their first post Franco term and have been increased ever since. Laws that have simply been a burden on business. Spain is not France and so much labour protection in an emerging economy was a disaster waiting to happen during a downturn.
    Yesterday in the Spanish parliament some of these protectionist laws were finally voted out, but it’s too little too late.

    Oh agreed. And even though it is too little to late, I do not think these changes were possible until now. I think the average man on the street is finally starting to realise that there needs to be some sort of overhaul of the labour market to help create jobs.
    You never know, the last crisis lead to sweeping changes in how the banks worked, maybe these time will see the same level of change in labour?

    @mark wrote:

    Also, we have to be careful what we wish for. I would like property prices and rents to be lower, at least so young people can start families.

    What spain needs to do is invest more in social welfare. A mother receives very little aid. Way below average for western europe.

    But this ties in with the labour laws, that mainly benefit an older generation of workers and not the newer generation.

  • #100608
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @logan wrote:

    When I post on this forum it is from long economic experience as an investor in markets, including property. I am a market watcher and only offer the investor prospective. Folks don’t consider economics when the so called ‘dream’ is in their head. That’s not my business, I deal in realities.

    I understand that, and I rarely have cause to disagree with you, but this the Insight Forum not simply the Investment Forum, and not everyone’s reality is based upon the finite economic argument, which may or may not be proven, the evidence of which will actually be several years hence and only available in hindsight.

    Would you not agree then that it will be the actions of others that you will watch, follow and decide to move upon, and they will be the ones who act upon emotion, desire and personal need, who will set a trend and actual spend that you will then base your financial logic upon?

    @logan wrote:

    If some property is selling it is probably because the price looks cheap or the bank offers crazy terms to shift stock. I read recently that a bank in Spain is offering mortgages of up to 50 years term. 😯

    So there are some opportunities then? Particularly related to a key driver for everyone being price and finance availability.

    @logan wrote:

    My advice for what it’s worth is if you are thinking of investing in Spain, don’t.

    I think you are referring solely to property, and here we agree, I think I have said the same thing for probably a lot longer than you have, but then I won’t invest in property in the UK either right now, nor in the US, in fact nowhere, and in fact I never have invested in property per se.

    Any investment area has its good and bad times no? I put money with Zurich some ten years ago, into two particular types of pension / investment funds and I still don’t have today what I put in originally going by the reports they send each quarter.

    I put money into Corporate Bonds a year or so back and am happy enough.

    We all have a choice, and we all have different funds available and different uses for them.

    Since the property boom ended in Spain in the first quarter of 04, since there is a worldwide economic recession, interest rates at their lowest, some people take a view that along with their other investments or options, they would like to physically sit on one pile, drink a glass of Rioja and watch the sun slide gently into the Med.

    I think that might be viewed as another type of investment don’t you?

    @logan wrote:

    Soon the banks will be forced to open the flood gates and unleash their massive stocks of property on the market. Then watch prices drop like a stone. There’s a positive for you Chris. They will sell like hot cakes. 😀

    We have been here before, you have I think predicted it for quite some time, the argument has bounced around on many a thread, but am sorry, it is not going to happen.

    Apart from anything else, it is naive to believe that simply opening up the floodgates means that there will a massive amount of purchasers out there. And despite your every wish to see the Banks somehow own up to their failings and take the hit, it just won’t happen.

    They will hold that stock for 10 years if they have to, and no government or even IMF is going to change that.

    I hear where you are coming from, I accept the rightness of your view, but by refusing to accept that of course there are people buying, and with another view, I think it doesn’t help the balance into Insight rather than simply Investment, any one can say it is not a good time to Invest it isn’t rocket science, I am interested in the people that are buying and why.

    You are not wrong, and neither are they.

  • #100609
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @angie wrote:

    Chris, why are people buying now in Spain you said, I agree with katy, only those buying to live there, for lifestyle I think?
    Not in great numbers though, maybe from other Eurozone countries.

    Thanks for asking me Angie, really thanks for asking, it means a lot that you would value my opinion on this, but I don’t think it is my place to answer, I would have hoped that others might chip in with one or two points here and there.

    Also, you don’t want me to go back to writing huge monologues!

    However, you are right to agree with Katy, lifestyle is of course a massive driver, it always has been, and as guideline of what others there might be, you can start with that and move through:

    Lifestyle / Change
    Price / Affordability
    Health / Family
    Dream / Goal Fulfillment
    Location / Ease

    & Sunshine

    I could bang on about that bunch and the mix across these areas all day long, and how this is demonstrated across many groups and types of people, but no… set against the height of the market, these are not overall, ‘significant numbers’, the numbers are still perhaps 80% down on what was an ‘insane’ buying peak end ’03, but in real terms they are not so different to the amount of buyers in say ’92-’97.

    It is not the quantity I am concerned with, it is the fact that individual / personal choices are made against the run or logic of the painful reality of the Spanish / World Economic Crisis and where I agree with you, I also wouldn’t buy for pure ‘investment’ I am sure there are a heap of people out there looking and acting, who disagree with us, because. the final provocative one issue that is missing in the above list is that the buyers do state:

    Long term investment

    Not just in financial terms but also for themselves in personal terms, and they think they won’t lose out over the long term, and will be happy whatever the benefit.

  • #100610
    Profile photo of logan
    logan
    Participant

    @Chris McCarthy wrote:

    They will hold that stock for 10 years if they have to, and no government or even IMF is going to change that.

    Have a read of this article.
    http://www.zerohedge.com/article/bank-spain-tells-lenders-take-30-loss-provisions-foreclosed-real-estate-held-over-two-years
    Spanish banks are being forced to reduce the asset values of repo property. The Bank of Spain has also forced them to increase capital reserves. They can only do that from either requesting it from shareholders, selling off assets or having a moratorium on all lending thereby building reserves from deposits. The final option will simply prolong the slowdown.
    In Basel this weekend the committee overseeing banking regulation seem to have come to a decision that will force banks to provide even greater capital reserves.
    I therefore think asset sales are more likely together with some further shareholder investment.
    Releasing for sale massive capital stocks on an already flooded market will deflate the market further. However if prices fall far enough investors will return. The degree of risk is less.

  • #100611
    Profile photo of Anonymous
    Anonymous
    Participant

    Relating to why people buy, I never understood the “investors”; they had half the money and wanted to buy double the property that anyone else did…Of course all these “investors” ended up buying in god forsaken places because some unethical EA told him about 10-12% returns…
    I remember offering second flats in working class areas of Alicante city for around 50-70 thousand euros but they wouldn’t touch it because they didn’t like the area! So much for realities and investors. I have one of those apartments, 8% return per annum (ok, thats before costs), but nevertheless, we never had “real” investors, not in my area anyway.

    The same still happens today with the new middle class Russian, the “investor”, 100.000 € wants something frontline to the beach, at least 2 bed and he wants to use it in July and August and is sure he will get 10% return.

    I agree with Chris, though about the reasons for buying and it is true to say it is lifestyle, but also natural demographic pressure; people get older and want to live in warmer places.

  • #100613
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @logan wrote:

    Have a read of this article.
    http://www.zerohedge.com/article/bank-spain-tells-lenders-take-30-loss-provisions-foreclosed-real-estate-held-over-two-years
    However if prices fall far enough investors will return. The degree of risk is less.

    Thanks, I read it, but it doesn’t change my opinion, as it said in there, there will be a period of consultation – and there’s a whole heap of other noise making stuff from regulators to banks, to just keep it all on the books till the price and time is right.

    There are not enough ‘investors’ to buy up that stock, there never were.

    Which goes to Marjal’s later point

    @Marjal wrote:

    Relating to why people buy, I never understood the “investors”; they had half the money and wanted to buy double the property that anyone else did…Of course all these “investors” ended up buying in god forsaken places because some unethical EA told him about 10-12% returns…

    I complained on what I think was at least 3 occasions to the Advertising Standards Authority about at least 4 competitors advertising returns on buying property in Spain. I thought it was madness and corrupt.

    There were ‘investors’ who bought bank and genuine distressed resale stock in the early to mid 90’s who did well, then there were ‘fortunate buyers’ who bought just before the boom who saw their new purchases and a few off plan properties shoot up by 20-40-60% just because they bought at the right time, after that it was a mad feeding frenzy of everyone assuming you put down a deposit and flipped it, and you too could be come an instant winning investor, which was based on the actual and successful evidence of the fortunate few from the outset.

    After that… well there was barely a dinner table discussion that didn’t centre around which property had been bought in Spain that week. These people were not ‘investors’ in truth, they were extremely unfortunate and often grossly misled individuals caught up in buying something for entirely the wrong reasons. And consequently were more often than not ripped off.

    To all our eternal shame.

    Anyone that buys today however has the potential to be making a wise decision, but that is potential, and like every other investment it can go down as well as up, but you buy right, it simply can’t go that far down, not when it has fallen 40% already. You buy for the right reasons, well, there is the potential that one day, people will say ‘boy you bought at the right time hey’ we have all seen it before and we will see it again.

    Swings and roundabouts, right now, my point is, any point we make is not necessarily exactly right or wrong, these are the worst of times, the best of times, oh jeeze enough with the cliches, you all know what a I mean.

    And I think there should be more insight for the buyers that visit this forum, not just don’t do it, especially if we ignore the fact that plenty of people are doing it, and enough analysis says that it is the intention of a significant number to do it in the future.

  • #100614
    Profile photo of adiep
    adiep
    Participant

    That ZH article ( dated 05/26/2010 ) is old news and 30% is still optional. Anyway, we had the stress tests and Spanish banks are fine… 🙄

  • #100615
    Profile photo of adiep
    adiep
    Participant

    “Anyone that buys today however has the potential to be making a wise decision…”

    Tax on buying houses is up from 7% to 8%, tax breaks worth 000’s will be lost Jan 1st, 20% unemployed, banks playing games to keep house prices artificially high, rental yields well below average and unattractive to investors, austerity program kicking in, 1.5 million stock of homes, developers insolvent and being propped up by banks, traditional market from foreign investors dead..

    And this is a good time to buy because?

  • #100616
    Profile photo of Anonymous
    Anonymous
    Participant

    Anyone that buys today however has the potential to be making a wise decision, but that is potential, and like every other investment it can go down as well as up, but you buy right, it simply can’t go that far down, not when it has fallen 40% already.

    Here Chris I fundamentally disagree with you. Yes it can go that far down. Just because the grossly over inflated market has already fallen 40% doesn’t mean it hasn’t further to fall. For example, there are plenty of markets in Ireland, which had a similar bubble, where prices are now 60%+ lower than they were fetching at the peak. Some Bulgarian ‘investors’ have seen values drop by 90%.

    Yes indeed anyone who buys today ‘could’ be making a wise decision but I have to say I very much doubt it. Pretty well all the economic fundamentals indicate that prices, particularly on the costas, will continue to fall for some time. The only questions in my mind are for how long they will decline and how far they will drop.

  • #100617
    Profile photo of Anonymous
    Anonymous
    Participant

    It is definitely not a good investment at the moment unless it is a really unique property (ie. frontline villa) and always taking into consideration that:

    a. You are getting a good deal; paying approximately 60% of market price
    b. You are in it for the long run

    Other than that it is purely a lifestyle/ personal decision with many other factors coming into play, like Chris said: health, retirement…

    Not everything we buy is an investment, look at new cars! Investments are for investors, professionals who do their sums BEFORE they get off the plane. People who STILL promote property with 8-10% guaranteed returns really should not be in this sector.

  • #100618
    Profile photo of adiep
    adiep
    Participant

    I’m not even seeing 40% price drops, ok occasionally, but incredibly the ones that drop 40% seem to then be at parity with others on the market — which are 30% over-priced.

    Some of these properties had mortgages that were massively over-valued, to allow the buyer to get a 110% loan.

    Honestly, the housing market in Spain is still a basket case. I have the money to buy, but wouldn’t throw it away on what i’m seeing, even so I’m getting desperate to buy but there’s no way im going to throw six figures of cash at a negative equity pit.

  • #100619
    Profile photo of adiep
    adiep
    Participant
  • #100620
    Profile photo of logan
    logan
    Participant

    I completely agree with Brianc’s analysis.
    There’s an old saying. If you want to know the future look at the past. I was in the property business in Spain in the 1970’s early 80’s. Then recessions came and went like London buses. Property crashed big time, stayed there for years and slowly came back as the devalued Peseta, easier credit and floored prices made a difference. Banks repossessed everything and developers such as I bought them back when times got better. It was a cosy relationship. The banks would sit tight sometimes for years until the market improved.
    The difference today however is everything has changed. The EU, the currency and massive financial regulations in the pipeline. All these factors have to work through the system before any movement in the markets will take place. EU Governments are determined to change the property bubble ethos and restrict the financial institutions and the markets capacity to create one.
    One of the principal reasons France, Germany and the Benalux countries do not have property bubbles as such is because of massive financial regulation. A house is to live in for life and hand on to your family, nothing more This principal is on it’s way to Spain.
    Spain does not need any more holiday homes, little finance will be available to build them. Domestic mortgages will be restricted to property buys the bank owns.
    Until all these factors work through the system, the stock piles of property are moved and Spain returns to substantial growth, investing in the country will prove useless.
    If you buy a property now you risk so many things. Decline of your asset value will almost certainly continue, your overhead expenses will increase year on year, it’s unlikely you will be able to sell it, rental returns will be marginal.
    All this risk for a simple holiday home?
    Different if you want to move to Spain and work there or retire perhaps. Then it’s a home, nothing more. However you had better be sure the move will de definitive.

  • #100621
    Profile photo of logan
    logan
    Participant

    I completely agree with Brianc’s analysis.
    There’s an old saying. If you want to know the future look at the past. I was in the property business in Spain in the 1970’s early 80’s. Then recessions came and went like London buses. Property crashed big time, stayed there for years and slowly came back as the devalued Peseta, easier credit and floored prices made a difference. Banks repossessed everything and developers such as I bought them back when times got better. It was a cosy relationship. The banks would sit tight sometimes for years until the market improved.
    The difference today however is everything has changed. The EU, the currency and massive financial regulations in the pipeline. All these factors have to work through the system before any movement in the markets will take place. EU Governments are determined to change the property bubble ethos and restrict the financial institutions and the markets capacity to create one.
    One of the principal reasons France, Germany and the Benalux countries do not have property bubbles as such is because of massive financial regulation. A house is to live in for life and hand on to your family, nothing more This principal is on it’s way to Spain.
    Spain does not need any more holiday homes, little finance will be available to build them. Domestic mortgages will be restricted to property buys the bank owns.
    Until all these factors work through the system, the stock piles of property are moved and Spain returns to substantial growth, investing in the country will prove useless.
    If you buy a property now you risk so many things. Decline of your asset value will almost certainly continue, your overhead expenses will increase year on year, it’s unlikely you will be able to sell it, rental returns will be marginal.
    All this risk for a simple holiday home?
    Different if you want to move to Spain and work there or retire perhaps. Then it’s a home, nothing more. However you had better be sure the move will de definitive.

  • #100624
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @brianc_li wrote:

    Here Chris I fundamentally disagree with you. Yes it can go that far down. Just because the grossly over inflated market has already fallen 40% doesn’t mean it hasn’t further to fall. For example, there are plenty of markets in Ireland, which had a similar bubble, where prices are now 60%+ lower than they were fetching at the peak. Some Bulgarian ‘investors’ have seen values drop by 90%.

    Yes indeed anyone who buys today ‘could’ be making a wise decision but I have to say I very much doubt it. Pretty well all the economic fundamentals indicate that prices, particularly on the costas, will continue to fall for some time. The only questions in my mind are for how long they will decline and how far they will drop.

    I have seen perfectly reasonable 2 bed apartments, Marbella, long finished development and fully occupied that were sold at peak for €325k sell this year for @ €180k being close to 45% fall, I simply can’t see them one day selling for €65k being a further 35% to say 75%. It just isn’t going to happen.

    As for Bulgaria, well what kind of utter madness was that, people were buying them in packs over the telephone, goodness help me, I myself saw a full page Sunday Times advert one day from Savills offering a 2 bed unit in somewhere like Bansko, with ski and beach pictures offering me a unit for £32,000 the deposit was 20% and I found myself reaching for the phone to put it on my credit card, people thought it was the new ‘Spanish Costa’ scenario, it was sold mainly by people who had been operating on the Spanish costa’s, it was boiler room time, and even Savills were caught up in the madness, I bet they were doing a 100 deposits a week. They nearly had me for a moment. I wonder how many completed?

    I did say ‘potential’ here guys, and I was referring to long term investment, and I thought it was implicit that people would be buying for other primary reasons, irrespective of investment.

  • #100625
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @adiep wrote:

    And this is a good time to buy because?

    If your priorities are…

    Lifestyle / Change
    Price / Affordability
    Health / Family
    Dream / Goal Fulfillment
    Location / Ease
    & Sunshine

    Along with a preference for Spain, and you consider that the worst time to have bought was 6 years ago at the peak, so now the risk of serious loss in value is much reduced, and if you don’t want to devote your life to the application of macro economics – you just want to live it.

    And you can afford it, then there’s a lot worse things you could do.

    They say tomorrow never comes, I was in the Doctor’s surgery the other day getting some test results back, got the all clear, but hey am at an age when these visits are fraught with worry just in case my kidney pains were something serious.

    Anyway, the Doctor asks how is life in general, asks me if I have been affected by the Recession – “boy and then some” I say – he then asks; after I tell him my net worth pre and post crisis, how I could still be so chipper and positive, I give him my view.

    He then tells me… “In the past 18 months, I have never known anything like it, I have had so many men sitting in here, just crying their eyes out, sobbing, it has been unbelievable to see, they of course hold and hide their desperation out there, from their wives, family and friends but in here, it just awful to see”.

    My point is, some fortunate few have an opportunity to invest in themselves, their well being, a release from pressure, to create a better balance and enjoy their life today.

    For everyone who wants it, likes it, and feels they need it, then I think that is a good time to buy. And to hell with the crisis and economy and paralysis of analysis.

  • #100628
    Profile photo of Anonymous
    Anonymous
    Participant

    My boss says: “Recessions are a good thing…you finally LEARN something!”

  • #100631
    Profile photo of Anonymous
    Anonymous
    Participant

    I have seen perfectly reasonable 2 bed apartments, Marbella, long finished development and fully occupied that were sold at peak for €325k sell this year for @ €180k being close to 45% fall, I simply can’t see them one day selling for €65k being a further 35% to say 75%. It just isn’t going to happen.

    Where on earth did I suggest that? The Spanish situation IMO is much more similar to the Irish one than the Bulgarian. The biggest difference being that the Irish market is much more transparent than the Spanish one, as such it has now more or less bottomed out. The Spanish market still has some way to go.

    For what it is worth, my guess is that the kind of apartment you have cited will bottom out around the 150k mark in a couple of years time. Allowing for inflation of 3% p.a. that will be the equivalent of 140k in todays money.

    I am one of those in the market for such a property. When I do buy it will be a pure lifestyle purchase. That said I simply refuse to buy now while the market is still over valued. I’m not going to throw money away, sun and sangria or not.

    It was apparent to me after I did my initial research a couple of years ago that the market still had some way to fall. If I recall correctly at the time you were predicting that the market would turn in 2009. History now tells us who proved to be correct. Having followed the market closely since then I still firmly believe that more falls are in the pipeline.

    The bottom line here is that this is fundamentally not a good time to buy. If you want the lifestyle then rent until such time as this market sorts itself out.

  • #100632
    Profile photo of logan
    logan
    Participant

    Chris why do you think a two bedroomed flat is worth 180K? Even allowing for the fact it’s in overblown and puffed up Marbella it’s probably only ‘worth’ today and tomorrow between 80-90k. Just because it was once selling for 360k does not mean it’s worth anything. Even though some punter might buy it for 180k today does not mean it’s worth that amount.
    That’s fundamentally the problem. The market knows prices are only going one way. The real question is by how much and for how long until fair value is reached and it stabilises My best guess and it’s only that, is an additional -20% over an additional 18 months as Europe and US hover over the risk of a double dip recession. This thing is not over.

  • #100634
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @brianc_li wrote:

    Where on earth did I suggest that? The Spanish situation IMO is much more similar to the Irish one than the Bulgarian.

    My apologies, I took this following statement too literally perhaps…

    @brianc_li wrote:

    For example, there are plenty of markets in Ireland, which had a similar bubble, where prices are now 60%+ lower than they were fetching at the peak. Some Bulgarian ‘investors’ have seen values drop by 90%.

    I took a line between your Irish scenario and Bulgaria at 75%.

    Much as Logan also does, when he / she seems to think that these apartments are worth €80-€90k, it gets confusing trying to keep up who is saying exactly what on here sometimes – forgive me.

    @brianc_li wrote:

    For what it is worth, my guess is that the kind of apartment you have cited will bottom out around the 150k mark in a couple of years time. Allowing for inflation of 3% p.a. that will be the equivalent of 140k in todays money.

    And today, given the right circumstance and Vendor position, my point would be that you just might get one for €150k, if an agent knew your position, or a vendor of your willingness to decide instantly to buy. Your a smart guy, looking for a real smart deal, well these are out there – sometimes. And go fast.

    @brianc_li wrote:

    If I recall correctly at the time you were predicting that the market would turn in 2009. History now tells us who proved to be correct. Having followed the market closely since then I still firmly believe that more falls are in the pipeline.

    I am no market price guru or economist that is for sure and don’t think I have ever claimed to be one, but if you want to know if the market has improved from ’09 to ’10 I can tell you it certainly has, but you couldn’t get much more Armageddon than ’09 and if I said that before October ’08 well I wouldn’t be alone in not predicting the extent or calamity of ’08 now would I?

    My place here (I think) has been to report, comment, and lodge some of the current / active buying market views, for what they are worth. And whilst there was the odd week here and there in the absolute crisis, I have never known a two week period go by at any time where there were not a couple of sales my associates would have achieved for vendors.

    @brianc_li wrote:

    The bottom line here is that this is fundamentally not a good time to buy. If you want the lifestyle then rent until such time as this market sorts itself out.

    As to the fundamental bottom line, I absolutely agree and support your view, that is not a good time for you to buy, I don’t disagree with that one iota, I think when you buy you will be delighted and make a thoroughly good decision.

    What my point is; is that others have a different view, as equally valid as yours, yet toward their own circumstances and are happily buying and again in increasing numbers.

    And if you will permit me, as I think I pointed out to Logan in an early post, you will be making your decision having waited, watched and followed the lead of these others, who will have created (at some point) the upturn in the market that you are looking for.

    And you no doubt will have a few bob more from saving your funds to use toward the difference if there is one. So buy when you will, now is not for everyone, but let us not insist that it isn’t for anyone.

    It is for many.

  • #100635
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @logan wrote:

    Chris why do you think a two bedroomed flat is worth 180K? Even allowing for the fact it’s in overblown and puffed up Marbella it’s probably only ‘worth’ today and tomorrow between 80-90k. Just because it was once selling for 360k does not mean it’s worth anything. Even though some punter might buy it for 180k today does not mean it’s worth that amount.
    That’s fundamentally the problem. The market knows prices are only going one way. The real question is by how much and for how long until fair value is reached and it stabilises My best guess and it’s only that, is an additional -20% over an additional 18 months as Europe and US hover over the risk of a double dip recession. This thing is not over.

    I probably had too much time on my hands this past few days, as all my work here in UK was in order days ago and I fly out to overblown and puffed up Marbella early tomorrow.

    Logan, I have enjoyed the debate on this thread, it has been one of the better ones I think for a while, but I can’t accept the €80k scenario, though am willing to concede that maybe you are right -20% could happen.

    Marjal is right, in Recessions we do learn something, and that is yes… that anything could happen.

    So I leave it there for now, I have a holdall, to pack and loads to do for the next two weeks or so upon landing, thanks to you Logan, and Brianc_li for at least humoring me and giving me a fair hearing.

    Cheers

  • #100636
    Profile photo of peterhun
    peterhun
    Participant

    Everyone is going to fundamentally, look at buying property as an investment. The problem in Spain in particular is the difficulty of getting a mortgage, so buyers are going have another source of funds.

    Selling an existing property or business is the main way most people will have the money to buy. Selling in the UK is obviously difficult and anyone who thinks the UK/Irish market is going to rise is going to wait, if they can. That could be a long wait.

    If you have business to sell to retire, its even worse. First many businesses have depresses real estate as part of the sale and commercial property is even harder hit than residential. Secondly, business valuations are down even for profitable going concerns.
    Four times net profit seems to be a common selling price (FT.com); why would a businessperson sell up now an swap an asset that is in effect yielding 25% and is a lifetimes work, for a Spanish home with a negative return?

    Even Chris put his money outside Spanish real estate, so why shouldn’t other buyers/investors, because you can always RENT far cheaper than buying.

  • #100637
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @peterhun wrote:

    Even Chris put his money outside Spanish real estate, so why shouldn’t other buyers/investors, because you can always RENT far cheaper than buying.

    Oh dear, just when I thought I was gone, in pings a notification, so anyway…

    “Chris puts his money outside Spanish real estate”... you presume far, far too much.

    Not that it is any of your business, but as I have in fact referred to various Pension and other typical Investments over the past couple of years openly on the forum, I think I would describe whatever it is I hold outside of my “investment and interests in Spanish Real Estate”, as a basket of different / varied investments, kind of appropriate to my age and circumstance, managed by professional advisors for my twilight years.

    And I think it a bit tiresome, to throw up the much and over discussed issue of renting than buying, and of course people can put their money where they like.

    I was going to say Poland, but hey we been there with that, but a bit of a silly position at the end of much debate to assume to tell the world where you think I have put my money. You haven’t a clue where I have my ‘money’.

    Jeeze, am done with this thread for now.

  • #100638
    Profile photo of adiep
    adiep
    Participant

    @Chris McCarthy wrote:

    @adiep wrote:
    And this is a good time to buy because?

    If your priorities are…

    […]

    My point is, some fortunate few have an opportunity to invest in themselves, their well being, a release from pressure, to create a better balance and enjoy their life today. .

    So in otherwords, just do it, you might die soon.

    Erm, still not a good reason.

  • #100639
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @adiep wrote:

    So in otherwords, just do it, you might die soon.
    Erm, still not a good reason.

    Erm…, just a bit trite and slightly unworthy, I am not trying to win an economic argument, and I think there was more to my point than that, nor was I trying to win a buying argument, just pointing out that there are people buying and for good reason.

    However, as I came up to my desk and found the computer still on, I would bother to say that I think it is an excellent reason for some, and has the potential to be a good investment too.

    Now am definitely switching this machine off. I repeat it was an interesting weekend popping in and out though, and one day we will all be right am sure!

  • #100640
    Profile photo of adiep
    adiep
    Participant

    @Chris McCarthy wrote:

    @adiep wrote:
    So in otherwords, just do it, you might die soon.
    Erm, still not a good reason.

    Erm…, just a bit trite and slightly unworthy, I am not trying to win an economic argument, and I think there was more to my point than that, nor was I trying to win a buying argument, just pointing out that there are people buying and for good reason.

    However, as I came up to my desk and found the computer still on, I would bother to say that I think it is an excellent reason for some, and has the potential to be a good investment too.

    Now am definitely switching this machine off. I repeat it was an interesting weekend popping in and out though, and one day we will all be right am sure!

    Chris, for sure there are wealthy people who can sit on a loss for the sake of some sunshine.

    Of course, once you have invested here, you can bet that the Spanish government will be extracting as much from property related taxes as is possible over the coming years.

  • #100642
    Profile photo of logan
    logan
    Participant

    In most parts of Europe 180k will buy you a decent house, 3 bedrooms, some land, nice situation, good area.
    Why then in property recession hit Spain is a 2 bedroomed flat worth anything like 180k? 😯
    I mean apples and pears cost roughly the same throughout Europe. New cars too, almost everything.
    So is it the town Marbella that produces this cost hike? Perhaps but IMO it’s a tatty town. So many better places offer greater value.
    In France on the southern coast 180K will get you much more.
    Actually I think it’s a hangover from so much hyperbole and vastly inflated property prices in Spain which have contributed to much misery.
    That’s why I say the apartment is only worth a fraction of it’s asking price. The ‘Emperor wears no clothes’ for all to see

  • #100643
    Profile photo of adiep
    adiep
    Participant

    warren buffet has a nice saying to be quoted; you don’t know who is swimming naked until the tide goes out.

  • #100645
    Profile photo of adiep
    adiep
    Participant

    So here;s an example of a 40% drop

    http://www.oportunidadescam.es/Apartamentos-en-Algeciras-3-dormitorios/2662/vivienda_3420.html

    Bear in mind this house is in Algeciras and is now a bank repo, it was at 320k, now at 177k, I reckon its worth 120k. Even then its probably priced at 5 x salary for your average Algeciras family.

  • #100646
    Profile photo of Anonymous
    Anonymous
    Participant

    I mean apples and pears cost roughly the same throughout Europe. New cars too, almost everything.
    So is it the town Marbella that produces this cost hike? Perhaps but IMO it’s a tatty town. So many better places offer greater value.
    In France on the southern coast 180K will get you much more.

    Now don’t get me wrong here, but things are worth what people are ready to pay for them.
    Apples and pears do not cost “roughly the same in Europe”; you’ll probably find there is about 300 % price difference between Spain and say Denmark.
    If people pay 180k for something in Marbella (I barely know the town) its because they think its worth it, whether it be for lifestyle or any other reason.
    We are seeing prices plummet because of an absence (lack of) of demand and too much supply, nothing more, nothing less. If prices got silly in Marbella, it was because there was a demand.
    So, I ask, why does anyone want to live in the centre of Manchester, Birmingham, Edinburgh… and pay a lot more than 180k! It’s because there is a demand for these locations.
    By the way, when you say the south of France, do you mean by the sea…or inland? It’s not the same to live in Marbella than Torrox.

  • #100647
    Profile photo of adiep
    adiep
    Participant

    There was (and still remains) a demand, however, the demand was allowed to become a reality by the ability of buyers to borrow ever more ludicrous amounts from banks, the ease at which made the possibility of selling at even more stupendous valuations even more likely.

    Quite simply, if the banks stated, “sorry, no more than 4x salary” we’d have seen very little price movement and without a doubt there’d be no boom or bust. The salary requirements would have capped prices.

    Borrowing isnt going to become any easier. Basel III regs appear to state that banks must hold 3 x the amount of capital that they currently hold and thats going to make lending requirements more stringent.

    Meanwhile we have wage deflation in Spain, food price inflation and Interest rates set to rise in the next 12 months and of course plenty of uncertainty over the future of Greek (and Spanish) sovereign debt being repaid.

    The dominoes and lined up.

  • #100648
    Profile photo of logan
    logan
    Participant

    @adiep wrote:

    warren buffet has a nice saying to be quoted; you don’t know who is swimming naked until the tide goes out.

    😀 😀 😀 We will soon see who’s swimming naked.
    This decision yesterday will have a major downside effect on the property market in Europe. Spain will be hardest hit because the banks are under capitalised. Another nail in the coffin? Depends if their rights issues are supported.
    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7998504/Banks-told-to-double-their-cash-reserves.html

  • #100649
    Profile photo of Anonymous
    Anonymous
    Participant

    Funny how it is never UK banks that seem to have a problem. Wonder why every national press defends their own? I bet if we read Greek papers they’d also paint a much rosier picture than the one we have in mind.

  • #100651
    Profile photo of katy
    katy
    Spectator

    Heard on TV this morning that European banks borrowed 20.5 billion euro last month. The highest for 6 months.

  • #100654
    Profile photo of peterhun
    peterhun
    Participant

    @Chris McCarthy wrote:

    @peterhun wrote:
    Even Chris put his money outside Spanish real estate, so why shouldn’t other buyers/investors, because you can always RENT far cheaper than buying.

    Oh dear, just when I thought I was gone, in pings a notification, so anyway…

    “Chris puts his money outside Spanish real estate”... you presume far, far too much.

    Not that it is any of your business, but as I have in fact referred to various Pension and other typical Investments over the past couple of years openly on the forum, I think I would describe whatever it is I hold outside of my “investment and interests in Spanish Real Estate”, as a basket of different / varied investments, kind of appropriate to my age and circumstance, managed by professional advisors for my twilight years.

    And I think it a bit tiresome, to throw up the much and over discussed issue of renting than buying, and of course people can put their money where they like.

    I was going to say Poland, but hey we been there with that, but a bit of a silly position at the end of much debate to assume to tell the world where you think I have put my money. You haven’t a clue where I have my ‘money’.

    Jeeze, am done with this thread for now.

    You keep asking the question, e.g.

    @Chris McCarthy wrote:

    @peterhun wrote:
    Even Chris put his money outside Spanish real estate, so why shouldn’t other buyers/investors, because you can always RENT far cheaper than buying.

    Oh dear, just when I thought I was gone, in pings a notification, so anyway…

    “Chris puts his money outside Spanish real estate”... you presume far, far too much.

    Not that it is any of your business, but as I have in fact referred to various Pension and other typical Investments over the past couple of years openly on the forum, I think I would describe whatever it is I hold outside of my “investment and interests in Spanish Real Estate”, as a basket of different / varied investments, kind of appropriate to my age and circumstance, managed by professional advisors for my twilight years.

    And I think it a bit tiresome, to throw up the much and over discussed issue of renting than buying, and of course people can put their money where they like.

    I was going to say Poland, but hey we been there with that, but a bit of a silly position at the end of much debate to assume to tell the world where you think I have put my money. You haven’t a clue where I have my ‘money’.

    Jeeze, am done with this thread for now.

    You keep asking the same question ..

    If your priorities are…

    Lifestyle / Change
    Price / Affordability
    Health / Family
    Dream / Goal Fulfillment
    Location / Ease
    & Sunshine

    When NONE of that really matters, none of its is going to persuade someone to throwaway money that they don’t have. My point is nobody wants to loose money when they don’t have to, you included. Well, except lottery winners I suppose.

  • #100655
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    Funny how it is never UK banks that seem to have a problem. Wonder why every national press defends their own? I bet if we read Greek papers they’d also paint a much rosier picture than the one we have in mind.

    Its a well know fact that half the UK banking system went bust and was nationalised.

    Possibly less well know, UK banks have something like £4.5 trillion debt and have to raise £400billion in this year alone just to keep their existing borrowing in balance.

    Everyone who wants or needs to know knows how bad the situation is, the coalition have broadcast those facts and told the country to expect 25% cuts.

    Could you point to me where the national press are saying otherwise about the UK banking system? I’ve never seen a headline saying UK banks and the UK economy is in great financial shape. House prices, yes; the bullshit that follows it is down to the universal basic human greed that blinds everything.

  • #100657
    Profile photo of Anonymous
    Anonymous
    Participant

    @katy wrote:

    Heard on TV this morning that European banks borrowed 20.5 billion euro last month. The highest for 6 months.

    This escalating borrowing represents only a small part of what is needed in order to keep the Eurozone Dream and the Euro currency afloat. It seems the larger part goes on behind closed doors in so-called secret deals and ‘arrangements’, accompanied by ‘untruths’ concerning the true state of affairs.

    An example shown is this very interesting read:
    http://nbyslog.blogspot.com/2010/09/exclusive-norways-investment-in-clubmed.html

  • #100659
    Profile photo of Anonymous
    Anonymous
    Participant

    http://www.telegraph.co.uk/finance/news … erves.html

    It was in the article posted. I never said that they were in great shape it just said that UK banks would not have a problem with the new rules on having more funds.

  • #100660
    Profile photo of Anonymous
    Anonymous
    Participant

    I believe this is the link you wanted to post:
    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7998504/Banks-told-to-double-their-cash-reserves.html

    Indeed this is nothing to do with the state of British banks. After the 2008 debacle the BoE had already leant on them to make provisions akin to those that have now been agreed worldwide.

  • #100661
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    It was in the article posted. I never said that they were in great shape it just said that UK banks would not have a problem with the new rules on having more funds.

    I wasn’t replying to that post (which seems to have disappeared) but to your comment, as quoted.

    Spanish banks were supposed to have higher capital ratio’s than most EU banks, surely they would be a little better off than the German’s (who are sounding suspiciously delicate, where has that come from?).

  • #100663
    Profile photo of Anonymous
    Anonymous
    Participant

    No idea what the German bank thing came from. That’s what you get for calling one of your banks “Hypo”…

  • #100664
    Profile photo of logan
    logan
    Participant

    I don’t believe that Spanish banks are well capitalised. To start with if the Bank of Spain declared that some banks were under capitalised the Spanish government would have to provide the cash to fix it. So it’s in everyone’s interests to disguise the true position.
    The recent stress tests are considered flawed by almost all financial commentators. This is what one academic thinks of them:
    Francisco Lopez Lubian, a professor of finance at Madrid’s IE Business School faulted the stress tests for in some cases counting cash injections from the FROB as the bank’s capital when they should be considered loans. Source Google.
    You can find much more negative comment if you look.
    The stress tests were designed to calm the financial markets not to report the truth and cause panic.
    Creating and maintaining stability is considered far more important by central bankers and politicians than informing the public the system is falling apart. The capitalist model depends on investor confidence.
    However if you are trying to spot future trends and market behaviour you have to either get a crystal ball or be cynical about anything that emerges from regulators and bankers.
    With the new 7% reserve rule, banks are going to have go round with a large begging bowel or more likely cover up their true position.

  • #100666
    Profile photo of katy
    katy
    Spectator

    Some spanish banks which passed the stress test only just scraped through.

  • #100673
    Profile photo of Anonymous
    Anonymous
    Participant

    Regarding the title of this thread, I think the whole European economy is in crisis, being ruled by smoke and mirrors. The stress tests were part of that.

You must be logged in to reply to this topic.