Re: Re: Investor confidence in Spain improves says WSJ

#103649
ozmunky
Participant

@Chris McCarthy wrote:

Can somebody clear this up for me…

Has not the UK the engaged in the practise of quantitative easing to a level previously considered unimaginable and is not the UK in rags and tatters?

Did we not have the first run on a major bank in 200 years back in 2007, and don’t we the public, own something like 85% of the previously gloried RBS because it actually couldn’t make 2+2=4.

Was it not, in the Houses of Parliament, that the heads of each major bank sat in front of a Commons Committee and it was discovered that none of the heads of the banks, had a single banking qualification between them?

Was that the UK? I think it was and much more horrific stories of gross financial mismanagement and negligence besides when it came to the economy, which in our usual cahoots with the USA we, and they, almost managed to literally close down the entire world economy.

Am sure I was sat here watching Alistair Darling explaining to the BBC Money Programme special how, we were within two hours of all the ATM’s in the UK shutting down and being unable to dispense money and an equal number of hours before all banking would have frozen and literally no ones wages would have been paid.

What…. you think Spain has problems?

And where were all you guys prior to 2008? And what was your financial analysis and data collecting telling you back then? I know Mark was predicting the Perfect Storm for the Spanish Property Market back in 2006 and I was agreeing with him.

But now all of a sudden you all know with unbelievable certainty that Spain’s economy is on the rack and you all come from where… exactly? And you were what all ahead of the ball game come the crash too I suppose?

Sorry but am afraid it is all phooey round here. I say this not to be rude, just that for about 3 years I religiously watched the stock market daily having gone in and lost a bundle and was waiting for it to come back, and I used to know the exchange rate to the € / £ by the hour, but I gave up looking at any of that quite a while back.

It matters not folks, you need to get out and live a little, lets all meet up on the Paseo in Marbella have a beer and a tapas and chill down some.

And believe it, am sure investor confidence in Spain is improving and there is an argument to say that but for quantitative easing on a MASSIVE SCALE the UK would have been in a lot worse position than Spain no?

Or do I have it all wrong?

Hello Chris

Always good to see you. Hope you are well and your golfing is getting better than mine.

As a worker in the markets, I am always asked to explain in laymens terms whats going on.

Essentially its this :

(i) QE (quantitative easing) is the process of governments giving cash as a loan to banks in return for bonds/shares to keep them functioning
(ii) Unfortunately, the Banks have not lent the money out for mortgages or to businesses etc. to keep them going as the govt wanted, but instead have used it to put out fires in their own back yard or invested it for their benefit — both against the govts wishes but the silly govts didn’t have any mechanisms to force them to do what the govts wanted.
(iii) So, what you have is Banks getting cash and told what to do with it but not enforced how they have spent it — so they have done whatever they wanted
(iv) Spain is different however.
(v) In Spain’s case the govt doesnt have enough cash or credibility in the bond markets to do a QE program — markets say you are nearly bust and you want to borrow more from us to do QE ?
(vi) Spain has a huge debt from the property bubble but not the means to pay it back to the bond markets — manufacturing, tourism, property sales cant pay the bills.
(vii) Unemployment in Spain is 20% and economy contracting.
(viii) Market (Bond market — bankers to the govt) cant see how they are going to repay.

End Game: Markets lose faith, interest rates rise to spain, govt stubbornly goes alone,EU says they are too big bail out, govt runs out of money, IMF crisis who knows what else happens……

What does this mean for property buyers, owners, agents ?

(i) those on euro mortgages with not too much equity will be crushed
(ii) property values must drop dramatically to provide liquidity for stressed banks
(ii) agents better start telling sellers to be realistic or dont bother and deal with consequences
(ii) those owning outright will be OK provided they hold and not sell due to health reasons, divorce etc ….

The reasons the UK will come out of it better is:

(i) London financial markets are the biggest on earth — 7 times bigger than New York (its next competitor)
(ii) UK will innovate its way out of the slump — do not under estimate biotech and quality high value stuff the US cant do properly
(iii) The UK will also lead the way for private finance/hedge funds — no other center can compete on rule of law, deal making and infrastructure (finance, lawyers etc)

What does Spain have to offer ?

(i) Weather
(ii) Golf
(iii) Nice relaxed lifestyle

No contest in the end.

— Munnky