by Graham Summers
Phoenix Capital Research
November 29, 2012
Spain’s financial system is at truly apocalyptic
If you’ve been reading me for some time, you know that Spain has already
experienced a bank run equal to 18% of total deposits this year alone
the mainstream media is avoiding).
However, what you likely don’t know is that an
on annualized basis, Spain has experienced portfolio and investment outflows
GREATER THAN 50% OF ITS GDP.
To give this number some context, Indonesia only saw outflows equal to 23%
of its GDP during the Asian Financial Crisis. Spain is experiencing more
than DOUBLE this.
I’ve long averred that Spain will be the straw to break the EU’s back. By
the look of things this is not far off. The country’s regional bailout fund
has only less than €1 billion in funding left.
As the below chart shows, this will barely make
a dent in the regions’ debt problems:
Indeed, things are far far worse than is commonly know.
Valencia for instance owes its pharmacies over
€500 billion. In some areas there is no longer insulin. In the region of
Andalusia some government workers haven’t been paid in eight months and are
working for free while begging for food.
And Catalonia is pushing to secede from Spain entirely. Indeed, its
pro-secessionist leader, President Artur Mas, just won the most
recent election. And over 1.5 million of Catalonia’s 7.5 million inhabitants
turned out for an independence rally in September.
Again, Spain as a country is finished. Things are so bad that British
Airways (many wealthy Brits vacation in Spain) is putting a contingency plan
for SPAIN to leave the Euro.
Worst of all, it is clear EU and Spanish leaders have no clue how to deal
with any of this. Their latest plan is for the country to cut the balance
sheets of three nationalized banks by 50% sometime in the next five years.
How will they do this? By dumping their toxic
property assets into a “bad bank.”
The idea here is that somehow someone will want to buy this stuff. Spain
already had to postpone the launch of the bad bank by a month because no one
wanted to participate in it (despite the mainstream media claiming that the
idea was popular which is untrue).
So, here we have Spain proposing that it can somehow unload a ton of garbage
debts onto “someone” even though there is no “someone” to buy them. And the
whole point of this exercise is to meet conditions so that Spain would
qualify for another €40 billion in aid.
€40 billion in aid... when Spain has experienced portfolio and investment
outflows of more than €700 billion.
Indeed, things are so bad that the ECB has put the entire Spanish banking
system on life support to the tune of over €400 billion Euros. To put this
number into perspective, the entire equity base for every bank in Spain is
only a little over €100 billion.
Oh, and the country needs to issue over €200 billion in debt next year.
If you’re looking for ideas on how to navigate this mess, we have produced a
Special Report titled
'What Europe’s Collapse Means For You and Your Savings'.
This report features ten pages of material outlining our independent
analysis real debt situation in Europe (numbers far worse than is publicly
admitted), the true nature of the EU banking system, and the systemic risks
Europe poses to investors around the world.
It also outlines a number of investments to profit from this; investments
that anyone can use to take advantage of the European Debt Crisis.