Spain

[Cabrone]

Maybe I'm being naieve but the question in my mind is why should a small group of uber greedy financiers be allowed to attack a nation state of some 40m people like this?

Who's attacking Spain?

Spain wants to borrow money, people are demanding higher interest rates than they did a year ago.
In what way is that an "attack".
If Spain doesnt like the price asked, its free to *not* borrow the money and live within its means.

Yes but Spain appears to be fairly stable and is able to pay so why are the bond holders all of a sudden trying to squeeze more money out of them? What has changed? They just fancy having a go at them?

I'd have thought that the UK would be more open to attack than Spain.

[emordnilap]

If Spain doesnt like the price asked, its free to *not* borrow the money and live within its means.

I hope they're free to tell the gamblers to go fook themselves too.

[Lord Beria3]

Well, it is true that if a country doesn't want to be dependent upon foreign bondholders, it can live within its means! Of course, that would mean a smaller state and slimmer welfare state, something the banker bashers here are rather not fond of.

Seems like folks here want to have their cake and eat it!

Regarding Ireland and other countries I happen to agree that the senior/junior bondholders should take a 'haircut' in terms of a managed default, but in the long run it is the fault of governments in not running their finances in a sound order.

[Guest]

EDIT

[Mean Mr Mustard]

Turkey, innit.

[Tawney]

If Spain doesnt like the price asked, its free to *not* borrow the money and live within its means.

Slight problem in that all the western economies have built up vast national debts that they can never realistically hope to pay off, regardless of how much belt tightening they do. The debt has to be serviced to keep the whole system going. Then there's the difficulty of reducing a massive deficit without sending your economy (and those of your trading partners) spinning into recession/depression.

Tricky.

[Potemkin Villager]

If Spain doesnt like the price asked, its free to *not* borrow the money and live within its means.

Slight problem in that all the western economies have built up vast national debts that they can never realistically hope to pay off, regardless of how much belt tightening they do. The debt has to be serviced to keep the whole system going. Then there's the difficulty of reducing a massive deficit without sending your economy (and those of your trading partners) spinning into recession/depression.

Tricky.

I would love to see a comprehensive summary of just who owes
who what and when it falls due. It would probably be very surreal.

Still in the end of the day these are all just numbers in elecrtronic
ledgers and if we cannot sort out a non material book keeping issue
what hope have we when facing real physical constraints?

I have been rereading "The Smartest Guys in the Room" recently, those MBA Enron boys sure had a few cute hoor book keeping tricks for hiding massive debts...

Jeff Skilling where are you when the world needs you?

[emordnilap]

Indeed Roger. It would seem on the face of it that, if each country did a 'debt exchange', ie, Italy hands over the 28 billion it owes Spain and Spain hands over (after all, it's just numbers, nothing physical) the 40 billion it owes Italy, etc etc, things might look a little more straightforward. (Apologies, not sure of the actual figures but you get my meaning).

Of course, I realise it is an impossible transaction because of the number of creditors and debtors involved but the point remains that money is debt and thus are in balance. It also points up the fact that liabilities can be socialised but not assets, according to the rules we've voted for.

On the domestic front, I suspect there are a huge number of dealings of which we're not aware and which are likely to remain hidden for decades. Someone has Fianna Fail by the balls.

[Cabrone]

Interesting idea about countries 'netting off' against each other but the complexity would be horrendous.

I have a friend that worked\still works for Lehman Bros (she wasn't involved in any of their car crash investment decisions).

She was kept on as part of a team that is sorting out the mess that they left behind i.e. paying off the creditors\getting money back from debtors that they had at the point of going bust.

She's been doing it since they went bust and could be there for many years yet.

If that's just one company imagine the complexity for whole countries.

[emordnilap]

Interesting idea about countries 'netting off' against each other but the complexity would be horrendous.

I have a friend that worked\still works for Lehman Bros (she wasn't involved in any of their car crash investment decisions).

She was kept on as part of a team that is sorting out the mess that they left behind i.e. paying off the creditors\getting money back from debtors that they had at the point of going bust.

She's been doing it since they went bust and could be there for many years yet.

If that's just one company imagine the complexity for whole countries.

Yep. Anglo Irish is said to be taking 15 years to wind down and €34 more billion.

Which means double that.

[DominicJ]

Yes but Spain appears to be fairly stable and is able to pay so why are the bond holders all of a sudden trying to squeeze more money out of them? What has changed? They just fancy having a go at them?
I'd have thought that the UK would be more open to attack than Spain.

Well its a matter of opinion that spain is stable. I personaly think its a powder keg.
Unemployment is over 20% in spain, youth employment is over 40% and their housing bust makes ours look placid. I've heard stopries of children not going to school because their parents cant afford to buy them shoes and four generation families living on the pensions of the Great Grand Parents.

I cant find a source for it, but I'm sure German Labour costs have gone up 2% PA since EMU, Spanish Labour costs were going up at 6%
If thats correct, over a decade, German Wages have gone up 22%, Spanish wages have gone up 80%.
So to correct that massive unemployment problem, wages will have to drop by a third, probably more to attract investment.

Theres also the easiest answer, theres only so much available to be borrowed, If Spain wants to borrow more money, Morroco has to go without, if Germany wants to borrow more money, Spain has to go without, or bid higher.

The UK is protected by Sterling, at the peak of the crisis, Sterling was 1:2 with the US dollar, we're now 2:3, we took that 1 third paycut and didnt really notice.

[Potemkin Villager]

If that's just one company imagine the complexity for whole countries.

Yes we certainly do complexity, nay even complex complexity in a very big way. All those highly complex systems, procedures, transactions, finacial instruments, structures, reporting systems........

I blame computers myself.

[DominicJ]

The problem with netting is the amounts dont net.
Portugal owes Spain $86bn, Spain owes Portugal $28bn leaving a Net of $58bn.
But Spain owes Germany $238bn and France $220bn.

It also leaves the problem that the states dont owe each other money, they owe each others pension funds money.

[Potemkin Villager]

The problem with netting is the amounts dont net.
Portugal owes Spain $86bn, Spain owes Portugal $28bn leaving a Net of $58bn.
But Spain owes Germany $238bn and France $220bn.

It also leaves the problem that the states dont owe each other money, they owe each others pension funds money.

If Spain owed France and Germany say 10% of this it certainly would be
a problem for Spain. As it is it looks like a giga-problem for France and Germany.

Of course the tits should never have lent them so much in the first place.

[DominicJ]

As it is it looks like a giga-problem for France and Germany.

France is owed $511bn by Italy.
Thats the really scary one.