Spain is about to enter a full-scale Crisis.
A few facts about Spain:
• Total Spanish banking loans are equal to 170% of Spanish GDP.
• Troubled loans at Spanish Banks just hit an 18-year high.
• Spanish Banks are drawing a record €316.3 billion from the ECB
(up from €169.2 billion in February).
Things have gotten so bad that Spanish citizens are pulling their
money out of Spain en masse: €65 billion left the Spanish banking system
in March 2011 alone.
As bad as they are, even these data points don't do justice to the toxic sewer that is the Spanish banking system.
Case in point, over HALF of all Spanish mortgages are owned by Spanish cajas.
If you're unfamiliar with the caja banking system, let me give you a little background...
Until recently, the caja banking system was virtually unregulated.
Yes, you read that correctly, until about 2010-2011 there were next no
regulations for these banks (which account for 50% of all Spanish
deposits). They didn’t have to reveal their loan to value ratios, the
quality of collateral they took for making loans… or anything for that
matter.
So, with Spain today, we have a totally unregulated banking system
sitting atop HALF of ALL Spanish mortgages after a housing bubble that
makes the one that happened in the US look like a small bump.
Oh, I forgot to mention, the cajas primary lending market during Spain's housing boom were subprime and sub-sub prime borrowers.
Put another way, today the entire Spanish banking system is saturated
with toxic mortgage debt on a level that makes the US in 2008 LOOK
GREAT.
If you don't want to take my word for it, have a look at the Spanish
stock market. It's been in a free fall for over a month as Spain's
banking system teeters on the brink of collapse (remember they're
drawing over €300 BILLION in emergency loans from the ECB.
With that in mind, I believe we have at most a month before Spain
drags down the entire EU. The Spanish economy and banking system are too
large to be bailed out. The IMF and ECB know this.
Moreover, worldwide banking exposure to Spain is well over €1
TRILLION. What impact do you think that might have on the EU which has
an entire banking system that is leveraged at 26 to 1 (Lehman Brothers
was leveraged at 30 to 1 when it collapsed)?
Heck even Ben Bernanke and others have issued warnings that Europe could drag down the US banking system if it crumbles.
So if you’re not already taking steps to prepare for the coming collapse, you need to do so now.
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