The Eurofiscal Corruption Contest – The Spanish entry.

Let me make it clear straight away – the lies, corruption, cowardice and greed of Spanish bankers and government officials is nothing special. What is happening in Spain now, reminds me of Northern Rock in the UK, Hypo in Germany and  CountryWide in the US. So please do not think that I dislike Spain or of the ordinary people of Spain. The people I detest in Spain are the same people I detest in Britain and every country: The Cabal of corrupt Bankers and Political parasites.

Every country will have its moment in the spotlight. Italy is preparing in the wings as we speak. But today, on the Eurofiscal Corruption Contest, Spain is on stage.

It is the mantra of the main political parties and media across Europe, that the present crisis is the result of too many people taking on loans they could not afford. Neither the bankers nor the politicians, according to the accepted story, saw the crisis coming or could have seen it coming but have been engaged in heroic attempts to rescue us from a crisis of our own making.  THIS IS NOT TRUE.

First, people did not ‘take’ loans they could not afford. The loans were ‘offered’  by bankers whose job it should have been to advise their clients on whether the loan was wise and sustainable. The bankers offered no such advice but instead pocketed the bonuses which came from selling as many loans as possible to all and sundry. So a more accurate summary of who is morally guilty, is that people accepted loans they should have known they would not be able to afford if ever the market turned down, but which were offered to them by professional bankers who assured them they would be fools not to get on the property ladder. Second, a vast number of the loans which have gone bad in Spain were not in fact ever made to ordinary people. They were made to developers and construction companies. It is those companies which have defaulted.

I am not saying ordinary citizens bear no responsibility. My concern is to stick a knife into the diseased carcas of Spanish Politics and bring to the surface the parasites who have gorged themselves on the flesh of Spain for decades and insist that their blame be recognized.

Let us start with the men who can be said to have built and profited from the disaster which is now engulfing the Spanish people. Four of Spain’s ugliest parasites are Rodrigo Rato the former head of Bankia, Prime Minister Mariano Rajoy , Miguel Ángel Fernandez Ordóñez the Head of the Central Bank of Spain and Jaime Caruana former head of the Bank of Spain. These men form a tight and incestuous group who have promoted and appointed each other to positions of power. They were at the helm during the whole bubble period and they can be said to be the men who caused the present crisis. They, as I hope to show, are at least some of Spain’s guilty men.

Rodrigo Rato become known to the outside world as the Head of the now notorious Bankia. It has been Bankia’s collapse which triggered the current round of Europe’s on-going bank debt crisis. The Bankia collapse has angered the rest of Europe’s elite. Just when they thought they had succeeded in convincing people to forget that this was a crisis of private bank debts and insolvency, caused by bankers, and to think instead that the whole problem was a Sovereign debt crisis caused by greedy citizens,  along comes Bankia to remind people, in a most unhelpful fashion, that, at root, this is a PRIVATE BANK CRISIS. A crisis of private loans and private debts, created by bankers at private banks for their private clients. Particularly in Spain this crisis is not one of Public debt.

As the BBC pointed out,

The Spanish government’s debts were a mere 36% of its gross domestic product (GDP) (the output of its economy) in 2007, while the German government’s were 65%.

And what is more Spain was living well within its means, spending less than it was taking in. Those are facts.

BUT, once Spain entered the Euro interest rates fell dramatically. The result was that borrowing grew and grew. Those who borrowed first and biggest were the developers, construction companies and banks. The ordinary Spaniard followed their lead, and was encouraged to do so because those who had borrowed first, the builders, developers, speculators and banks, urgently needed customers.  The big players led the market. They did not respond to demand they created and fostered it.

But back to Señor Rato. His role in Spain’s agony goes back long before Bankia. Señor Rato was, in fact, Spain’s Minister of the Economy from 1996 until 2000 and Vice President from 2000-2004 when the PP was previously in power. This means he was at the helm of the economy during the bubble years when property prices tripled.

Of course he wasn’t alone. Here enters our story another of our villains, Señor Jaime Caruana who was Governor of The Bank of Spain from 2000 – 06, the exact time Rato was Minister of the Economy. He too was a PP nomination. As Governor of the Bank of Spain, Señor
Caruana shared with Rato oversight and regulation of the banks. Neither of them did or said anything to warn of the growing dangers from bank lending and debts. There is nothing I am aware of on record anywhere. Señor Caruana smiled, waved and drew his salary. He was also appointed, again with Señor Rato’s support, to be the Chairman of the Basel Committee for Bank regulation.

So here was Caruana, the Governor of the Bank of Spain, who we now know was asleep at the wheel, while every Caja in Spain was gorging itself on rancid, stupid and outright fraudulent loans, now appointed to the pivotal European Committee charged with regulating Europe’s banks and saving them from themselves. Irony? The word isn’t big enough.

So Señor Caruana was Govenor of The Bank of Spain while also enjoying the power and prestige, of the  Basel Committee, and from neither vantage saw anything to worry about in the hugely inflating property and debt bubble at all, and made sure nobody investigated the Cajas. While Caruana had Bank of Spain and Basel Señor Rato too found higher office beckon.

As minister of the Economy, Rato was a rising star in the Parido Popular government, but so was another man, Señor Mariano Rajoy. It was Rajoy not Rato who, in 2004 ascended to become head of the PP. and later Prime Minister. What happend to Rato? As Rajoy ascended to the leadership of the PP, he and the outgoing PP head Señor José María Aznar, lobbied for Señor Rato to become Managing Director of the IMF.  Getting their man to head the IMF was virtually the last act of the PP leadership before they lost the 2004 election. Señor Rato was MD of the IMF from 2004 till he resigned suddenly in 2007. 2007…Hmm. During the time he was there, the IMF said nothing unkind about Spain’s property bubble nor its banks.  Caruana was at The Bank of Spain and the Basel Committee where he saw no evil, while Rato was at the IMF where he spoke no evil.

Of course Rato left the IMF in a hurry in 2007 while Caruana had been replaced in 2006 at the Bank of Spain by the new governor, Señor Ordóñez, who was appointed by the new socialist government. You might think the loss of IMF and Bank of Spain positions for thePP boys would upset things for Rato et al. But no. While Rato was still at the IMF in 2006 he plucked Caruana, even as he left the Bank of Spain job and installed him at the IMF as Director of the new financial, capital and regulatory operation called the Monetary and Capital Markets Department. Where he could see no evil even more comprehensively than before. Rato was out of the IMF, but his man was newly in. Rato was not done yet.

But before finding out what Rato did next it is important to remind ourselves of the saga of the Spanish regional banks, the Cajas. The first Caja to collapse was Caja Castilla La Mancha in July ’09 . As I wrote back in May 2010 in The Ugly Truth everyone expected others to follow. Even a year later none had. Then David Watts at CreditSights wrote a piece which ZeroHedge picked up and about which I wrote in The Stink is Out. The Caja’s and other Spanish banks had been quietly and selectively buying back the worst performing loans out of the securities they had sold. This meant when people looked at Spanish securities they looked impressively healthy and seemed to speak of a well run and surprisingly resilient Spanish banking sector. A fiction which suited Rato and Caruana.

But this fiction came at an appaling cost. By buying back those bad loans the Spanish Caja and banks were managing to hide the real extent of their losses and insolvency but only by keeping the worst loans and the losses they created, on their own books. While other banks in other nations were off-loading whatever they could on to any idiot who they could cheat, the Spanish banks were shovelling their mess down their own throats.

Of course for this to work the bank regulators had to be either unaware or complicit. This is where the new Govenor of the Bank of Spain, Señor Ordóñez comes in. He was not PP but appointed by the new ‘socialist’ government. You might have thought he would have blown the whistle, but he didn’t. Rajoy, Rato and Carauna who were all either out of power or out of the country after 04 -06 were all so well connected it beggars belief that they would not have known what was going on in the Cajas, but they didn’t blow any whistles either. Why would they? They would be exposing their own complicity and guilt. In fact Caruana is even more guilty than the others, if that’s possible, For in ’09, just when Caja Castilla La Mancha became the first to choke upon and then violently vomit up all of its own shit that it had been shovelling into itself, Señor Caruana had become General Manager of the Bank of International Settlement, the BIS.  He was the Central Banker’s banker and guardian of their secrets. He still said nothing.

Now let us return again to Caruana’s benfactor, Signor Rato.

Whatever caused Señor Rato to resign so suddenly from the IMF it did not end his career. Far from it. By now we are in 2011 and Señor Rajoy is now Spanish Prime Minister. He was determined to hear no evil. To help him do this Señor Rajoy turned once again to Señor Rato, now ex of the IMF, and this time he appointed him to be head of Caja Madrid.

Madrid also happened to be where Signor Rato’s family, who are very wealthy and who have been involved at the heart of Spain’s politics since Ratos’ Grandfather was Mayor of Madrid and a minister in successive governments, happen to have deep business interests. Caja Madrid gave out a huge number of loans to… construction and development companies. It is the construction and development companies, such as Begar and Ploder Uicesa or Metrovacesa which have defaulted on their loans and gone bankrupt.

But remember many of those worst loans are the ones the Caja’s had been hiding away by buying them back and swallowing them. There is zero reason for believing that Caja Madrid, at the epicentre of the banking and property bubble, would not have been playing this fraud. When Señor Rato took the helm he would have been quickly aware of the explosively awful situation. No sooner had he and Rajoy got back together than the Caja implosion engulfed them both. Rajoy and Rato’s answer was to merge 7 dying Caja, including Caja Madrid, into Bankia.

In their minds somehow sewing together 7 dying men into one many limbed monster was going to make them all much healtheir. Maybe they believed their own bullshit. They had, after all been swallowing it for some time. Perhaps they had aquired a taste. Who knows. But on the 31st of January 2011 one of Spain’s more shameful events began. Señor Rato annouced that Bankia would go public and they would offer Spanish investors, ordinary people, pension funds etc, the chance to buy into this new bank which Rato said, and I quote from the official press release, was,

 “solid, healthy and with a vast capacity for generating resources, a factor that has already proven its values on the market”.

On July 15th Rato’s version of reality was endorsed when Bankia passed what the European Banking Authoritiy’s called its definitlive and completely transparent stress test.  The finest financial experts of the EBA and The Bank of Spain working, as they said, hand in hand with Bankia’s own overseers, found nothing amiss in Bankia. And the bank even declared a profit of €44 million.

Those who believed all the bankers and their expert friends and bought Bankia shares at the offer price of €3.75 have now lost over 60% of the money they invested. Bankia shares are today worth 1 euro. Bankia is now so close to death, the death it was in actual fact always close to, that  the Spanish people are once again being forced to bail it out.

Mr Rato was forced to resign. No sooner had he gone but Signor Ordóñez, Govenor of The Bank of Spain has also said he will resign too.

The rats are leaving the ship in Spain. A right leaning pressure group, Manos Limpias, founded and led by a lawyer, recently filed suit against both Ordonez and Rato. The suit which has been admitted to court by a judge in Madrid accuses Señor Ordonez of mismanagement of the banking sector particularly during the Bankia bailout and accuses Señor Rato of falsifying financial statements. Señor Caruana is so far safe at the BIS. He should not be. While Señor Rajoy is protected by still being in power. And he too should be made to answer.

Rato, Rajoy, Caruana and  Ordóñez all saw no evil, heard no evil and spoke no evil. Together, however, they profited personally from destroying the lives of their countrymen and women. That, to my mind, is evil.

 

82 thoughts on “The Eurofiscal Corruption Contest – The Spanish entry.”

  1. Good research.

    It is important to flesh out supposedly glaring facts which are nonetheless quickly forgotten.

    I found that I have forgotten myself how Bankia came into existence just months ago.

    Might I suggest that in a piece in the future you investigate the personal connections between bankers and politicians on a wider pan-European scale.

    Particularly Goldman, Sachs seems to be heavy in this department (http://www.independent.co.uk/news/business/analysis-and-features/what-price-the-new-democracy-goldman-sachs-conquers-europe-6264091.html)

    1. RBS did the same only had a rights issue a couple of weeks for HMG stepped in and bailed it out (some £12.5Bn was raised and promptly swallowed up by the mess)

      But hey, ordinary peoples saving and wealth are there to be plundered by the feral elite so it seems

  2. >>First, people did not ‘take’ loans they could not afford. The loans were ‘offered’ by bankers whose job it should have been to advise their clients on whether the loan was wise and sustainable.

    I would have to disagree with you on the first sentence quoted above. Folks did take too much debt, as they did here in the US…

    I personally thought long and hard before taking out my first mortgage, and for that one, with the help of my parents paid a down payment more than 1/3 of the purchase price.

    The reason was, as self employed, small payments were required for survival.

    That set the pattern for all future purchases… the most recent one, we paid as a down payment 87% of the purchase price.

    The upside of this is we were able to pay it off in a few years.

    This is regardless of any “candy” being offered by the bankers.

    It is a matter of:

    1. What you are comfortable with owing

    2. What your view of the future may be

    3. And how comfortable your are with uncertainty.

    So, in short, I do not blame loan availability on bankers.

    Loan repayment is primarily the responsibility of the borrower, and herd mentality is not a very good excuse (everyone else is doing it).

    Frankly, I could not believe how “everyone else was doing it”. It always struck me as scary and dangerous… as owing money has always been uncomfortable to me. I also do not carry credit card balances, as they appear dangerous also.

    We are not wealthy, my parents were working class, and I have been exceedingly frugal and hopefully, prudent.

    1. Here in the UK people were unable to get social housing, and could not afford private rental. They thought they could not afford to buy but they tried because it was the cheapest option. I’m sure many were surprised that they were given loans, but happy to have a roof over their heads, and of course they trusted the banks who surely knew better than them.

      What you have had is people who should never have been given loans encouraged into the housing market both to keep the market going and to give bankers their bonuses. Remember that these people were forced by lack of choice to follow this route. I also think that banks et al often encourage these borrowers because the risk they pose allows them to charge a higher rate of interest. I sometimes wonder whether people, and countries, only have a problem because their interest repayments are so high, and that they are only a risk because they are seen as a risk. In other words a self-fulfilling prophecy.

      1. I would add the following :

        The UK TV Media has been pumping “house-buying” for the last 10 years with all sorts of “shows” …sometimes 4 different shows in one day, every day !

        Anybody watching ( and I suspect many did ) would have got the feeling : “get on the ladder now, before prices are out of reach”.
        I have always asked the question who finances or sponsors these shows… and if that is not the case, maybe they are indirectly sponsored via advertising thanks to massive viewing quotas.

        One example I remember well is a show where a house in South East England was auctioned off for 500K … and the TV-Moderator said to the buyer … “XXX, you’ve got a great bargain there” . The house in question had a WW2 crack in the back wall from the roof to the ground. My German wife was aghast , saying “In Germany that house would have been condemned and marked for demolition by the state”.

        I was also regularly pestered by UK relatives to “buy a house in the UK, they’re going up in price fast” … quickly justified with “Government Reports say that there will be a great housing shortage in Britain in the future”. I counteracted by saying that “for that money, you could buy a nice Villa in Germany”

        Bottom line :
        Aas far as am concerned, an Inquiry is missing which examines the role that the British Govt. + Media + Banks + Estate Agents played in creating the UK housing bubble.

        FWIW

    2. Lenders have a duty of care to their primary fund sources not to lend to borrowers who will not be able to repay.

      If somebody lends an unemployed tramp 200 quid and the tramp goes on a bender and doesn’t repay, who’s fault is it ultimately and who bears the greater responsibility.

  3. I hope we the people have not lost sight of the basic truth about this phony money we are supposed to owe. We must remember that it was created out of nothing by the bond market using a conjurer’s trick called “securitization”. This securitization of mortgage finance was the root cause of the global financial crisis. Everything else is secondary.

    Thus a tsunami of “mortgage-backed securities” was released on an unsuspecting world by the bond market, who marketed it as “bond debt”. The banks were mere conduits for this phony “money”. The bond market cleverly passed it through bankers as its salesmen, but that did not make it money.

    What was “securitized” was an impossible promise of exponential growth of real estate values ad infinitum. That impossible requirement made these “bonds” worthless.

    Therefore this so-called “bank debt” need never be repaid because it was never real money to begin with.

    The dream of easy riches bred massive greed among bankers, developers, homeowners, everybody. But that greed, ugly and regrettable as it may be, is not the root cause of our global meltdown. The well-spring of our trouble is “securitization” of mortgages by the bond market masquerading as banks.

    Our governments therefore, are not bailing out banks; they are bailing out the bond market. Banks have become mere hollowed out instruments of this monster our governments slavishly call “the bond market”. Amazingly they still try to placate it instead of fighting and killing it.

    The sooner our governments realize who and what they are fighting the sooner we will get our lives and our economies back.

  4. Golem,

    Another well researched article and another rollicking good read. The Damon Runyan of your time you are. Unfortunately though, your characters are true, and aren’t in danger of redemption any time soon….

    As Hunter Thompson said,

    ‘In a nation run by swine, all pigs are upward-mobile and the rest of us are fucked until we can put our acts together: Not necessarily to Win, but mainly to keep from Losing Completely’.

    Unfortunately though, the Spaniards are 5-0 down and we are going into injury time.

    On a slight tangent (I’m sure you’ve seen it on ZH), but the latest Farage clip was interesting as usual. Apologies if I get the alphabet soup bit wrong, but the summary of what he was saying was that the EFSM is lending money to Spain for the bailout at 3%. As it is part funded by Italy, they need to raise 20 billion or so to pay their share. As they are charged 7% by the markets, and in dire straits themselves, the Spanish bailout pushes them towards the need for a bailout. Domino’s indeed…

      1. If Hunter S. is to your taste, here’s my favourite:

        I sat there for a long time, and thought about a lot of things. Foremost among them was the suspicion that my strange and ungovernable instincts might do me in before I had a chance to get rich. No matter how much I wanted those things that I needed money to buy, there was some devilish current pushing me off in another direction- toward anarchy poverty and craziness. That maddening delusion that a man can lead a decent life without hiring himself out as a Judas goat.

  5. Seems like a similar story to Ireland but on a much larger scale. As for people going over their heads by taking on mortgages they cannot afford or using the inflated value of their house to pay for cars holidays etc, it seems to me that when those who are supposed to be in the know promote this behaviour, how are most ordinary people supposed to know better ?

    In Ireland the property market was like a snowball running down a hill, all the time getting bigger & accelerating. This was fuelled by gobshite politicians, bankers, the media & to some extent herd mentality. The politicians spent most of their time spouting off about the Celtic Pig, sorry tiger, insisting that growth would continue forever. Add to this policies which didn’t include hardly any provision for new social housing to add to the already very small disgusting existing stock & high rents in the private sector, It’s hardly surprising that a lot of people went over their heads to buy before the prices got to the stage where they would be impossible for them to afford.

    The government were raking in millions from stamp duty & did nothing to dissuade the selling of high interest loans to people who couldn’t get a mortgage from the first call banks. RBS through First Active being one of these sharks. Estate agents & the media didn’t give any words of caution, the former were making a mint, the latter through property supplements & TV programmes dedicated to investing in property through renovation etc, further fanned the flames. Add to this the cosy relationship between all the above & property developers who got planning permission to build any old shite anywhere & you get a storm that has ended with a burst bubble & something like 2000 unfinished housing estates.

    On entering a bank the place would be plastered with in your face ads offering mortgage deals with tellers finishing your business with the question : ” Have you got a mortgage ? ” while at HQ the top guys would be slicing & dicing juicy sub-prime so they can gorge on the higher interest returns & all of these marketed with the word easy screaming out of every format.

    As G says by far the biggest part of the debt built up was from the banks followed bt the developers. Now who should be the ones in the know here ? The ordinary person who is led to believe that the sky’s the limit, that renting is a waste of money & the good times are here to stay? or should they all despite this served up propaganda spend their spare time reading books on economics & it’s history so as they will not be caught out ? OK some people were greedy, I know some myself, but unlike the big boys they have since paid dearly for their mistakes. The fact is that those who should have had the knowledge & the responsibility to make sure that everybody preceded with caution did not, but instead gloried in the sight of the giant snowball getting ever larger.

    So the people who were fed a rotten dream pay the price for believing the spewed out bullshit from those they are led to believe they should trust, while these so called respectable, clever, important, highly rewarded individuals, you know, the ones we are supposed to look to for guidance & protection, for the most part, still enjoy the fruits of their labours by making sure that the finally exploding snowball landed on us.

  6. Prof. of Economics at Uni of Western Sydney Steve Keen hosted by the BBC’s Paul Mason at The London School of Economics, May 4. Took a while to release, but was worth waiting for. Easily Keen’s most polished performance of his recent Euro tour.

    Amazing what a very well versed host provides. Deep knowledge, easy answers and humour.

    http://www.bbc.co.uk/podcasts/series/analysis#playepisode2

    ‘you don’t need economists to have an economy, you do need engineers to build a bridge’

  7. Pat – is the securitization you describe something seperate from the expansion of the money supply through fractional reserve banking i.e. loaning money into existence?

    Isn’t the banks’ licence to create money out of nothing/almost nothing one of the major drivers of house price inflation?

    1. Chris – exactly. The “money” explosion that caused the present “banking” crisis did not come from fractional reserve banking. Most of what is being written here and elsewhere wrongly assumes that it did.

      One can only begin to understand the present crisis, let alone fix it, by first understanding mortgage “securitization” and how it created this phony “money”.

      As a California mortgage broker I had a ring-side seat as Prudential and other Wall Street bond traders came into the real estate brokerage business and started mining the home mortgage market like the Anaconda Copper Mining Company in Butte, Montana or Chile. Like Anaconda they left devastation and millions of ruined lives in their wake.

      So Chris, you are on the right track. Just study mortgage securitization and help lead us all out of this swamp of “banking” hyperbole.

      1. Pat and Chris,

        I agree with Pat about the centrality of Securitization. So when Pat says ‘most of what is written here’ I think he is refering to comments made by others.

        For my views and a view of teh importance of securitization I would offer you my three part blog on Securitization.

        Go to the “Liars Lexicon” button at the top of the blog home page. They are the three entitled – Securtization :The undead heart.

        1. Thank you Golem for pointing out the distinction I should have made between your writings and other comments here.

          I knew you had repeatedly pointed the finger at securitization and indeed had led the fight against the “undead heart” of our current problem.

          I foolishly assumed I would be understood to be backing you up not disagreeing with you. You are still my hero Golem. Continue bringing light where there is darkness. We will win this thing yet and get most of this “debt” written down to what it is worth – nothing.

          1. Sorry if I came across as precious. Didn’t mean too. You and I are on the same side. So is Hawkeye by the way. He may see things slightly differently but we’re all in this together. Let’s stay that way.

            As you say Pat, we will win in the end.

    2. Chris

      I would argue that Securitisation merely compounds the expansion of the money supply by disguising credit risks. I wrote a submission in 2010 to the Vickers Commission on Banking (ICB) to this effect:

      “The expectation of market operations to effectively regulate credit risk is shown to be unfounded, instead resulting in ill-conceived and excessive lending practices. The recent growth in debt levels therefore may be masking a more fundamental issue of declining debt quality, such as debt for consumption and Ponzi financing.”

      http://forensicstatistician.files.wordpress.com/2010/11/icb-submission-nov-2010.pdf

      Securitisation is a further layer of money expansion that compounds bank balance sheet expansion (i.e. leverage). It is “a fraud a-top a fraud”.

      1. Hawkeye, they are entirely separate. It is important that people understand the difference. Mortgage securitization is NOT a “further layer” of fractional reserve banking. Mortgage securitization is NOT subject to the banking regulatory process. It is an entirely separate and unregulated way of expanding the money supply. Such money is a creature of the bond market, not of the banking system.

        1. Pat

          I don’t think that we disagree. I stated that is was a further layer of expanding the money supply, via bank balance sheet expansion. Both FRB and Securitisation achieve this (through loan creation – i.e. the endogenous money principle).

          Securitisation has massively extended the amount of leverage that banks undertake. FRB took it to one level (i.e. the familar concept of a normal bank run). Securitisation has pushed the leverage even further(in the UK bank sector balance sheets are approx 7 times UK GDP !), and created the scope for wholesale funding “bank-runs” (e.g. Northern Rock).

          The process of Securitisation has umbically connected the Bond Market with Banking. It isn’t purely a creature of the bond market, as banks are neccessary to orginate the loans in the first place. This article explains it in more detail:

          http://forensicstatistician.wordpress.com/2011/04/11/its-the-credit-creation-stupid/

          Therefore, despite the efforts of the Vickers proposals to ring fence Investment & Retail banking, securitisation creates the unholy linkage anyway, and so must be outlawed entirely.

          I’d welcome your comments on the ICB piece linked above.

          1. Hawkeye,

            I think the best way for me to illustrate the separateness of mortgage finance from the banking system is to point out that the biggest originators of the trillions of U.S. mortgage “money” that was poured into the U.S. property market during the boom years were Countrywide Funding and GMC (General Motors). Neither were banks.

            All they needed was a real estate broker’s license in the State in which they originated loans. I myself as a licensed California Real Estate Broker originated millions of dollars worth of such mortgages under exactly the same rules as Countrywide and GMC.

            In America a real estate mortgage is legally real estate because it is secured by real estate. In that sense you could say that I created money just like the banks do, every time I sold a house and persuaded the seller to carry the mortgage: the buyer got the money to buy the house and the seller got a fungible instrument for which I had ready cash buyers by simply putting an ad in the local paper. I fact I had such an ad running in the financial column of the San Diego Union-Tribune every day for several years on a yearly contract.

            Back in the early ‘80s when Paul Volcker was in charge of the Fed the only source of real estate finance was “owner carry-backs”. Bank interest was 20% because Volker was squeezing inflation out of the American system. If you wanted to sell your house you had to carry the loan yourself.

            The reason a real estate market existed at all and we managed to get through those early Reagan years was because we brokers found eager private buyers (mostly retired people managing their own portfolios) for those owner carry-backs at moderate discounts.

            I personally arranged hundreds of such private loans and found lots of private investors eager to purchase them at 10% or 15% discount over 5 or 10 years. I actually made a good living at it during those bleak years.

            I was legally able to sell those loans because they were not considered separate “securities” as they were secured by real estate and were actually real estate.

            Then along came the Wall Street securities carpet-baggers with their fancy New York “securitization” instruments and institutionalized the lucrative side of millions of small real estate brokerage businesses. I owned three very successful franchised (Century 21) local offices but eventually had to sell out to the NY carpet baggers.

            From then on it was inevitable that the Countrywides and GMCs would industrialize the mortgage business and inflate it until it exploded. That’s exactly what happened.

            When they saw the crash coming they all rushed under the Fed’s insurance scheme (FDIC) by getting banking licenses.

            Securitization had nothing to do with fractionalized banking (which is a whole other can of worms).

  8. I think you will find the Rajoy came to power this year not 2010. more or less anyway 21, dec 2011.

    No mention that the Cajas are not banks but the equivalent of our building societies and as such are Mutuals.

    Bankia is the crass pish up of the right wing (in spain at least) controlled Cajas the left wing ones are still in the wild and are everything as bed and dangerous.

    basically what happened is you gave a donation/bride to your local politico, you got your building permit, then you went to the caja for the cash (any prob would be dealt with by a reference letter from said politico) and build away.

    This is pure and simple state sponsored corruption. A Spanish relative was going to go on German TV and say this but was persuaded otherwise by a few lets say discreet telephone calls.

    Sorry the Spanish people knew by and large they were being bribed. and the wall of silence is ongoing.

    1. Thanks for the corretion Sean. Fixed now. I realize the Caja are mutuals. It doesn’t reallychange teh arguemtn though, does it?

      As for the corruptoin on the ground which you describe I agree entirely. I think I described the situation in very similar terms in the early blogs I wrote about Spain and the Cajas. The politicians, the bankers, and the local notable families were all in it together, without doubt. They are all guilty.

      Certainly people went along with them. It’s hard to not go along with those who appear to be more powerful than you especially when teh ehrd seems to be on their side. No one is entrely innocent. I just object when the bankers and poiticos (left and right) would like us to belive they alone are innocent.

        1. I think we can agree there. Corporatism is indeed teh enemy.

          I do still think we need one part of our organization as people to be international. As per the suggested party. I don;t see that as corporatist or ‘big’. More an international affiliation of like minded groups from every nation.

          1. as they say the road to hell and all that…..

            The best we can hope for is lab politics/economics. one lab gets it wrong, we note. another lab gets it right we copy. trial and error.

            even the above is subject to the human condition, which pretty much says my perception of the world/reality must be the right one, without it we cannot be individuals. and thus getting to truth becomes so much harder.

            Lets hope we make it thru the evolutionary filter before we blow ourselves to oblivion.

    2. Brilliant article Golem. And this is needed as Sean is right to say there is a bit of a conspiracy of silence in Spain. I found even left wingers curiously unwilling to look at this. It was much much easier to attack the AngloSaxon banking model etc etc.

      Part of this is explicable perhaps by the long term underlying inferiority complex that Spaniards suffered from in relation to Europe. Shut out from European liberation in 1945 they became the holiday destination not the holiday makers. Back in the seventies when I lived there it was both very conformist on the surface and very divided. They were busy ruining their own coastline for quick cash but still felt pushed away from the top table.

      The hilarious fact that the character from “Barzeelona” in Faulty Towers had to be changed to another nationality when they imported the programme into Spain only revealed this sensitivity.

      They wanted to be like other Europeans and buying homes on mortgages was all part of it and getting municipalities to spend on lavish public works was too. They felt richer and richer and were suddenly fashionable too. A heady mix.
      Add to this all the need to paper over the old never cleaned out ex-fascist elites and the incipient regional strife and its perhaps not surprising that looking the other way and enjoying the ride became the norm there.

  9. Have been reading your blog for a number of months and, as a little guy (even though I’m a gal!) whose business is failing (stupid me, targetting the middle class client!) and whose pension fund is down the toilet, feel utterly depressed and powerless.
    There’s a nice refrain here in Spain “a cada cerdo su San Martín” (pigs are traditionally slaughtered around San Martín’s feast day so it sort of means that pigs always get their come-uppance). Oh, how I wish it were true! Problem is, both political parties are up to their ears in the mess of the Cajas, having put unqualified lackeys on the boards to sign off on ego projects which have proven to be nothing but a complete waste of money. (As if the man in the street couldn’t have told them that for nothing!) Neither of them wish for their dirty laundry to be aired in public and the justice system is a stich up. Just look what they did to Garzón when he proved inconvenient. Manos Limpias will never win.
    So here we are, business volumes going down and down, property values, rental values following the same pattern, etc, etc. Just waiting for the second bailout and probable, disastrous return to the peseta.
    (Sigh of despair!)

    1. Hello H,

      We do live in desperate times. But those are the times when the ordinary slobs who you think couldn’t raise their lazy arses from their sofa’s nor tear their limp minds away from the drivell-vision machine, gradually, amazingly, wake up.

      It does happen – impossible as it may see. It has happened before. If happened here in the UKand is happening again, and it happened not long ago in Spain. Those who awoke in Spain then, were no better than people today. They were lazy, cowardly, gullible and stupid then. But somehow they became heros. It can happen again.

      I made a suggestion for a political away forward. I believe what I suggested or another suggestion like it from someone else will happen and Leviathan will awake once more.

      We, the ordinary people of Europe, are Leviathan.

  10. In reply to BA who said

    ‘I would have to disagree with you on the first sentence quoted above. Folks did take too much debt, as they did here in the US’

    I agree with that. I like you hate any kind of debt and when I signed any loan agreement it felt as if I was signing my name in blood.

    But (as they say there’s always a but) that’s why we pay (or so I thought) these bankers such fabulous salaries.
    So they can put in the checks and balances to prevent the foolhardy (like the ones you highlight) from themselves and protect their savers precious hard earned money.

    It cannot be said any of them did that. It was in their own financial interest not to do that. Because they were paid bonuses on the sales of said foolhardy loans.
    It was allowed to happen because the check and balances had been removed at I might add the bankers request.
    They (the bankers) lobbied the US government and the UK government for those changes and the rest of the Western World economies followed behind.
    They did so because they could see the money to be made without them.

    You can rightly point the finger at the foolhardy.
    But in doing that don’t remove the hand of blame away from the shoulders of those that really should shoulder that blame.
    The politicians, bankers, property and bond speculators, and economists. For they where paid (and still are) fantastic amounts of money to manage the system they created and failed do so on a monstrous scale.
    That’s where the true blame lays and so very few of them have paid for their economic crimes.
    You cannot correct a problem by ignore what caused it. Neither can you prevent it happening again. Until the people who made a fortune from their mismanagement are made to pat back what was given for the mismanagement and rules put in place to stop them doing it again. The taxpaying public of the western world will keep paying to ensure the wrongdoers keep their ill gotten gains.
    So by all means blame the foolhardy for their mistakes. Mistakes I might add most are still paying for.
    But in doing that don’t remove the blame from its real protagonist. The Bankers.

    1. 46Martman

      You make an excellent point, and one which (unfortunately) escapes most people.

      This is not a crisis of Irresponsible Borrowing, but of Irresponsible, Incompetent and Illicit LENDING.

      It is almost the one-year anniversary of this article:

      https://www.golemxiv.co.uk/2011/06/guest-post-by-hawkeye-irresponsible-borrowing-and-irresponsible-lending/

      We mustn’t forget the principles of:
      1) Shared responsibility
      2) Symmetry of risk & reward
      3) Incompetent lending practices
      4) Odious debt
      5) Debt for foreclosure

    2. Excellent article/analysis and debate. Thank you.

      A year or two ago, as the economic/financial crisis deepened, an Irish politician said he had suddenly realised that we we live only 3 score years and ten, or thereabouts, so that succeding generations can repeat the total cock-ups of the prevoius generation simply by not learning that they had already happened.

      For H. here in Central America, it´s ” a todo cerdo, le viene su sábado” (every pig get´s it´s Saturday).

  11. Interesting article.

    But please change the “Signor”s (and in one case “Segnor”) to “Señor” or “Sr” or just leave it out altogether. Unless of course, that these corrupt Spanish politicians/bankers have all decided to take Italian nationality. 😉

    Sorry for the pedantry, but I think small details add to the persuasiveness of an argument.

  12. 46Martman

    “But (as they say there’s always a but) that’s why we pay (or so I thought) these bankers such fabulous salaries. So they can put in the checks and balances to prevent the foolhardy (like the ones you highlight) from themselves and protect their savers precious hard earned money.”

    I’m not sure if banks necessarily lend out depositors/savers’ money, I believe they are effectively licenced to create new digital “money” (which, as it is redeemable for cash/specie on a £1=£1 basis is therefore, to all intents and purposes, money) through their banking licence. In the US First National Bank of Montgomery vs Jerome Daly case, a senior bank representative admitted under oath that banks create money as a bookkeeping entry, effectively out of thin air. The extent to which desposits are used as a leverage on lending seems to be unclear and the subject of much debate, but the fact that just 3% of the UK money supply is cash/specie and the rest is bank created digital money suggests that money creation by the private banking sector is virtually unregulated and out of control.

    Harking back to my earlier post and the responses from Pat, Hawkeye and Golem, I’m aware that this blog and David’s book focus on the role of securitisation and I don’t doubt that securitization it is a monstrous ponzi scheme in its own right which is at the heart of the banking/”sovereign debt” crisis, but on the more fundamental level of mortgage finance/bank “lending”, would anyone else agree that money creation/”lending” by the banks is at the heart of the house price explosion of the last 30 years or so?

    It seems crazy to me that people spend their lives working in jobs they hate to pay off a mortgage debt which has been effortlessly created in a microsecond by a bank and which they then have the audacity to charge interest on. If banks could only lend their own money and not money they had created out of nothing, or depositors’ money, then house prices would be much more affordable and people wouldn’t spend quite so much of their lives as debt slaves. Although I daresay some other wheeze would be conjured up to keep us all cowed and subservient to the financial system – perhaps wages would drop to miniscule levels and houses would be equally unaffordable.

    I don’t doubt this is a naive and unsophisticated analysis so I will look forward to being enlightened by the rest of the blog.

    1. Chris

      Far form being naive, your analysis is perfectly correct.

      This recent interview on Radio 4 with Australian Economist Steve Keen (referenced earlier by Patma2003) supports your conclusion:

      http://www.bbc.co.uk/podcasts/series/analysis#playepisode2

      Thankfully Paul Mason at the BBC is perhaps the only mainstream journalist who gets this stuff. His analysis is far better than the drivel spouted by Peston & Flanders.

      It may take a few more years and some further big crises, but eventually the truth of this fraudulent money creation will come out.

  13. I really enjoy these articles and the intelligent, well-informed discussions.

    The problems all come back to this article written by a former chief economist of the International Monetary Fund:

    http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

    “Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.”

    “From long years of experience, the IMF staff knows its program will succeed—stabilizing the economy and enabling growth—only if at least some of the powerful oligarchs who did so much to create the underlying problems take a hit.”

    What is happening across the western world has happened before many times. It cannot be fixed until the elites start sacrificing their friends.

  14. princesschipchops

    ”First, people did not ‘take’ loans they could not afford. The loans were ‘offered’ by bankers whose job it should have been to advise their clients on whether the loan was wise and sustainable. ”

    This is something I’ve being trying to argue for a long time (often to no avail) to those who like to paint this crisis in terms of ‘oh we all over indulged now we all have to share the hangover’.

    From the top to the bottom of financial services there was immense pressure to sell – above all else. Only last year one of the pinks – Money Marketing – was reporting on how tellers in banks were still pressured to try and sell all sorts of extra products to clients. You can’t have a supposedly effectively regulated industry, where there is huge pressure to hit sky high targets. High targets, pressure driven selling and good advice contradict one another.

    Take the UK; Mortgage advisors should have made sure they didn’t rec mortgages that their clients couldn’t afford. Senior marketing and auditing teams in banks shouldn’t have invented more and more ways to lend ever more money to people, things like 125% mortgages. The FSA should have realised just how many ‘liar loans’ were being signed off etc.

    And these banks – here and in the US – absolutely should not have knowingly wrapped these bad loans up with good loans to hide them and sell them on.

    From the top to the bottom there was, at best, an astonishing lack of oversight and at worst downright fraud. And this was the same in Spain, the UK, Ireland, Iceland and of course the US.

    My theory is that at first the lenders didn’t realise how serious it was and by pursuing their normal tactic of aggressively going after struggling debtors and making lots of repossessions they made the crisis much worse. I think at first they thought it was a normal housing downturn. that they could profit from the misery as they retook assets and then sold them twelve months down the line when things ‘picked up’. Things haven’t – and won’t be – picking up. So at every stage they’ve made things worse.

    Yes some ordinary people were maybe foolish. But most ordinary people who were have paid. They will have lost their homes, many have lost jobs and the infrastructure that ordinary people rely on is being left in tatters.

    The supposed experts, the people who really should ‘know better’, haven’t – in the main – suffered any change in fortunes for the worse. That’s whats so disgusting.

  15. Great post, as always. It’s worth finding out/publicising why Rato, due to speak at the diggers and dealers (ahem) conference this year, had to leave the IMF. He probably had a chuckle when his successor had to go (ahem).

  16. Desmond Dillon

    hi everybody. l have to say another great piece Golem and a really good discussion about the ‘securitization’ being the spark but fractional reserve banking is the gas being ignited.

    surely banking should not be about creating debt (cancer)??

  17. thanku once again golem. I have my mortgage in bankia. I’ve taken my savings out. they are….. Nearly told you!!
    Its not just manos limpios who are denouncing rato and the bankia board. The 15 M movement has presented a deuncia. Their lawyer is a Señor Yague( just watched it on the news). The money to pay for the court case was raised by public subscription., so, H KEEP YOUR HEAD UP!! Little people can make a difference.
    Golem, I read your ideas about starting a polical party/ movement. May I suggest an alternative? A charter, around the points you posted, then circulating the points between established political parties in Europe, asking them to incorporate the points. (An honest bankers charter?)
    To establish a poltical party from scratch, for it to have prescence in the decision making forums in needs to be heard in would take an extremely long time. I’m not sure we have it. Why not hitch a ride with those organizations which have the infrstructure already established?

  18. The reason taht so many people borrowed to buy what they could not afford was that ponzi schemes DO work at the outset,(which is why people always fall for them) and the early birds clean. up House prices were rising at 10%pa. and so evn if, after a couple of years one realised that it could no longer be afforded,then it could still be sold at a fat profit. Only when prices had risen to a point where those at the bottom couldn’t enter the game did it crash, as ponzis do, which is why they are illegal. So why wern’t they stopped? My feeling is that it’s because capitalism itself is a giant ponzi, dependent on infinite growth and the crashes that occur when the effective market is saturated are the regular booms and busts of the capitalist cycle; and we’re all signed up for it, whether we like it or not. The reason we don’t see it is because we’re inside it!For all our sakes I hope that somene comes up with a viable zero growth model that would be acceptable to all, but it strikes me as a utopian fantasy.

    1. If you want an analysis of the credit crisis, and the explosion of debt and speculation that preceded it, that puts it in the context of the development of capitalism in the post-war decades, I recommend John Bellamy Foster and Fred Magdoff’s book ‘The Great Financial Crisis. Causes and Consequences’. Central to their view is the finacialisation of capitalism since the 1970s as a result of the stagnation of productive capital.
      David Harvey also aims to explain the crisis in the perspective of the motor of capital accumulation. Have a look at his RSA talk:

      http://www.youtube.com/watch?v=qOP2V_np2c0

      It seems to me that talk of solving the crisis through growth by way of a return to ‘business as usual’ is looking increasingly implausible. Both because of the increasing instability of globalised financial capitalism, but also because it is crashing in to ecological limits (resource depletion, climate change, peak oil, pollution) in a way that is unsustainable. Maybe a ‘no growth’ solution will be unavoidable. The question will be not whether we want it, but how we manage it without permanent recession/depression at best, barbarism at worst.

    1. I’m very sorry you found the font difficult. But you’re the only one that has mentioned this.
      Do others find it a difficult font as well? If so I’ll change it.

  19. you do not even mention solbes, zapatero and many other contributors to spanish mess, while upgrading the responsibilities of your particularly chosen goats. your view looks like a foreign simplistic version prepared for sectarian socialistic minds. i do not buy your explanation.

    1. Quite true I did not. And they surely played their part.

      But I think those I did chose: two heads of the Bank of Spain, one opf them PP the other socialist, the latter who went on to the IMF, BIS and Basel Committee, a Prime Minister and the Minister for the Economy/VP during the bubble years, who also went to the IMF before heading Bankia – were not chosen for any sectarian desire to blame one party or another. They were cnosen because they were central to what happened.

      I have no preference for Left or Right either in Spain or in the UK. To my mind , Left ad Right wing parties have been nothing more than two sides of the same counterfeit coin.

  20. Spaniard Demon

    The greatest problem in Spain is widespread corruption: among the politicians, the bankers, the wealthy, the Royal Family, the Catholic Church and the Judiciary. And I mean at a greater level than what we find here in the UK.
    There’s no future for Spain unless there is a great clean-up at all levels. And that doesn’t seem to be happening anytime soon. Although who knows, if the country ends up belly up because of all this mess, maybe the Spaniards will have a chance.

  21. On the important subject of winning this battle, can I go back to the earlier mooted political approach Golem was discussing a few weeks back?

    The conclusion on that front now is no different than it was when The Debt Generation was published – sadly because politics has moved ever further backwards & there’s still no representation or debate for us 99%.

    In the end it’s just the volume of the population with understanding that’s the key isn’t it?

    The “financial” “elite” are neither – coming up with clever algorithms in a rigged casino game doesn’t make anyone financial. With that understanding change inevitably follows.

    Given the main stream media’s incessant dancing to the speculators tune (Paul Mason being the only exception I’ve found – this with Steve Keen is the transcript patma2003 linked to above http://news.bbc.co.uk/1/shared/spl/hi/programmes/analysis/transcripts/04_06_12.pdf), the battle remains getting across to enough of the population exactly how this fraud works & what we are paying for it – in simple terms that grab mass attention.

    We need our 30 second elevator pitch that we can send viral – there’s more than enough that Golem’s written in the Debt Generation & on here over the last few years that’s clear & precise but to get massive viral exposure it all needs very few non techie words & some powerful images – not my thing clearly but hopefully between us we could find it 🙂

    It’s all the emperor’s new clothes – & once the truth is widely out there rather than just in places like this, I have no doubt the vampire squid will prove to be the biggest insolvency in history – very closely followed by the other major “investment” “banks” & most of the retail ones. Not sure I fancy seeing Blankfein in no clothes though….

    And if we can get something we could send viral, we might be better getting it done in Spanish, Greek or Italian – the solution won’t come from UK/US – parasites eat their hosts last of all. EZ holds the key to killing the “market” – an interesting view on the ECB solution here

    http://www.iicpa.com/articles/2012-06-14%20ltr%20to%20Eurozone%20Min%20Finance.pdf

  22. irish before i punch you in the face i just want to know why i punch you so hard

    stupid cunts

    apologies in advance sorry…spelling is ok

  23. Thanks for this informative and very troubling article. It’s one of those pieces that lifts the veil surrounding high-level politics. It takes the reader by the hand and gives him a glimpse of the true depravity that operates behind the scenes. It hints towards even darker possibilities and raises the suspicion that there is something more behind all this than securitization and fractional reserve banking, something beyond the conceptual grasp of financial economics and above the jurisidction of the courts – some nebulous, malvolent and ancient power. The reader is not only stirred to indignation, but unfortunately left nursing a sense of powerlessness to ever understand let alone take arms against this hydra-headed enemy. At moments like these, moments of moral and intellectual weakness, good people, even good minds, can succumb to the temptation of conspiracy theories.

    David, in the context of this article, I would sincerely appreciate hearing your considered thoughts on the temptation of conspiracy theories, especially those of the NWO variety, are they purely counterproductive or do they contain a grain of truth?

    1. Hello artisson.

      I will write something that speaks to this at least to an extent very soon. I agree with you it is a subject, is there any substance to such theories and does there even need to be for them to still have an importance, that has to be dealt with.

  24. I have appreciated your answer and i enclose only three points more.
    1.- Spain´s bubble years have been those of solbes, zapatero, salgado, sebastian, pajin, trini, rubalcaba et allii (2004 to 2008). Proof: with aznar, rato et allii (1996-2003) number of built flats was an average of 450.000 per year, with a total average of 3.600.000; the stock was of about 350.000 (six times bigger than needed). With the above mentioned solbes et allii, (after the bubble in your opinion) the average built in those four years was of 630.000 per year, with a total average 2.500.000; the stock was of about 1.700.000 (thirty times bigger than needed).
    2.- Funding for those 2.500.000 flats came mainly from the bigger “privately managed” banks (Santander-Banesto, BBVA, Popular, Sabadell) and of course from the “publicly managed” cajas (Caixa, Bankia, and many others). Now we are witnessing the disrepute of cajas to gather their wreck in order to “save” the banks (i.e. not to dilute equity, not to change management).
    3.- The BIS ratio rules the weightings to be given to bank´s assets (in sum, 0% to public funding, 50% to mortgages, 100% all other loans). Now we see the evil results of such an
    implicit pact between politics and banking all over the world: the other economic sectors (families and enterprises) are suffering a prolonged and institutional crowding out to the benefit of so-called “enlightened” spongers. This rule is what we need to change now and quick (for better).

    1. Santos,

      I am so glad you came back. I couldn’t agree more with you final point. Yes and double yes!

      As for your figures for flat being built – they are great figures. Thank you for taking the time to post them. It seems to me those figures say, as was your basic point I think, that I have only described the first half of the disaster and therefore only mentioned those who figured in that first half.

      It seems I could go on to wrtite a second half with those villains whose names you mention. It was never my intention to protect or hide anyone. I am an equal oportunity detester.

      I was particularly interested that you say the second larger round of building was funded by the bigger banks such as Santander and BBVA.

      All I can say is that I did not mean to give the impression that I blamed only those people who I wrote about. I did say they were some of the ugly parasites. I was careful never to claim they were the only ones. I know they were not.

      I think, on reflection, I did give the impression of calling the years up to 04 ‘the bubble years’. What I should have said is they were the first part, the early stages of the bubble. As you say the gigantic growth was 05-07/8. And this was under other people. You are right.

      All I would say is that there is only so much I can research. Whatever I left out or did not know of, it doesn’t mean I was wrong to point out the role and guilt of those whose story I told. It does mean there are others who I left untouched. For that I am sorry.

      It was never my intention to blame one group and exonerate another. It boils down to man power or rather the lack of it. I am one man in his house in Scarborough. I do what I can and reveal what I can.

      When I can piece together a story I do. I know everything I write is partial and leaves out more than it includes. But I don’t feel right about saying nothing until I know everything because I never will know everything. So I write what I can as I can.

      If I have left untouched the worst crimials in favour of those less guilty then I apologize to you and ask you to help me right this ommission.

      But if I have fingered any of those guilty of destroying the lives of my fellow europeans then I feel I have on balance done some good and hope you will feel so too.

    2. Spaniard Demon

      Yes Santos, but you forget to mention that it was under Aznar’s government that the “Ley de Suelos”, or “Law of the land”, was approved, which was the key to enable the construction boom. After that point, the number of properties built grew steadily. The fact that the peak happened after Aznar’s government desn’t imply that it is not a consequence of their policies.
      I must agree, though, that Zapatero’s government did nothing to stop the boom either, nor to move to a more rational economic model.

  25. I have always been interested in the fact that the global debt crisis was so tightly linked to land and/or construction in some places and not in others. We see Ireland and Spain (construction); The US sub-primes (which neatly shows that the housing market is a joint housing/mortgage market), with some construction, it rose, but not extraordinarily so; and other countries, where no such thing occurred, such as France, Germany, Switzerland.

    The difference is generally attributed to banking practices and laws in the area of mortgage approval. (E.g. Germany, Switz, 20% at least down plus other conditions, etc. etc.) But other legislation plays a role as well, e.g. France which offers state support (fiscal, loans, etc.) to new home owners, carefully controlled; taxes profits from property sales quite stiffly unless one has owned for 20 years.

    E.g. Switzerland (which btw just voted that in any commune, ‘district’, only 20% of housing can be ‘a secondary residence’! Oh oh, imagine that!) which examines any building project as to its viability, use, environmental impact, esthetics, energy consumption, etc. etc.

    it appears that Germany is mostly concerned with financial probity, correctness, carefulness, debt avoidance; France is concerned with implementing proper state controls in many areas and helping out the lowers and middles, creating a market without ‘the market’, whereas CH actually cares little about the finance aspect (“free contract” is alive and well, though most banks will be quite prudent, specially now as under scrutiny and this is easy for them to do) and is potty about what it considers the ‘common good’, use of land, the landscape, energy, transport, etc.

    There are also many other aspects: present housing stock, cultural questions around land
    ownership, etc.

    So, thru history and a dense admin. and pol landscape, these countries had inherent ‘checks and balances’, and even have arms ready to go to prevent housing bubbles. CH is now struggling with one…

    No such thing in post Franco Spain. Nada. (Ireland’s crony capitalism looks different to me.)

    Ppl often blame the borrower (overstretched, illusory hubris), the lender (predatory), and the reasonable say well there is blame on both; but that is within a one-on-one relation, a theoretical pure distillation that doesn’t exist. Crackpot economy studies…

    Easy credit in Spain, I imagine (only been as a tourist) lead to the perception of a win-win situation. A small ex. A municipality sold land, and that money was returned to the community in the form of a popular mayor, always a good thing to have, school lunches and more teachers, etc. At the same time, the Municipality could create jobs, landscaping, roads, and many other jobs became available for the unemployed or the left out – workers, secretaries, improvised gardeners, and on and on.

    The end point was never considered, and perhaps there is something to building – very concrete, visible – that contributes to pride, to the perception of ‘growth’…(see China)…

    Just to put a sort of cultural, historical, spin on money matters..

    1. Hello Andrea,

      I think a the cultural aspect and invironment of different countries is a valuable lens through which to look for idfferences in what has happened and how different nations regard what has happened.

      Thank you.

  26. thx Golem, ok, — more on Spain:

    Spain joined the Euro in 1999.

    It was a model of neo-liberal Development.

    From 1995 on it modernized its infrastructure, its ‘economy.’

    Unemployment went from 20% or so (all such numbers are rough and iffy) in 94 or so to a semi normal or acceptable 8% in 06.

    Mostly: services (tourism, hotels, to the person, health, like foot massage and nail care), construction and all that goes with it, and …public administration.

    Public finances had a surplus, quite respectable by EU standards.

    EU funds, low interest rates. Etc.

    Renewal, Success, Jamboree! Or what?

    Privatization lead to the creation of ‘super champion corps’ (like in France), a few big Corps with massive control. (Go for a winner!)

    At the same time, it de-industrialized, scaled down to earning much less from the previous so called ‘value added’ industries, food, tobacco, drinks, metallurgy, metals, transport, amongst others.

    It also lowered social spending massively. Family policy, schools, education, universities, health, etc. Spanish U’s are something to behold, you’d think you were in the 4th world, except in some places, as compared to other EU. (Imho.)

    Salaries did not rise or were even lowered and massive immigrants were accepted (“social dumping”), temp contracts were encouraged, etc. Cheap labor was the way to go.. Private debt, the old story, shored that up for a while.

    Little investment was made in new tech or the like (as comp. to EU) Yet Spain became the champion .. of wind power, which cost the tax payer a bomb, very heavily subsidized, but made headlines in the world press.

    >> Seen from the outside and some papers, so who am I. Spaniards, what is to be said?

    I call all this a Paris Hilton economy. To avoid the word Mafia.

    It is glitzy, it looks good, it creates froth, bubbles, media admiration, a lot of spin, fashion, puts a country on the map (endless articles about Spanish chefs, artists, charm, hotels; driven by wind, etc.) but it is hollow, and despicable in a way, as it is a one off-profit making move, built on financial high jinks, and ignores the children, and the future.

    Of course Spain is just one ex., and not the worst at all, the bashing is not > Spain as a country but to banksters and various elites…outside of Spain…

  27. Heya are using WordPress for your blog platform?
    I’m new to the blog world but I’m trying to get started and create my own. Do you require any coding knowledge to make your own blog? Any help would be really appreciated!

    1. Hello Maya,

      I don’t think you need much coding to use WordPress BUT I’m not the best person to ask because someone else set this up for me. When I first created the blog I used Blogger which even I was able to get to grips with.

  28. It is surrounded by the Black sea, it has a
    mountainous spectacular coastline, and a fascinating and colourful history.
    The initial hip hop songs started out by the artists dubbing over
    reggae music. The most popular celebrity commonly seen in this brand of Air
    Jordan shoe is Musician Lily Allen.

  29. The students of Physics are very much at an gain when they play and
    appreciate the intricacies of the subject. New Super Mario Bros Wii is a
    famous Mario game for the Wii, and has been created
    in Australia on November 12; in the USA on November 15, and Europe on November 20 of the year 2009.
    The DSi XL microphone is located between the two
    screens when the device is flipped open, and there is also a stereo headphone output
    that lets users listen to music saved on an SD cards (sold separately), even with the screen shut.

  30. All you have to do is to grab a handful of popular classics that are likely to be on the karaoke playlist and
    get singing. One key for the event is to get each player to offer
    a number of pledges. This kid’s karaoke machine is inspired by popular pop
    star Hannah Montana.

  31. Enjoy multiple shows and programs in original Latino language at Dish – M.
    The advantages are that the scrub friction of the holes and slots, while increasing the wear on your pad, reduce the chance of
    the pads becoming glazed. foundation for your eggshell structure …
    they’re the ‘groundwork’ and ‘core, steel structure’ on.

Leave a Comment

Your email address will not be published.