Outside the Box

Spain: The Hole In Europe’s Balance Sheet

John Mauldin

August 31, 2009

Today's offering for this week's Outside the Box starts off with a quote from Titus Maccius Plautus: "I am a rich man as long as I don't pay my creditors." Even 2200 years ago, it seems that problems of credit were an issue.

I talked last Friday about the US being faced with a number of bad choices. But it is not just the US. Today we look at a piece from my friends at Variant Perception based on London. They are a relatively new institutional research house. I have been reading their material for some time and have begun to look very much forward to it. They do some very good in-depth analysis. I asked then to shorten a piece they did on Spain and Spanish banks for this week's Outside the Box. Spain will soon be faced with a number of very uncomfortable choices, but for now they appear in denial.

For those interested, I also provide a link to another report they did on the United Kingdom, tax collections (way down!) and the link to UK gilts (or bonds). It seems they also have a problem with issuing too much debt. http://www.variantperception.com/sites/default/files/uploads/Taxing_Problems_and_a_Gilt-y_Solution.pdf

I have highlighted problems in Japan and with the European banking system. The problem from the credit crisis are world wide. To think they are not interconnected would be naiveté in the extreme. What happens in Japan and Spain and the US will affect your part of the world, some more than others. Today, let's look at Spain, which has as many unsold hoes but at one-sixth of the population, and these homes are on the books of banks at full price. I will let you read about the rest of the future train wreck that is Spain from Variant Reception (www.variantperception.com which has some other interesting sample commentary as well).

Choices indeed.

John Mauldin, Editor
Outside the Box

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Spain: The Hole In Europe's Balance Sheet

From Variant Perception

Dives sum, si non reddo eis quibus debeo.
I am a rich man as long as I don't pay my creditors.

Titus Maccius Plautus (c. 254-184 BCE), "Curculio"

Themes

  • Spain = Japan 2.0? - We argue that 1) the real estate crash in Spain is worse than is widely believed, 2) Spanish banks are hiding their losses, and 3) investors are smoking…

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