Spain – The Next Domino Is Getting Ready to Tumble
BY PATER TENEBRARUM
Spanish House Prices Plunge Again
It is well known that Spain’s economy is in a depression, and we do not use this term lightly. With the official unemployment rate at about 23% and youth unemployment close to 50% it is not an exaggeration to speak of a depression. The probability of social upheaval erupting with greater frequency is extremely high. We already noted that the general strike recently called for by Spain’s unions is only the fifth since the end of the Franco regime in 1975. It is a rare event in Spain and underscores the decline in the social mood and the growing desperation. Those who still have work want to protect their privileges and use the unemployed as their political weapon.
Meanwhile, Spain’s banks are quietly sinking beneath the waves. They are the quintessential zombies, especially the insolvent cajas, which are drowning in real estate related assets that see the value of their collateral inexorably spiraling down the drain (as an aside here: the Fed’s recent ‘stress test’ of US banks possibly has not taken sufficient account of this ‘moving target problem’; as we have seen mentioned elsewhere, it also failed to consider the remote possibility that treasury bonds may decline more than it currently widely expected).
But let’s return to Spain. The WSJ reports on the latest house price data, and keep in mind here that these are the ‘official’ and hence doctored in every imaginable way, data. The plunge in house prices is in fact accelerating.