Spain Real Time Data Charts

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Spain related comment. He also maintains a collection of constantly updated Spain charts with short updates on a Storify dedicated page Spain's Economic Recovery - Glass Half Full or Glass Half Empty?

Thursday, March 19, 2009

The Serial Borrowing of Catalonia's "Robin Hood"

From Wikipedia:

Enric Duran, also known as "Robin Bank" or "Robin Hood of the Banks" is a Catalan anticapitalist activist and member of the "Temps de Re-volts collective". On September 17, 2008, he publicly announced that he had 'robbed' dozens of Spanish banks of nearly a half-million euros as part of a campaign of political action to denounce what he termed the "predatory capitalist system" and finance various anti-capitalist movements. From 2006 to 2008, Duran took out 68 commercial and personal loans from 39 banks with no guarantees or properties as collateral. Duran published an article entitled "I have 'robbed' 492,000 euros from those who most rob us in order to denounce them and build some alternatives for society" explaining via the internet that he had taken out a series of loans from numerous Spanish banks as well as publishing his "confession" in the Catalan magazine Crisis. Duran called his action an act of 'financial civil disobedience.'

Of course, while Timothy Geithner recieves a supportive understanding pardon for his "sin of omission" (he forget to present adequate tax returns), and AIG directors continue to haggle about their bonus payments, Duran is whiling away his time in prison awaiting trial on charges of fraud. There is a fairly credible rumour going the rounds that he will be receiving no support from the official government "bail"-out fund.

Meantime we are constantly reassured that Spain's banks are completely sound, that every loan was judiciously and meticulously checked, and that there really is nothing at all to worry about.

My point here is not to defend Duran's actions, but to highlight the double standards embodied in the way we go about things. I think his case can also give us some inkling of an insight into why it is that some of our young people are now becoming so disaffected. Apart from being left with the lions share of the debt to pay off over the years to come, they will also be called upon to sustain our ever more fragile pension systems.

We are told that recovery is just round the corner, maybe as soon as the end of this year. Personally I fail to see how this can be the case, not only because none of the macro economic data I am looking at are consistent with such a view, but also because it isn't at all evident how things can ever "correct" themselves while we still have such a massive "values overhang". Part of the problem we just got into was about greed (it always is), not just the greed of those who wanted an ever bigger cash bonus, but the petty greed of all those millions who got themselves ever deeper into debt on the basis of the flawed idea that the price of their home (or second home) would simply go up and up forever. We still have a lot of "cleaning out" to do in this department, all of us, before what is steadily getting worse can start getting better.

The much maligned Keynes went to work as a volunteer at the Bank of England during World War II, the man who was arguably the twentieth century's greatest philosopher (Ludwig Wittgenstein) spent the war as a porter in Charing Cross hospital (he was already old, and a pacifist), while one of Russia's greatest painters, Pavel Filonov, starved to death in 1943 since stayed behind in a beseiged Leningrad simply to take care of a sickly old woman. When we start to see people of this calibre up there and running things, then we will know we are starting to emerge from the crisis. Meantime, its "war" as usual, although hopefully not the type of "class war" that Duran and his associates would have us get ourselves into.

Of course, these scenes shot outside Barcelona's central university yesterday afternoon are one good example of how NOT to handle the crisis.


Anonymous said...

Hi Edward,

"Oh look, all of Spain is already de facto bankrupt"

A hart attack everyime i read somehething like this from you ;) But fact is a fact and we have to, first, be aware, second, be informed (what the hell is going on behind the scenes, stupid faces and speeches on Spanis TV/media), and third, take appropiate actions.
I dispair when I see someone like Ana Botin (BBVA) saying that "she has great trust in Spanish banks and Spain will come up from this stronger"...... she also said something as interested in 2007 i think as ("the level of indebness of Spanish is appropiate"...... 35 years hipoteca is "appropiate" for her. I rather no commment no more. I can not express enough my sympathy for these kind of people.

Anyway, the way to deal with this for normal people is:
many of us already moved savings from small cajas to big ones or banks, in order to shield ourself a bit if one can say.
how will we (spaniards) know when the situation starts getting really serious in this respect?

I mean, will funcioarios see pay cuts or similar? Smaller cajas are already going under (Caja la Mancha, fantastic investments, 5 constructores hold 80% of their debt, which is mostly lost, scary but an example of what is there hidden), more entities to go under the water...

What signals should we check
before reaching the point that big banks/cajas can not honour their clients, or some sort of Argentina's corralito" could take place. Personally, if I feel that is near, I'll take more aggressive actions.. and I'll council my family to do so

Many of us have the feeling that is like tryzing to scape from infection, going from
one place to another (banks), but everyone here seems to be infected.

Is there something effective one can do to protect their savings? Apart from Bonos del Tesoro, gold etc, something for people on the street?
or we just can cross fingers and pray for banks to stay alive sucking goberment resources or a bailout from brussels?
I must say that riots are closer the deeper the crisis is unfolding(like in Greece, but noone here nows what's the root of what happend there)

What a panorama!!


Edward Hugh said...

Hello Jaime,

"What a panorama!!"

Well, I couldn't agree more, and in every sense. If it wasn't real life, this would make a great film.


"What signals should we check
before reaching the point that big banks/cajas can not honour their clients"

Look, I don't think this is the way to be approaching this. All banks and bank deposits are guranteed (unti they aren't) following the October 12 2008 decision in Paris. They may all need to be nationalised, but they are guaranteed.

What isn't guaranteed here is the government, and their finances, since this is the loophole in the EU architecture that Krugman keeps going on about.

So basically, without an immediate reduction in prices and wages of 15% and an immediate injection of around 500 billion euros via EU bonds to saok up all the loan defaults this internal devaluation will produce, the government is going to get trapped in a self-defeating spiral where they have to cut spending, and the cuts simply feed the contraction more. We may be getting near the point that they have to start cutting now, since all their estimates are absolutely out, especially the size of the contraction (OECD just came in with nearer 5% for Spain 2009, which is much nearer where I am), and the rise in the rate of unemployment, which they don't think will hit 4 million before xmas, while it looks like we will be there in May or June.

"I mean, will funcioarios see pay cuts or similar?"

Oh, obviously. Or they will start paying them in convertible IOUs (letras de cambio) like Lecops, Patacones or whatever, as we run out of euro liquidity - very important, the Spanish central bank cannot print money.

"or some sort of Argentina's corralito" could take place."

Look, I don't think we are going to see this. I think they cannot let one country fold, this will bring down everything in this climate. This is where I think the New Drachma type arguments are well off the point.

The battle at the moment is in the East. IMF type programmes are not sufficient, and they are not working - one government after another is simply buckling under the weight, first Iceland, then Latvia, now Hungary). We need common fiscal capacity (even if it is through printing money at the ECB to buy EU Bonds).

However I am not pessimistic, and I do think they will do the necessary. My reasoning runs like this:

Basically, let's do a reductio ad absurdum here. Joaquin Almunia says anyone leaving the eurozone right now would have to be mad.

So that means you would have to be mad to let the whole thing fall apart, right.

So, they aren't mad (I hope, this is the weakest point in the argument :) )

So they will react. And they don't have too many options, they have to put the architecture in place.

So, while in the short term I am very negative, in the mid term I am more optimistic. They will react, but they need to see some more pain first. Just a pity that it will be millions of ordinary people who will be getting the pain that makes them see the light.

Incidentally, looking at this in Krugmans latest piece on Qualitative Easing on his blog:

"Now, the Fed isn’t taking on any serious default risk — Treasuries are backed by the full faith etc of the US government, and agency debt is de facto backed by the same, although the market doesn’t seem to believe that. Anyway, the Fed is for these purposes a government agency itself, so all this is debt between different parts of USG."

Fine, and I agree completely. But the ECB, is that a government agency, and if it is, by which government is it backed?

Do you see where I am leading? If the centre doesn't hold in Europe, it won't be one country leaving, but the whole thing disintegrating, in which case, who will be honouring all those pieces of paper they are accumulating over there on Kaiserstrasse, assuming the whole thing would be accompanied by massive debt restructuring all over the place, and several defaulting sovereigns.

This would make the sort of counterparty stuff they had with Lehman's look like childs play.

So the centre has to hold, and we work back from there.

So look, if you are nervous, stay close to this blog (as you are doing). I reckon if there is a big crunch coming I will be able to see the Iceberg at least a few metres before we hit. At that point, if we reach that point, cash will be king. So the secret now is to be as liquid as possible.

If we have deflation, then even notes increase in value with time, but keeping things at home under the bed has a risk, and I see no problem with the banks in this moment, although probably the bigger the better. The important thing is not to bury your money too deep where you can't reach it quickly if needs must. And then, if shove really comes to shove, really comes to shove, remember all the notes have country-specific serial numbers, and that the French ones will go to Francs, while the Spanish ones will go to pesetas.

Anonymous said...

Hello Edward,
thanks for your really good comments

Then, we'll do as the saying "Prepare for the worst, hope for the best" ;)

"stay close to this blog (as you are doing). I reckon if there is a big crunch coming
I will be able to see the Iceberg at least a few metres before we hit"
yesterday I watched Titanic ;) I'm not kidding

Good weekend and enjoy Barcelona

Anonymous said...

Hi Edward,

The previous commentator has a point, but is his point. And everyone has a point. The problem is that is the problem is there and will affect many people lifes for years to come. It all depends on how you look into it and how you want to react, and minimize the effects on your person because other people's irresponsability. Maybe he is already middle aged and has property already. Good to have critical people anyway, that is what we need in Spain

Having said that, it happens that I am very pragmatic person, and I do work as a contractor for Swiss companies, which i found they pay around 3 times that in Spain, of course nothing comes for free and i speak 3 foreign languages. So fortunately I'm not sucking money from Spanish middle class ;) I would rather say I suck it from Swiss companies ;) but they suck my time when I'm in office. So far, I accept the deal ;) At the end we all accept some sort of deal, right?

Now going to the point, I find you blog Edward most interesting. There are other sources i read too, eurointelligence, RGE monitor, Bloomberg and so on, but what makes your blog special is that you are "in touch" with the street. You are not Spanish, you life in Spain as an expat and you are economist.

The chances are that you will not be influenced by everything that most of Spanish people are influenced from; you are based on numbers, not influenced by "raices" (comments like "En ningun sitio se vive como en Espania" are correct maybe not correct , but you have to give arguments backing that, and when you ask for those arguments, people don't know what to answer appart from weather, food...I guess too much TV has something to do with that. Desde luego Hipotecas at 35 years doesn't seem paradise. But Espania es asi, and I accept that but I want to change it to.
My position regarding all this is very pragmatic. I am sure many others like me think the same. The first priority for us is to minimize the effect of this trap that lies in front uf us. To buy a house only when apropiate, avert housing boomms is a must before we sign any paper binding my life to a bank) and of course. you don't want your money to go..."oh, I'm sorry, the bank has collapsed and your money is lost. Le deseo Buenas tardes. POr favor no se ponga violento o llamo a seguridad"

We have to be alert even when you are from Spain and we have all those incompetetn people in goverment, banks and everything surrounding power. It seems that the whole system encourage you yo go that way based on I don't know what. We need critical approach, read more,watch less Toreros,football, PP/PSOE war crap, autonomias. More canias in bares with friends and more talk about real problems, problems that affect the new generation, and that we are the people that suppose to buil the future and they give us just crap and hipotecas... no comment.

Yes Edward, please keep posting so normal people like me are reading your analysis, true analysis and see more or less what is comming. That will give us definitve advantage.

I see young people's priotities are very clear, first, not to get our money "robbed" or sucked by bank closures due to incompetence. I want to be proactive and i read your blog exactly for that. Second avoid the maximun of debt i can manage (I want to know when there is a boom/bust, and take decisions based on that, just to buy a casa, after all, I'm Spanish :)

The EU archtecture problems and things like that, I leave that to economis and economist_politics (no politics_economist as you well say) for the time being now i have to worry not to get caught in the twister. Nevetherless, if there are riots, I will be there first line, since it's my generation's duty to ask for responsabilities.

Keep it up Edward!

Culinary Note- Did you try "Calcots"? if not, find out. That's delicious but not everybody knows in Spain. Is typical from Tarragona

Edward Hugh said...

Hi again Jaime

"Culinary Note- Did you try "Calcots"? if not, find out. That's delicious but not everybody knows in Spain. Is typical from Tarragona."

Yes, of course. When I say I am Catalan, I mean I am Catalan (at least as a state of mind). I have been here for nearly 20 years now, and know Barcelona better than many of my friends who were born here.

Though I am more at home in the Garotxa and the Ripolles than I am in Taragona, I'm afraid.

The thing is I eat so many (there is an old Paul Newman film - Cool Hand Luke - where he eats a "barbarity" of hard boiled eggs, I'm something similar with calçots. Of course, the key is the Romseco sauce.

Like Allioli, this gives me indigestion though. (The whole mediterranean fringe seems to be firmly ensconced in the aioli culture (allioli, alhòli) from Marsella to Alacant, very interesting topic this one).