I am having a conversation with Edward Hugh, an Economist who lives in Spain and sits on the Board of Directors for one of the newly restructured savings banks over there. He has been elected as an executive director of the Catalunya Caixa, as a representative of the people.
He and I are discussing the state of the bail out in Europe, and who is actually going to be funding it. Its interesting in the oblique as the real source of funds appears to be the US and that means in reality the US Federal Reserve, even when we are supposed to be the most bankrupt nation on the planet, we still appear to be the largest & more importantly the funder of last resort.
I find it Ironic that while the US is a basket case, it is slowly becoming the last funder of available Capital in the IMF portion of the Euro bail outs.
The US is the source of capital in the world, as the global margin calls continue to generate deleveraging around the world. The real world demand for capital is showing that the stress tests in Europe where a complete farce.
The Irish banks were *fine in July* but needed a massive bail out in November?So, the real question is why did they need a $100 Billion USD in bail outs within the the following 5 months if they were properly capitalized?
If they are typical of Euro banks, what does this say about the other banks that barely passed the capitalization tests?
That’s not a joke, that’s a travesty, when you consider the hundreds of billions of dollars of capital at risk of being shown to have evaporated. Ponder the implications of perfectly fine banking sector needing a national bail out of equal to 50% the GDP of Ireland, EVERWHERE.
Its a good thing that the US is riding to the worlds rescue, check book in hand, offering to fund the national level bail outs that the rest of Europe cant handle. It will be more interesting when the US quits bailing out other nations via the IMF, or can’t any longer.