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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Spanish banking issues

Posted by WARREN MOSLER on May 24th, 2010

The end game is unfortunately unfolding as Spanish bank losses become Spanish govt losses.

Deposit insurance is only credible at the ‘Federal’ level, not the ‘State’ level.

If the ECB had to write the check the issue would be inflation, but not solvency.

The euro govts can no more fund bank losses than the US States could cover bank losses.

And the euro zone response of spending cuts and tax increases only makes matters worse.

From inception, the euro system has been exactly this kind of accident waiting to happen.

CajaSur Seizure Marks Change for Spain’s Ailing Banks

2 Responses to “Spanish banking issues”

  1. RSG Says:

    “The euro govts can no more fund bank losses than the US States could cover bank losses.”

    Can’t the individual euro govt cb’s mark accounts up and down just like the fed…

    Reply

    Bx12 Reply:

    “Can’t the individual euro govt cb’s mark accounts up and down just like the fed…”

    Good question. Perhaps this gives a clue as to why EMU members are consistently (mis)represented as US states, as otherwise, the presumed simplicity of marking accounts up and down itself comes into question.

    Reply

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