In Spain the banks lent billions of Euros to inflate a real-estate bubble. There were a lot of small home-buyer loans to people who could never pay them back, but that's only a tiny part of the Spanish crisis. The big loans were almost all to real-estate speculators and builders, corrupt money-men who built huge apartment complexes that never have been inhabited, some of them never completed. The speculators bought and sold while the prices were still up, and everyone else is now caught holding the bag.
Investors fled from Spanish government debt on Monday, an immediate rejection of the country's planned bank bailout by the constituency it most desperately needs to impress: the buyers of its own government bonds. Put all of this together and you get a picture of a European policy elite always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve. But don’t despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner.
Of course we Canucks shouldn't expect our Dear Leaders to have learned anything from the banking disasters in Europe. All across Canada our banks continue to follow the same idiotic logic of 'what goes up, must keep going up'. Our Canadian banks continue, ostrich like, to lend ever huger sums into the overly heated real-estate markets based on the nonsensical recommendations of hand picked Pollyanna minded appraisers. The Canadian game of musical 'real-estate' chairs will end, as it has in Spain, with the last owners of the 'inflated real-estate game' winning the prize of a sleeping bag on the street.
