Spanish banks 'vulnerable' and may need public help, says IMF … Spain, already struggling to contain its public debts, may need to pump more taxpayer money into its ailing banks to clear away tens of billions of dollars in bad real estate loans, the International Monetary Fund reported on Wednesday. In an overview of the country's financial system, the IMF said that despite extensive restructuring, Spain's banking sector "remains vulnerable." It needs more capital and a strategy for quickly clearing away the legacy of a collapsing property bubble. – The Economist
Dominant Social Theme: These bank problems need to be dealt with.
Free-Market Analysis: Once again the cry goes up to preserve the banking sector. Is this necessary? In a free-market economy such failing institutions would shut down of their own accord. But that's not the way it works in the modern world.
This is too bad because propping up such entities only makes the larger economic distortion worse. And yet … in the modern world, financial institutions are increasingly "too big to fail."
Central banks around the world use large commercial banks as distribution points for the money they create. And this is why the powers-that-be are loath to shut them down.
Of course, the money could actually be distributed directly to the citizenry but this would defeat the reality of the current monetary racket, which is to distribute money into circulation via debt.
It is the banks that perform this function by "lending." And thus these banks are a very important part of the larger system. Here's more from the article excerpted above:
Spanish officials have shut down or forced the merger of most of the country's "cajas" — the savings banks that lent heavily for real estate projects. But the level of bad loans continues to grow, and is now a $185 billion burden weighing on the capacity of banks to make loans to households and businesses. The ability of banks to absorb those losses on their own may be limited, the IMF said, and "greater reliance on public funding may be needed."
"Dealing effectively and comprehensively with banks' legacy problem assets should be the priority," the IMF said. "Unless the weak institutions are quickly and adequately cleaned up, the sound banks will suffer unnecessarily by a continued loss of market confidence."
With three smaller European countries already receiving international bailouts, the larger economies of Spain and Italy have become the critical test of whether the euro region can revive its economy and avoid dragging down global trade and economic growth.
We note in this excerpt that the freewheeling Spanish cajas that used to make up to 50 percent of Spanish banks have been shut down. Only the larger, regulated banks remains standing.
This is indeed the way the world works. Concentration and bigness are constantly encouraged – and the end result when it comes to the financial sector is a group of too big to fail entities that must be supported at taxpayer expense.
One finally begins to question the coincidental evolution of this abiding enlargement. Central banks themselves contributed to it by printing an overabundance of money that causes first booms and busts.
During the deleveraging part of the cycle, large companies and institutions are purchased for very little money and the centralization continues.
Because the distortion has been going on for so long – a hundred years or more, economies around the world have reached a kind of saturation point. So many industries have been created that would not exist otherwise, that the world is chock full of overcapacity and unemployment.
These kinds of imbalances are a direct result of monetary overprinting. And they facilitate what the power elite desires, which is ever-closer global integration.
The power elite, in our view, is driving the world toward global governance at an alarming rate and uses financial crises as a tool to create momentum for this state of affairs. The Euro-crisis is part of this larger paradigm.
In fact, top Eurocrats are on record as anticipating the current crisis and intended to take advantage of it to build a closer union that can then serve as a stepping-stone to something larger still.
And now, toward the end of the article, we read this: "The IMF wants the rules of the fund changed so it can lend directly to banks – and underwrite a rescue of the Spanish financial system without increasing Spain's government debt."
Again, we see – as we have documented in the past – that the powers-that-be do, in fact, use financial crises as a way of increasing control. In this case, the IMF itself is poised to receive greater powers.
If the IMF can lend directly to banks, the banking system's control passes to the IMF. This news – buried toward the end of the article – is momentous. Once again, we see that the impetus toward globalization is increasing. The IMF and its backers are determined to gain more power for global facilities.
We read as well, toward the end of the article, "The suggestion is controversial, and it would amount to asking taxpayers in more financially stable nations such as Germany to bail out private companies elsewhere in Europe."
It may be controversial but this is exactly what the elites wish to happen. Out of chaos …order.
The euro area will need this sort of integration if it to survive, the article concludes.
But why does it need to survive?