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Spain: who is responsible for the property bubble?

As recession takes hold, European citizens are starting to ask questions about how they were led into this, the deepest downturn in three-quarters of a century. The leading Spanish daily El Pais published a very thoughtful article today asking how things had unravelled so quickly and so spectacularly in Spain, previously one of the fastest growing economies in Europe.

These are the same questions that one must ask in the United States, Britain and Ireland regarding their own property bubbles. And, in view of recent turmoil in astern Europe, I suspect similar answers will be sought there as well.

This first part in a series of articles lays out the statistics of bubble and bust, demonstrating the scale of the bubble in Spain and it also makes a number of suggestion as to how to prevent a recurrence. You should note that this article points out Spain’s helplessness due to its lack of control over interest rates as a key impediment to solving the problem. Below is my translation of the article:

Links: 2009-02-22

More on That Dirty Word “Nationalization” and Possible Approaches – Naked Capitalism In Northern They Trust – Barron’s ING’s Hommen May Consider Seeking U.S. Support After Review – Blomberg.com ‘Good Banks’ Are the Cost Effective Way Out of the Financial Crisis – Willem Buiter Nouriel Roubini – ‘Nationalize’ the Banks Latvia’s Government Is the Latest in Europe to Fail – […]

The Oscars are tonight

The link for the list of nominees for the 81st Academy Awards Ceremony is here. Here are my picks: Best Actress – Kate Winslet Best Actor – Mickey Rourke Best Supporting Actor – Heath Ledger Best Supporting Actress – Penelope Cruz Best Director – Gus Van Sant Best Foreign Film – The Baader Meinhof Complex Best Picture – Slumdog Millionaire […]

Manhattan real estate in freefall

This week’s Barron’s magazine highlights the abysmal state of the Manhattan real estate market. Manhattan was one of the last bubble markets to burst. Now, things are unraveling quickly, particularly at the high end. Some experts see another 30% down before the carnage is over. The trigger for the bubble’s bursting came in the form of Lehman Brothers, making the NY real estate market another reminder of how badly the Lehman situation was handled by Paulson, Bernanke and Geithner.

Links: 2009-02-21

Frustrated savers are turning their backs on banks – Irish, Business – Independent.ie UBS warns of dire consequences from U.S. tax battle | Reuters Soros sees no bottom for world financial collapse | Reuters German ‘bad bank’ in Dublin adds to Irish concerns – National Post FT.com – ECB warns Germany against EU bail-out BBC NEWS | Business | Stanford […]

Hypo Real Estate: 600 billion in off-balance sheet assets

There is quite a buzz in the German press about Hypo Real Estate. But, what should really get oe’s attention is its massive off-balance sheet exposures (hat tip Ulrich). The long and short of reports is that Hypo Real Estate has assets valued at 1 and 1/2 times its entire balance sheet in off-balance sheet vehicles. This would bring total exposure to German taxpayers to a cool one trillion euros (1,000,000,000,000).