Bank runs are contagious because panic is contagious.
Yesterday, I did a post on bank runs in Greece: almost $1.27 billion has been withdrawn from Greek banks in the last 10 days.
Today, it’s Spain’s turn.
Over the past week, €1bn ($1.3 billion) has been withdrawn from just one bank in Spain — the part-nationalized Bankia.
The Financial Times isn’t calling it a bank-run because that’s a scary word. But that’s what it is.
Alexandra Stevenson reports for the Financial Times, May 17, 2012:
“Shares in Bankia, the Spanish bank that was part-nationalised last week, plunged by more than a quarter on Thursday morning, after a report that customers had withdrawn €1bn from the bank over the past week.
Shares fell 27 per cent to €1.21 after El Mundo, a national Spanish newspaper, reported customers had withdrawn the sum, citing information from a recent board meeting.”
“The government on May 9 took over Bankia, the country’s fourth-largest lender, in an attempt to dispel concerns over the bank’s ability to deal with losses related to the 2008 property crash.
Uncertainty over the final cost of Spain’s banking reforms has stoked investor fears that an expensive international bail-out could be on the cards, adding to concerns about the survival of the euro zone.
The amount of money the report said customers have withdrawn from Bankia, which holds around 10 percent of Spanish deposits, is equivalent to around 1 percent of the lender’s retail and corporate deposits.
[…] One source close to the bank said money had been leaving Bankia even before the nationalization. “I think that’s why the government stepped in to nationalize it so quickly,” the source said.”
On April 3, 2012, Reuters reported that Spain’s public debt has increased to its highest level since the 1990s, and that the country’s debt-to-GDP (gross domestic product) ratio is expected to soar to 79.8% in 2012, from 68.5% just last year.
In comparison, Greece’s debt-to-GDP ratio is 120%. That means Greece’s national debt of $1.3 trillion is 120% of its GDP.
Lest you think America is hunky dory, our national debt now exceeds our GDP, which economists consider a danger sign. The last time I saw a report, which was in February 2012, the ratio of our debt to GDP was 101%. As a point of comparison, although the ratio increased to 41% at the end of the 1980s, it decreased to a “mere” 31% by 2001, then increased to 62% by the end of fiscal year 2010.
In other words, in less than two years (we’re not yet at the end of fiscal year 2012), Obama and the useless Congress had expanded America’s debt to GDP ratio from 62% to 101%!