Bank run in Spain

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Yesterday, I did a post on bank runs in Greece: almost $1.27 billion has been withdrawn from Greek banks in the last 10 days.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Over the past week, €1bn ($1.3 billion) has been withdrawn from just one bank in Spain — the part-nationalized Bankia.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was part-nationalised last week, plunged by more than a quarter on Thursday morning, after a report that customers had withdrawn €1bn from the bank over the past week.

Shares fell 27 per cent to €1.21 after El Mundo, a national Spanish newspaper, reported customers had withdrawn the sum, citing information from a recent board meeting.”

From Reuters:

“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The amount of money the report said customers have withdrawn from Bankia, which holds around 10 percent of Spanish deposits, is equivalent to around 1 percent of the lender’s retail and corporate deposits.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%!

~Eowyn

2 responses to “Bank run in Spain

  1. American Socialism and the second Great Depression 
       
    A run on the banks started ten days ago in Greece, and it also has just been reported to be happening in Spain as if it just started but we have learned it also started several days ago, but the news is not reporting these events in Europe. (A run on the banks means a lot of people are taking out a lot of money.) It means people don’t trust the governments and the banks any more. The problem is created by socialism. Elect President Obama again and you can taste the same thing as European Socialism soon enough with American Socialism and a run on American banks. You may not have to wait that long. Europe is a preview. I hope you enjoy the show. Coming soon to America. American Socialism and the second Great Depression. You may not like this movie. 

  2. Time for Glass Steagall…………………….to stop the “bleeding” in the collapsing monetary system.
    Then Congress could utter credit based on future income which would be forthcoming from immediately monetized gigantic infrastructure projects, including enormous scientific research and development projects which could span at least two generations and put our citizens back to work. Should other nations wish to form alliances with the US to utter credit through the unique provisions of the Constitution, then that would be manageable with a new Bretton Woods, fixed exchange rate standard imposed on the different nations currency.
    How much more realistic to base the future’s prosperity on the premise of human creativity and productivity which have consequences that far outlive the repayment of the investment capital time frame. Placing our trust in silver or gold, or in banks and bankers like JPMOrganChase and Jamie Dimon is proving to be
    a travesty of an order of magnitude beyond most people’s imagination. The losses that are being projected are merely the tip of the iceberg………………
    the situation in the EU is so precarious that many other “hedges” and exotic financial instrumentation positions will not be fundable. We cannot be certain that money is fungible under current conditions, we have to assert our Constitutional Principles that govern the right of the people to be guaranteed that their general welfare is of paramound importance. Taking care of federally insured high risk taking banks doesn’t feed our people, and they don’t have time to fund productive economic ventures, they just want to roll the dice.
    Tell it like it is Dr. Eowyn. I hope everyone will take notice of this warning……………………………she is right on the money. Excuse the pun.

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