Empty Houses in Spain
August 6, 2014 2:59 PM Subscribe
The Spanish housing boom goes bust. "Some 65km from Madrid, in the quintessentially Spanish heart of a country riven by competing regional identities, Valdeluz – the notorious ciudad fantasma (ghost town) of the crisis – was conceived at the height of what is sometimes called Spain’s economic miracle. In a Catholic nation, whose faith has declined substantially during its three decades of democracy, there is an increasing reluctance to believe in miracles of any kind."
I'm getting a box that says I've reached my limit of 5 free articles a month, which is ridiculous since it's been literally months since I can remember reading a Newsweek article. Anyone have another link?
posted by skycrashesdown at 3:54 PM on August 6, 2014 [1 favorite]
posted by skycrashesdown at 3:54 PM on August 6, 2014 [1 favorite]
Newsweek really on the bleeding edge here.
I'll give you my favorite factoid. Spain, with 1/5 the population of the US had at the peak of the market 1 million housing starts. Just to put that in perspective - peak starts at the top of an epic bubble in the US was something like two million and sort of mid-cycle-y starts is something like 1.6 mil. And the US has underlying population growth. Spain housing demand growth is mostly European retirees.
That said - its Europe's Florida - so eventually the bubble will be absorbed and we can do this all over again in 2030
posted by JPD at 4:07 PM on August 6, 2014
I'll give you my favorite factoid. Spain, with 1/5 the population of the US had at the peak of the market 1 million housing starts. Just to put that in perspective - peak starts at the top of an epic bubble in the US was something like two million and sort of mid-cycle-y starts is something like 1.6 mil. And the US has underlying population growth. Spain housing demand growth is mostly European retirees.
That said - its Europe's Florida - so eventually the bubble will be absorbed and we can do this all over again in 2030
posted by JPD at 4:07 PM on August 6, 2014
There's an interesting detective novel called Broken Harbor, which is about a ghost town development in Ireland, which went through much of the same malaise. It does a good job of bringing out the creepiness.
Really, they should call it ‘fucking town’. These people never stop having kids.
"How do we filter out the teases? We don't let them in. This goes for the guys, too. Because sometimes the guys are tapped out. But check your lease, man. Because you're living in Fuck City!"
posted by codacorolla at 4:17 PM on August 6, 2014 [5 favorites]
Really, they should call it ‘fucking town’. These people never stop having kids.
"How do we filter out the teases? We don't let them in. This goes for the guys, too. Because sometimes the guys are tapped out. But check your lease, man. Because you're living in Fuck City!"
posted by codacorolla at 4:17 PM on August 6, 2014 [5 favorites]
The Valdeluz h̶o̶u̶s̶i̶n̶g̶ ̶d̶e̶v̶e̶l̶o̶p̶m̶e̶n̶t̶ prison complex, 60 kilometres (38 miles) northeast of Madrid
posted by absentian at 4:36 PM on August 6, 2014
posted by absentian at 4:36 PM on August 6, 2014
€100,000 for a 3-bedroom flat in a 2500-person mostly-vacant town? How many years after the crash? Talk about sticky prices. I assume it's only the mortgages larger than the current price that keep people from selling at prices where more people would move in and make better use of the products of all that construction.
posted by sfenders at 4:48 PM on August 6, 2014
posted by sfenders at 4:48 PM on August 6, 2014
Keep in mind that this entire debacle was caused by LEGAL over-leveraging of mortgage investment paper by banks, permitted by massive deregulation in the United States that began in the 80's and was wholeheartedly supported by the banking lobby and its bought-out politicians, including Reagan, Bush Sr., Clinton, Bush Jr., and Obama.
Spain is just the tip of a financial calamity that impacted the entire globe - causing massive personal, family, and commercial displacement, bankruptcy, near-worldwide-economic collapse, emotional trauma, etc. etc.
Result? A few billion dollar fines slap-on-the-wrist penalties and warnings, while the financial sector and political policy pigs who made this happen walk away enriched, and still leveraging paper and political deception to the hilt.
Side note: Eric Holder worked for a law firm that defended banks, prior to his appointment as AG.
posted by Vibrissae at 4:53 PM on August 6, 2014 [2 favorites]
Spain is just the tip of a financial calamity that impacted the entire globe - causing massive personal, family, and commercial displacement, bankruptcy, near-worldwide-economic collapse, emotional trauma, etc. etc.
Result? A few billion dollar fines slap-on-the-wrist penalties and warnings, while the financial sector and political policy pigs who made this happen walk away enriched, and still leveraging paper and political deception to the hilt.
Side note: Eric Holder worked for a law firm that defended banks, prior to his appointment as AG.
posted by Vibrissae at 4:53 PM on August 6, 2014 [2 favorites]
permitted by massive deregulation in the United States that began in the 80's
Yes, obviously, the law-makers in the US should have realized that their changes to banking regulation in the 80's would drive the real estate market in Spain to wild excess twenty years later.
posted by sfenders at 5:03 PM on August 6, 2014 [6 favorites]
Yes, obviously, the law-makers in the US should have realized that their changes to banking regulation in the 80's would drive the real estate market in Spain to wild excess twenty years later.
posted by sfenders at 5:03 PM on August 6, 2014 [6 favorites]
Keep in mind that this entire debacle was caused by [the USA]
No, not particularly, it wasn't. It's got far more to do with e.g. the eurozone setting interest rates for the benefit of the German manufacturing base, etc, etc.
posted by ambrosen at 5:04 PM on August 6, 2014 [9 favorites]
No, not particularly, it wasn't. It's got far more to do with e.g. the eurozone setting interest rates for the benefit of the German manufacturing base, etc, etc.
posted by ambrosen at 5:04 PM on August 6, 2014 [9 favorites]
Talk about sticky prices. I assume it's only the mortgages larger than the current price that keep people from selling at prices where more people would move in and make better use of the products of all that construction.
Isn't part of the reason for the stickiness that in Spain you can't walk away from a mortgage -- that you are still on the hook for the full amount even if you mail in the keys?
posted by Dip Flash at 5:14 PM on August 6, 2014 [2 favorites]
Isn't part of the reason for the stickiness that in Spain you can't walk away from a mortgage -- that you are still on the hook for the full amount even if you mail in the keys?
posted by Dip Flash at 5:14 PM on August 6, 2014 [2 favorites]
No, not particularly, it wasn't. It's got far more to do with e.g. the eurozone setting interest rates for the benefit of the German manufacturing base, etc, etc.
Beyond the fact that mortgage lenders like Countrywide in the US didn't underwrite Spanish loans, there was plenty of competition in securitization from London. Northern Rock was a particularly shining example, and there are more in Iceland and Ireland. More regulation in the US without equal and matching regulations elsewhere in the world will do nothing.
posted by pwnguin at 5:22 PM on August 6, 2014 [1 favorite]
Beyond the fact that mortgage lenders like Countrywide in the US didn't underwrite Spanish loans, there was plenty of competition in securitization from London. Northern Rock was a particularly shining example, and there are more in Iceland and Ireland. More regulation in the US without equal and matching regulations elsewhere in the world will do nothing.
posted by pwnguin at 5:22 PM on August 6, 2014 [1 favorite]
you are still on the hook for the full amount even if you mail in the keys?
Yeah, it hadn't occurred to me that it might be otherwise outside the US, but Wikipedia quotes The Irish Times as reporting: "Unlike most European countries, Spanish law does not enforce mortgage debt forgiveness after eviction."
posted by sfenders at 5:23 PM on August 6, 2014 [1 favorite]
Yeah, it hadn't occurred to me that it might be otherwise outside the US, but Wikipedia quotes The Irish Times as reporting: "Unlike most European countries, Spanish law does not enforce mortgage debt forgiveness after eviction."
posted by sfenders at 5:23 PM on August 6, 2014 [1 favorite]
Keep in mind that this entire debacle was caused by LEGAL over-leveraging of mortgage investment paper by banks, permitted by massive deregulation in the United States that began in the 80's and was wholeheartedly supported by the banking lobby and its bought-out politicians, including Reagan, Bush Sr., Clinton, Bush Jr., and Obama.
No - this just simply is not correct in this case. The Spanish bubble was not funded with any sort of innovative structured finance entities. It was almost all on balance sheet covered bonds issued by the caja (savings banks) - mostly held by Northern European institutions. Really it was the corruption of local municipalities and mutually owned caja that drove the bubble. The Anglo-Saxon world wasn't really much involved. (although they were involved other ways - especially lending money to builders and construction companies as well as real estate portfolio investors)
Isn't part of the reason for the stickiness that in Spain you can't walk away from a mortgage -- that you are still on the hook for the full amount even if you mail in the keys?
Yes and No, Meaning you are right, you can't walk from a mortgage. However most of these loans were held as Construction loans at the Caja/Caixa that the Spanish government took over. For years their plan was "extend and pretend" but now that the underlying businesses have started to stabilize a bit the new successor entities are starting to sell bad loans on third parties - which basically will effectuate the price moves that need to happen.
In places where there was a real liquid market prices have declined dramatically.
posted by JPD at 5:26 PM on August 6, 2014 [7 favorites]
No - this just simply is not correct in this case. The Spanish bubble was not funded with any sort of innovative structured finance entities. It was almost all on balance sheet covered bonds issued by the caja (savings banks) - mostly held by Northern European institutions. Really it was the corruption of local municipalities and mutually owned caja that drove the bubble. The Anglo-Saxon world wasn't really much involved. (although they were involved other ways - especially lending money to builders and construction companies as well as real estate portfolio investors)
Isn't part of the reason for the stickiness that in Spain you can't walk away from a mortgage -- that you are still on the hook for the full amount even if you mail in the keys?
Yes and No, Meaning you are right, you can't walk from a mortgage. However most of these loans were held as Construction loans at the Caja/Caixa that the Spanish government took over. For years their plan was "extend and pretend" but now that the underlying businesses have started to stabilize a bit the new successor entities are starting to sell bad loans on third parties - which basically will effectuate the price moves that need to happen.
In places where there was a real liquid market prices have declined dramatically.
posted by JPD at 5:26 PM on August 6, 2014 [7 favorites]
BTW - during this time period most of these municipalities functionally funded themselves off of building fees, and the degree of collusion between the local governments and the cajas was epic.
So basically no one had an incentive to stop the building. Even when it was clearly insane.
The whole construction industry was like that. In '06 I want to say Spain spent something like 10% more of its GDP on construction than any other developed country in Europe. And this was already after two decades of EU accession spending funding a massive highway build out.
Portugal and Spain hands down have the worlds best tollroads.
posted by JPD at 5:32 PM on August 6, 2014 [3 favorites]
So basically no one had an incentive to stop the building. Even when it was clearly insane.
The whole construction industry was like that. In '06 I want to say Spain spent something like 10% more of its GDP on construction than any other developed country in Europe. And this was already after two decades of EU accession spending funding a massive highway build out.
Portugal and Spain hands down have the worlds best tollroads.
posted by JPD at 5:32 PM on August 6, 2014 [3 favorites]
. In '06 I want to say Spain spent something like 10% more of its GDP on construction than any other developed country in Europe.
According to the article, "At its peak, construction made up a massive 19% of the Spanish economy."
posted by junco at 5:35 PM on August 6, 2014
According to the article, "At its peak, construction made up a massive 19% of the Spanish economy."
posted by junco at 5:35 PM on August 6, 2014
I thought it was low 20's and the rest of Europe tops out in the very low teens, with most of N. Europe in the low 9 range. But I'm quoting 7 year old Euroconstruct data from memory
posted by JPD at 5:37 PM on August 6, 2014
posted by JPD at 5:37 PM on August 6, 2014
I've been tempted to move to Spain and telecommute for a while. Only thing really stopping me is visa issues.
posted by empath at 8:56 PM on August 6, 2014 [1 favorite]
posted by empath at 8:56 PM on August 6, 2014 [1 favorite]
I imagine renting all those underwater condos has to be super cheap.
posted by empath at 8:57 PM on August 6, 2014
posted by empath at 8:57 PM on August 6, 2014
Cocaine Nights was written in 1996. It's not like this was unexpected.
posted by 99_ at 11:22 PM on August 6, 2014
posted by 99_ at 11:22 PM on August 6, 2014
Yes, obviously, the law-makers in the US should have realized that their changes to banking regulation in the 80's would drive the real estate market in Spain to wild excess twenty years later.
It's not that they should have known; they didn't care. Look at the three crashes that started with the Savings and Loan debacle in the 80's - all led by US deregulation. The rest of the financial world took lessons from America. Yes, that's right, America.
No - this just simply is not correct in this case. The Spanish bubble was not funded with any sort of innovative structured finance entities. It was almost all on balance sheet covered bonds issued by the caja (savings banks) - mostly held by Northern European institutions. Really it was the corruption of local municipalities and mutually owned caja that drove the bubble. The Anglo-Saxon world wasn't really much involved. (although they were involved other ways - especially lending money to builders and construction companies as well as real estate portfolio investors)
The American downturn was the trigger that set the world on its economic heels. The details of internal manipulations in other nations is chickenfeed to the house of cards that came tumbling down due to the failure of AMERICAN banks, considered the most solid banks on earth. Psychologically, that failure started the ball rolling.
And, to repeat: "Eric Holder worked for a law firm that defended banks, prior to his appointment as AG."
posted by Vibrissae at 11:24 PM on August 6, 2014
It's not that they should have known; they didn't care. Look at the three crashes that started with the Savings and Loan debacle in the 80's - all led by US deregulation. The rest of the financial world took lessons from America. Yes, that's right, America.
No - this just simply is not correct in this case. The Spanish bubble was not funded with any sort of innovative structured finance entities. It was almost all on balance sheet covered bonds issued by the caja (savings banks) - mostly held by Northern European institutions. Really it was the corruption of local municipalities and mutually owned caja that drove the bubble. The Anglo-Saxon world wasn't really much involved. (although they were involved other ways - especially lending money to builders and construction companies as well as real estate portfolio investors)
The American downturn was the trigger that set the world on its economic heels. The details of internal manipulations in other nations is chickenfeed to the house of cards that came tumbling down due to the failure of AMERICAN banks, considered the most solid banks on earth. Psychologically, that failure started the ball rolling.
And, to repeat: "Eric Holder worked for a law firm that defended banks, prior to his appointment as AG."
posted by Vibrissae at 11:24 PM on August 6, 2014
... so what? I'm guessing virtually every large law firm has defended large banks.
posted by Justinian at 12:09 AM on August 7, 2014 [2 favorites]
posted by Justinian at 12:09 AM on August 7, 2014 [2 favorites]
Anecdote time - I live in Barcelona, and own property here.
First, don't believe any unemployment figures you see. I can only speak for Barcelona, but a large portion of people I know who are on "el paro" (unemployment payments or the dole) are working somewhere "en negro" (in black or under the table). People are still going out, the shops are full, the bars are jumping. The locals do like to game the system. If I put up a help wanted sign in the window of one of my bars, I'll get a couple of applications in a couple of weeks, and they will ALL be from foreigners. I've never had a local apply for a job, and if the unemployment rate was so high, people would be lining up.
Second, house prices seem to be starting to recover here. I think they peaked around 2007 or so, and I think in a couple of years they'll be back to that level. Don't forget, Spain is still cheap by European standards. At the peak price time, you could buy a two bedroom flat in the city center, 10 minutes from the beach, for 150,000 or so. Maybe 25% less now. That's crazy cheap if you compare to most other European cities. How much would that cost in London or Paris or Stockholm?
Third, all the locals complain about "el crisis" and how nobody has any money. But they still close their shops and businesses for the entire month of August and head away on vacations. The locals complain about the foreign owned businesses, but they still close for three of four hours every day for siesta, while the shops owned by pakistanis and chinese stay open, and open on Saturday afternoons and Sundays and holidays, which the locals don't. If it was that much of a crisis for them, they would stay open. If they don't, they need to adjust. Barcelona is a super international city now and working on Catalan schedules and rules just isn't going to cut it, and I'm sure that's even more true for the rest of Spain.
posted by conifer at 12:24 AM on August 7, 2014 [1 favorite]
First, don't believe any unemployment figures you see. I can only speak for Barcelona, but a large portion of people I know who are on "el paro" (unemployment payments or the dole) are working somewhere "en negro" (in black or under the table). People are still going out, the shops are full, the bars are jumping. The locals do like to game the system. If I put up a help wanted sign in the window of one of my bars, I'll get a couple of applications in a couple of weeks, and they will ALL be from foreigners. I've never had a local apply for a job, and if the unemployment rate was so high, people would be lining up.
Second, house prices seem to be starting to recover here. I think they peaked around 2007 or so, and I think in a couple of years they'll be back to that level. Don't forget, Spain is still cheap by European standards. At the peak price time, you could buy a two bedroom flat in the city center, 10 minutes from the beach, for 150,000 or so. Maybe 25% less now. That's crazy cheap if you compare to most other European cities. How much would that cost in London or Paris or Stockholm?
Third, all the locals complain about "el crisis" and how nobody has any money. But they still close their shops and businesses for the entire month of August and head away on vacations. The locals complain about the foreign owned businesses, but they still close for three of four hours every day for siesta, while the shops owned by pakistanis and chinese stay open, and open on Saturday afternoons and Sundays and holidays, which the locals don't. If it was that much of a crisis for them, they would stay open. If they don't, they need to adjust. Barcelona is a super international city now and working on Catalan schedules and rules just isn't going to cut it, and I'm sure that's even more true for the rest of Spain.
posted by conifer at 12:24 AM on August 7, 2014 [1 favorite]
... so what? I'm guessing virtually every large law firm has defended large banks.
"So what?" So what that the Attorney General of the United States put the prosecution of criminals who caused the financial crisis on the bank burner, and has not prosecuted even one CEO for what happened? Not one big time banker in jail? So what that Holder talks out of both sides of his mouth on that issue? Holder has done some good things, but his prosecution of the creeps that stole (and continue to steal) from Americans from their "to big to fail" institutions will remain a lasting negative stain on Holder's term as AG?
Holder: ""I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,".
Holder is telling the American people that certain people - in this case large institutional bankers - are immune from criminal activity. What kind of message does that send to those bankers, and the American people? Holder made a lot of high-level banking friends before he took the AG post; he's going to be looking good when he leaves office.
"So what?" Indeed.
posted by Vibrissae at 1:18 AM on August 7, 2014 [2 favorites]
"So what?" So what that the Attorney General of the United States put the prosecution of criminals who caused the financial crisis on the bank burner, and has not prosecuted even one CEO for what happened? Not one big time banker in jail? So what that Holder talks out of both sides of his mouth on that issue? Holder has done some good things, but his prosecution of the creeps that stole (and continue to steal) from Americans from their "to big to fail" institutions will remain a lasting negative stain on Holder's term as AG?
Holder: ""I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,".
Holder is telling the American people that certain people - in this case large institutional bankers - are immune from criminal activity. What kind of message does that send to those bankers, and the American people? Holder made a lot of high-level banking friends before he took the AG post; he's going to be looking good when he leaves office.
"So what?" Indeed.
posted by Vibrissae at 1:18 AM on August 7, 2014 [2 favorites]
Keep in mind that this entire debacle was caused by LEGAL over-leveraging of mortgage investment paper by banks, permitted by massive deregulation in the United States that began in the 80's and was wholeheartedly supported by the banking lobby and its bought-out politicians, including Reagan, Bush Sr., Clinton, Bush Jr., and Obama.
...
"So what?" So what that the Attorney General of the United States put the prosecution of criminals who caused the financial crisis on the bank burner, and has not prosecuted even one CEO for what happened?
Leaving aside the fact that this didn't have anything to do with American banking regulations (and I'm glad that we can turn a thread about Spanish housing markets into a circle-jerk about American politics so quickly), how can you possibly reconcile these two statements?
As you said, the majority of what happened was perfectly legal. There was certainly fraud around the edges, but by no means did that cause the crisis.
posted by atrazine at 1:25 AM on August 7, 2014 [2 favorites]
...
"So what?" So what that the Attorney General of the United States put the prosecution of criminals who caused the financial crisis on the bank burner, and has not prosecuted even one CEO for what happened?
Leaving aside the fact that this didn't have anything to do with American banking regulations (and I'm glad that we can turn a thread about Spanish housing markets into a circle-jerk about American politics so quickly), how can you possibly reconcile these two statements?
As you said, the majority of what happened was perfectly legal. There was certainly fraud around the edges, but by no means did that cause the crisis.
posted by atrazine at 1:25 AM on August 7, 2014 [2 favorites]
Third, all the locals complain about "el crisis" and how nobody has any money. But they still close their shops and businesses for the entire month of August and head away on vacations. The locals complain about the foreign owned businesses, but they still close for three of four hours every day for siesta, while the shops owned by pakistanis and chinese stay open, and open on Saturday afternoons and Sundays and holidays, which the locals don't. If it was that much of a crisis for them, they would stay open. If they don't, they need to adjust.
I don't think you understand this country, but good luck opening your shop when there is nobody there to buy because they've gone to the grandparents' house in the pueblo (because there is no money to go to the beach).
Barcelona has foreign tourists all year long. The rest of the country doesn't. And nobody in their own senses goes out to buy at three in the afternoon in high summer unless it's to the supermarket because there's no food at home, sheesh.
posted by sukeban at 1:51 AM on August 7, 2014 [3 favorites]
I don't think you understand this country, but good luck opening your shop when there is nobody there to buy because they've gone to the grandparents' house in the pueblo (because there is no money to go to the beach).
Barcelona has foreign tourists all year long. The rest of the country doesn't. And nobody in their own senses goes out to buy at three in the afternoon in high summer unless it's to the supermarket because there's no food at home, sheesh.
posted by sukeban at 1:51 AM on August 7, 2014 [3 favorites]
Oh, and
At the peak price time, you could buy a two bedroom flat in the city center, 10 minutes from the beach, for 150,000 or so. Maybe 25% less now. That's crazy cheap if you compare to most other European cities. How much would that cost in London or Paris or Stockholm?
I dunno, do they have mileurista salaries in London or Paris or Stockholm?
posted by sukeban at 1:56 AM on August 7, 2014 [1 favorite]
At the peak price time, you could buy a two bedroom flat in the city center, 10 minutes from the beach, for 150,000 or so. Maybe 25% less now. That's crazy cheap if you compare to most other European cities. How much would that cost in London or Paris or Stockholm?
I dunno, do they have mileurista salaries in London or Paris or Stockholm?
posted by sukeban at 1:56 AM on August 7, 2014 [1 favorite]
Barcelona has foreign tourists all year long. The rest of the country doesn't.
Sukeban, as I said, I can only speak about Barcelona.
I dunno, do they have mileurista salaries in London or Paris or Stockholm?
No, that's why such a large percentage of properties here are being snapped up by foreigners, making it the international city that it is. It's sad sometimes, but things change. Barcelona isn't the provincial city it was before thet Olympics.
posted by conifer at 2:56 AM on August 7, 2014
Sukeban, as I said, I can only speak about Barcelona.
I dunno, do they have mileurista salaries in London or Paris or Stockholm?
No, that's why such a large percentage of properties here are being snapped up by foreigners, making it the international city that it is. It's sad sometimes, but things change. Barcelona isn't the provincial city it was before thet Olympics.
posted by conifer at 2:56 AM on August 7, 2014
Leaving aside the fact that this didn't have anything to do with American banking regulations (and I'm glad that we can turn a thread about Spanish housing markets into a circle-jerk about American politics so quickly), how can you possibly reconcile these two statements?
The financial abuse visited on the world IS a circle jerk, with America having the biggest dick. Lets put it this way, if Lehman Bros and the rest hadn't gone belly up, does anyone believe for a second that the EU fail would have been as large as it was. And, where did it all start? Yes, that's right - American banking regulations made the solidity in *connected* marketplaces more vulnerable.
Right here in America. It was American financiers and policy makers who helped invent and legalize these atrocious financial instruments. Everyone else was simply following.
Our financial reality is NOT isolated from nation to nation; it's all interconnected and interdependent -so when the biggest nation looks like it is going to crash and burn, panic ensues, worldwide panic.
Of course there were internal, unique dynamics to every nation's financial, housing, etc. markets; that's undeniable. That said, the American financial system upset the psychological apple cart in a sector where lost trust and security and the sense that the strongest currency and economy in the world was impermeable, was lost, almost overnight. THAT is why everything else started falling, like a house of cards, including the Spanish and Irish housing markets, etc. etc. etc.
posted by Vibrissae at 3:30 AM on August 7, 2014
The financial abuse visited on the world IS a circle jerk, with America having the biggest dick. Lets put it this way, if Lehman Bros and the rest hadn't gone belly up, does anyone believe for a second that the EU fail would have been as large as it was. And, where did it all start? Yes, that's right - American banking regulations made the solidity in *connected* marketplaces more vulnerable.
Right here in America. It was American financiers and policy makers who helped invent and legalize these atrocious financial instruments. Everyone else was simply following.
Our financial reality is NOT isolated from nation to nation; it's all interconnected and interdependent -so when the biggest nation looks like it is going to crash and burn, panic ensues, worldwide panic.
Of course there were internal, unique dynamics to every nation's financial, housing, etc. markets; that's undeniable. That said, the American financial system upset the psychological apple cart in a sector where lost trust and security and the sense that the strongest currency and economy in the world was impermeable, was lost, almost overnight. THAT is why everything else started falling, like a house of cards, including the Spanish and Irish housing markets, etc. etc. etc.
posted by Vibrissae at 3:30 AM on August 7, 2014
Lets put it this way, if Lehman Bros and the rest hadn't gone belly up, does anyone believe for a second that the EU fail would have been as large as it was. And, where did it all start? Yes, that's right - American banking regulations made the solidity in *connected* marketplaces more vulnerable.
Was the collapse of a few American investment banks the trigger for what happened? Yeah, sure. That doesn't mean they caused it, this house of cards would have come down at some point anyway.
The construction insanity in Spain was funded by local Spanish banks, many of them mutually owned (much like American credit unions, in fact). They in turn funded themselves by borrowing from Northern European commercial bank and especially from German Landesbanken (regionally based banks that focus on investing in infrastructure and businesses rather than trading or investment banking).
Where do American banks and American banking regulations come into play here, exactly?
Right here in America. It was American financiers and policy makers who helped invent and legalize these atrocious financial instruments. Everyone else was simply following.
Which financial instruments?
Collateralised Debt Obligations? Nope. Those have never been heavily used in Europe and anyway they apply to mortgages, not construction loans. A large part of what happened in Spain was construction loan defaults.
Credit Default Swaps? Not really involved here. Those spread the damage from the housing market around but again, there wasn't a significant amount of that going on in Spain.
There wasn't anything exotic or weird or related to structured finance going on here. This was bog-standard on-balance sheet construction lending funded by bog-standard inter-bank bond issues.
In an earlier comment you said the following:
The American downturn was the trigger that set the world on its economic heels. The details of internal manipulations in other nations is chickenfeed to the house of cards that came tumbling down due to the failure of AMERICAN banks, considered the most solid banks on earth. Psychologically, that failure started the ball rolling.
And linked to this Economist article from which I have taken the following quotes:
In other words, although Europeans claimed to be innocent victims of Anglo-Saxon excess, their banks were actually in the thick of things.
...
The glut that caused America’s loose credit conditions before the crisis, he argues, was in global banking rather than in world savings.
...
Moreover, Europe had its own internal imbalances that proved just as significant as those between America and China. Southern European economies racked up huge current-account deficits in the first decade of the euro while countries in northern Europe ran offsetting surpluses. The imbalances were financed by credit flows from the euro-zone core to the overheated housing markets of countries like Spain and Ireland. (my emphasis)
In other words, the fact that Lehman came down first was coincidence. It wasn't a singular event that somehow spread like a contagion through an otherwise healthy global financial system.
posted by atrazine at 4:01 AM on August 7, 2014 [3 favorites]
Was the collapse of a few American investment banks the trigger for what happened? Yeah, sure. That doesn't mean they caused it, this house of cards would have come down at some point anyway.
The construction insanity in Spain was funded by local Spanish banks, many of them mutually owned (much like American credit unions, in fact). They in turn funded themselves by borrowing from Northern European commercial bank and especially from German Landesbanken (regionally based banks that focus on investing in infrastructure and businesses rather than trading or investment banking).
Where do American banks and American banking regulations come into play here, exactly?
Right here in America. It was American financiers and policy makers who helped invent and legalize these atrocious financial instruments. Everyone else was simply following.
Which financial instruments?
Collateralised Debt Obligations? Nope. Those have never been heavily used in Europe and anyway they apply to mortgages, not construction loans. A large part of what happened in Spain was construction loan defaults.
Credit Default Swaps? Not really involved here. Those spread the damage from the housing market around but again, there wasn't a significant amount of that going on in Spain.
There wasn't anything exotic or weird or related to structured finance going on here. This was bog-standard on-balance sheet construction lending funded by bog-standard inter-bank bond issues.
In an earlier comment you said the following:
The American downturn was the trigger that set the world on its economic heels. The details of internal manipulations in other nations is chickenfeed to the house of cards that came tumbling down due to the failure of AMERICAN banks, considered the most solid banks on earth. Psychologically, that failure started the ball rolling.
And linked to this Economist article from which I have taken the following quotes:
In other words, although Europeans claimed to be innocent victims of Anglo-Saxon excess, their banks were actually in the thick of things.
...
The glut that caused America’s loose credit conditions before the crisis, he argues, was in global banking rather than in world savings.
...
Moreover, Europe had its own internal imbalances that proved just as significant as those between America and China. Southern European economies racked up huge current-account deficits in the first decade of the euro while countries in northern Europe ran offsetting surpluses. The imbalances were financed by credit flows from the euro-zone core to the overheated housing markets of countries like Spain and Ireland. (my emphasis)
In other words, the fact that Lehman came down first was coincidence. It wasn't a singular event that somehow spread like a contagion through an otherwise healthy global financial system.
posted by atrazine at 4:01 AM on August 7, 2014 [3 favorites]
I imagine renting all those underwater condos has to be super cheap.
There's no one to rent to. My in-laws live in Portugal, whose housing boom followed a similar trajectory in the early 2000s.
They've been trying to get rid of an apartment they bought at the height of the boom. They're willing to sell low, but they can't find anyone. Beachfront, newly renovated. Not a nibble. Their apartment is on a dusty lot surrounded by lots of other empty apartments. There is literally no one there.
It's possible that these places will boom again in the next 25-40 years when demographic decline gets so bad that Europe is begging for immigrants.
posted by Occam's Aftershave at 4:09 AM on August 7, 2014
There's no one to rent to. My in-laws live in Portugal, whose housing boom followed a similar trajectory in the early 2000s.
They've been trying to get rid of an apartment they bought at the height of the boom. They're willing to sell low, but they can't find anyone. Beachfront, newly renovated. Not a nibble. Their apartment is on a dusty lot surrounded by lots of other empty apartments. There is literally no one there.
It's possible that these places will boom again in the next 25-40 years when demographic decline gets so bad that Europe is begging for immigrants.
posted by Occam's Aftershave at 4:09 AM on August 7, 2014
I called this out as an example of posts about non-US topics being derailed to discussion of US politics in this MeTa about encouraging global perspectives.
posted by strangely stunted trees at 7:04 AM on August 7, 2014 [8 favorites]
posted by strangely stunted trees at 7:04 AM on August 7, 2014 [8 favorites]
If I put up a help wanted sign in the window of one of my bars, I'll get a couple of applications in a couple of weeks, and they will ALL be from foreigners.
Many immigrants in Spain (about 50% in 2010) live in Madrid and Catalunya and many Spanish young people have bid adiós to Spain and moved abroad.
posted by ersatz at 10:09 AM on August 7, 2014
Many immigrants in Spain (about 50% in 2010) live in Madrid and Catalunya and many Spanish young people have bid adiós to Spain and moved abroad.
posted by ersatz at 10:09 AM on August 7, 2014
Occam's Aftershave: "Europe is begging for immigrants."
What alternate SciFi universe do you live in? Does everyone get to work with jetpacks?
posted by wcfields at 12:07 PM on August 7, 2014
What alternate SciFi universe do you live in? Does everyone get to work with jetpacks?
posted by wcfields at 12:07 PM on August 7, 2014
Occam's Aftershave: "Europe is begging for immigrants."
What alternate SciFi universe do you live in? Does everyone get to work with jetpacks?
Please read the beginning of the sentence. The dialogue about immigration that Europe will be having in 25-40 years is the opposite of the one that is happening now.
Here are some helpful charts.
Europe is not currently begging for immigrants. There is an employment crisis for those who are here and a brain drain of those who are most qualified to keep infrastructure, production and services running, as ersatz has pointed out.
This will come back to bite us in the butt by mid-century when tax coffers are empty and there are more old people on the dole than there are young people to keep things running and contribute to social programs.
posted by Occam's Aftershave at 4:24 PM on August 7, 2014
What alternate SciFi universe do you live in? Does everyone get to work with jetpacks?
Please read the beginning of the sentence. The dialogue about immigration that Europe will be having in 25-40 years is the opposite of the one that is happening now.
Here are some helpful charts.
Europe is not currently begging for immigrants. There is an employment crisis for those who are here and a brain drain of those who are most qualified to keep infrastructure, production and services running, as ersatz has pointed out.
This will come back to bite us in the butt by mid-century when tax coffers are empty and there are more old people on the dole than there are young people to keep things running and contribute to social programs.
posted by Occam's Aftershave at 4:24 PM on August 7, 2014
« Older Too Clever To Be Legal | "You can sort your life out anytime, the pub... Newer »
This thread has been archived and is closed to new comments
posted by larrybob at 3:28 PM on August 6, 2014