We're all Japanese now.

Our own MaxedOutMamma had an interesting post on her site on what she thought some of the macro causes of this were between the emerging and advanced economies are. She was particularly unhappy about the possibility that the rising prices of commodities would destabilize the cost of labor in the emerging economies and lead to currency moves and local unrest; the advanced economies she thought would see increases in inflation and drops in standards of living.

This could be ugly if it comes to pass.

MaxedOutMama: The Picture

Another comment:

There is the subprime issue. Spanish lenders deny that such "subprime-like" lending has occured in Spain. Nevertheless, some authoritative voices have said that yes, there has been "subprime-like" lending in Spain. I am pretty sure it is true. Nobody can quantify the amount of risky loans generated lately but the issue is there, waiting for delinquencies to rise (actually rising but still not high). I believe that some day S&P will downgrade some (several?) spanish MBSs.

JJL -

Based on info from the last thread, I say that God is my copilot (he's for American after all), and Seb is my investment advisor. I'm all set.

B52:

"On March 13, Bear Stearns advised the Federal Reserve
and other government agencies that its liquidity position had significantly deteriorated and that it
would have to file for Chapter 11 bankruptcy the next day unless alternative sources of funds
became available."

JJL said: "Sebastian says any real estate slow down is both contained and in the rear view mirror. Certainly applies to Europe, yes?"

I have no opinion on foreign-country assets...except for Monica Bellucci, which I'm in favor of.

Monica Bellucci - Wikipedia, the free encyclopedia

Sebastia

I have to say, with the yield curve sloping up (mostly), and the TED spread treading down, it might be sometime before reality hits this market again.

Wave 4 could come somewhere between 3rd and 4th quater. I expect a summer break.

"Sell in May and go away."

MadJock - From the S&P article:

It added that, at the same time, there are signs that housing in Ireland is becoming more affordable, while a combination of low indebtedness and fiscal stimulus should help support the market in France.

I have no opinion on Irish assets, except for their beer, which I'm in favor of.

MLM said: "My choice of investment advisors is paying off already!"

Would that I could have added the disclaimer, "which I already own.":)

Not in this life.))

S.

Anonymous - I meant sell your put options... lol.
(this site is mostly bears if you haven't noticed )

Spain is a weird place. If you take a vacation to Barcelona, you see unbelievable amounts of money, tourists and commerce from all over Europe. You can pay $10 for a coke in hotels.

But if you drive literally 20 minutes outside Barcelona, you will see little villages full of tin roof two-room houses with dirty little barefoot kids in the front yard. You can see orange groves where the water has all dried up and the farmers are starving. Two different worlds so close together.

And everywhere (when I was there two years ago) you saw hi-rise construction cranes. On a one-hour drive, you could easily count a hundred. A lot of it was foreign invesors buying 2nd homes at very inflated prices, a lot like Spain's version of Miami.

More bailouts:

UPDATE 2-Tax credits, FHA in US Senate housing bill-leaders
| Reuters

GRRRRRR! Now I'm really angry.

Viewing with alarm - I can picture it.

$50 gallon of milk
$20 gallon of gas
$30/h Minimum wage wage

That in the next 10 years...

It's all relative. Only those who are unprepared will feel the price shocks.

I think that feature creep thingy happened to mortgages too.

There is highly likely to be a sharp fall in U.K. house prices with a nasty knock on effect throughout the economy.
However we Ancient Brits are well used to seeing higher interest rates, and much higher on occasions, to correct imbalances. In the past we have taken the pain.
Whether the younger generaion is up to it remains a good question.

Interesting Times,

FYI, February 2008 yoy PPI = 6.4% for finished goods. That seems realistic to me. It also roughly matches my monthly yoy fixed expense increases (taxes, food, insurance, utils, gas, etc.)

The hedonic adjustments do me NO good as I don't buy new gadgets often. Also, that feature creep concept implies a negative hedonic adjustment should be required.

Angry Saver writes:
More bailouts

The result will be spread the pain and for those who were sensible, acted with due care, respected money, used debt wisely will now have to bail out those less fortunate.

I'm confused. Please help me. Are we talking about the United States of America here? Or is this:

Bolshevism is not merely a political doctrine; it
is also a religion, with elaborate dogmas and inspired scriptures.
When Lenin wishes to prove some proposition, he does so, if possible,
by quoting texts from Marx and Engels. A full-fledged Communist is not
merely a man who believes that land and capital should be held in
common, and their produce distributed as nearly equally as possible.
He is a man who entertains a number of elaborate and dogmatic
beliefs--such as philosophic materialism, for example--which may be
true, but are not, to a scientific temper, capable of being known to
be true with any certainty. This habit, of militant certainty about
objectively doubtful matters, is one from which, since the
Renaissance, the world has been gradually emerging, into that temper
of constructive and fruitful scepticism which constitutes the
scientific outlook.

Ancient Brit...sharp fall in U.K. house prices with a nasty knock on effect throughout the economy...

of Spain's English vacation home industry?

Ipodius,

Here is my reality over the last year:

NJ sales tax: up 16.7%
Property Taxes: up 7.3%
House/car insurance: up 11%
Gas: I've lost track.
Monthly food budget: up 9% (after altering mix)
Weekly 12 pack Bass ale: up 8.3%
Tuition for college: up 5.8%
Utils: up 6.7% (phone went down)
Computers, tvs, etc: No comment - I didn't buy any.

Like I said, I can't afford any more prosperity (asset inflation).

Yes, there will be plenty of British forced sellers in Spain.

Angry Saver - It doesn't matter if you and I can't afford it. It's the price that is dictated by market forces.

My personal extension to Peak Oil is this "oil will never run out, price will just exponentionaly increase with time until substitues are forced onto the economy"

Think solar-electric, hydrogen, etc. The Germans have one thing right - they are heavy into solar power.

Angry Saver

You devalue the Dollar to $3/Euro and $200 Oil becomes a reality.

Spain's banks have much higher reserve ratio reqs than the US(or the UK) and have for some time.

Which kind of reserves are you talking about? FX reserves were at wafer thin levels in 2007:

Spain's foreign reserves have plummeted to wafer-thin levels, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust - despite membership of the eurozone.

Spain risks crisis over vanishing reserves - Telegraph

Re: $200/bbl oil.

You may be right. Seems high to me though.

An extra 700 billion a year in the U.S. alone. Our trade deficit would surpass 1 trillion.

spain does have a good surplus..i believe ~30 bil..govt is providing stimulus by aid as well as infrastructure spending..
However, i am not sure if the scope of real estate rout will overwhelm such efforts

When I was a kid, the whole neighborhood drank powdered milk. Awful stuff. Did any one else put water in the ketchup jar to prevent waste?

Those will be the next hedonic adjustments.

Sorry... it's also due to the dollar tanking...

An extra 700 billion a year in the U.S. alone. Our trade deficit would surpass 1 trillion.

This would be a case where ceteris would most definitely not be paribus.

BTW, I'm now done posting commodity graphs. Don't want to have to change my name to "scotty makes pretty graphs" or something like that.

Kicker,

The kind of banks that lend money, not the spanish treasury.

To be honest, I haven't been impressed with the telegraph's coverage at any point during this credit crunch. It's been mostly about bashing governments and regurgitating noise(is Ambrose Pierce Doc Holiday?) rather that figuring out why things are happening and explaining it.

Andiron,

Agreed that Spain may not escape pain, but they should escape the worst of it compared to the UK or USA.

Hopefully this scare will force them to engage in labor market reforms that they need.

The other odd thing is that of all the infrastructure projects the one that's happening last is be the freight rail links between Alicante & Madrid

Budget surplus, not current accounts.

Read it in el Pais in the run up to the election.

And if my Aunt had Balls she'd be my uncle.

Current accounts isn't the only issue and my point is that they have other things working to mitigate the damage.

Spain doesn't have US or Italy's demographic problems.
Spain's banks didn't go out on the branch than the US or UK.

Spain's been doing catchup for more than a decade and have had prudent leadership from various governments.

Of course it could all end in tears but a lot of other are gona be crying a lot worse a lot sooner if that happens.

There's a reason that they've bee sellig ito glod's rise.

Angry Saver said: "Here is my reality over the last year:

NJ sales tax: up 16.7%
Property Taxes: up 7.3%
House/car insurance: up 11%
Gas: I've lost track.
Monthly food budget: up 9% (after altering mix)
Weekly 12 pack Bass ale: up 8.3%
Tuition for college: up 5.8%
Utils: up 6.7% (phone went down)
Computers, tvs, etc: No comment - I didn't buy any.

Like I said, I can't afford any more prosperity (asset inflation)."

And your rent/monthly mortgage payment?

Sebastia

Yah that little bugger is knocking on the door of the Eurasian bread basket (ug99 found in Iran recently).

No doubt many of us have observed bits and pieces of the world wide credit bubble and asset bubbles....

But....listen to this!

"...commodity bulls ought to consider this question. Can China prosper if the United States slumps? Probably no major economy has ever depended so much on one partner as China now depends on the United States. Eighty percent of China's GDP derives from international trade, and the United States is far and away the top destination..."

"...Much of America's uncertain mortgage debt is owned by Chinese investors. The state-owned Bank of China says it owns $5 billion of subprime loans, and that's on top of billions more of Chinese domestic bad debt. Some experts estimate that about half of all loans held by Chinese banks have ceased to pay interest. Bad debt imperils the credit that builds the gleaming new towers and airports of Shanghai and Beijing, and if those towers and airports stop going up, so too will the prices of the steel, copper and other materials of which they are made."

China will feel U.S. economy's pain | Marketplace From American Public Media

If that hits you like a 2x4, it should. If it's true that 1/2 of the loans behind all those gleaming new Chinese towers are going bad already....

Well....can you say...."new situation".