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Kasz216 on 06 September 2012
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Mnementh said:
Kasz216 said:
Mnementh said:
Kasz216 said:
Mnementh said:

Kasz216 said:

 

Like I said... Spain's official Debt only counts government Debt.  They've also taken on the stimulus funds and essentially their bank debt as well.  Since they've been forced to agree to back those funds and pay back the stimulus funds, you'd have to officially add on the debt of the banks, which is roughly 100% to GDP.

http://www.gfmag.com/tools/global-database/economic-data/11855-total-debt-to-gdp.html#axzz25ee2Z7dO

Germany doesn't, because Germany's banks aren't failing.

Additionally Spain's banks were the only ones buying Spain's bonds.

Also, absolute debt would just mean the hard number of debt.  Like 5 trillion or whatever, non related to GDP.

Really the issue isn't so much that debt isn't the issue.  It's that Debt to GDP is a poor indicator of it.

 

I mean, GDP =

Consumptipon + Investment + Government Spending + (Net Exports.)


Really investment is the only GDP factor that particularly matters and government spending, but government spending actually is better when it goes down.

 

A better ratio would be          Debt+Goverment Spelding /Investment.

Japan has the second largest debt market in the world they don't have any issues because the Japanese people LOVE to buy government bonds.  Unlike Spain, who was only relying on banks to buy their bonds... the Japanese see huge domestic demand from the common people.

Domestic demand is important because you usally get a better deal... things getting real dicey when you have to go outside the country.

 

That said, Germany is in a special class, with the USA and a few other countries, in which either ratio isn't quite as relevent because they're still seen as relativly safe all considered.

It's a bit of an unflattering and macabre saying but...  Rat's always do head for the highground of a sinking ship.

Basically you are saying, that the spanish government worked financially mediocre (better than german government) but private sector (banks) fucked up big time. And the taxpayer has to pay for the private fuckup. Does Spains government now gets the money back from the banks, if they turn to black numbers again?

Anyways, you agree that total debt alone is not a good measurement of the financial stability of a country.

Not quite.

The Banking system failing was actually due to government intervention.

In 2008, some banks were going to fail... because they made mistakes.

To combat this, the Spanish government created an official who would merge together bad banks with banks that were doing good with some implicit promises of help if problems continued.

All this did was weaken the bigger successful banks as they were merged with tinier banks that had made poor loans.

In attempting to spread out the posion so nobody got hurt.  Everybody got sick.

Which was stupid.  Considering that Spain relied on these banks disproprotionatly to buy it's bonds.

 

Worth noting too... these are mostly the non-profit Cajas.