Crash Alert! Where’s all the cash gone?

Spain is undergoing a massive run on its banks and hardly anyone has noticed. This is what has been reported  by the welliegraph;-

Spain has suffered the worst haemorrhaging of bank deposits since the launch of the euro, losing funds equal to 7% of GDP in a single month. Data from the European Central Bank shows that outflows from Spanish commercial banks reached Euros74bn (¬£59bn) in July, twice the previous monthly record. This brings the total deposit loss over the past year to 10.9%, replicating the pattern seen in Greece as the crisis spread. The Bank of Spain said the fall is distorted by the July effect of tax payments and by the expiry of securitised funds. On the other hand, Julian Callow from Barclays Capital said the deposit loss is 65bn even when adjusted for the season….Deposit outflows are clearly picking up and the balance sheet of the Spanish banking system is contracting.


So then, hard cash is rapidly disappearing from the Spanish banking system but consumers and businesses aren’t spending. So what is happening to all the hard cash? I don’t believe that anyone is seriously putting it ‘sous leur lits’ as the french would say. If history is anything to go by there could well be a run on prams in Spain as millions replace firewood with euro banknotes once the inevitable hyper-inflation finally happens ( a few years down the road). In the short-term there’s little evidence that spaniards might be

  1. buying government bonds
  2. buying spanish equities
  3. buying any other sovereign debt
  4. investing abroad
  5. buying Gold
  6. buying agriculture, agri-foods, normal food
  7. buying art
  8. buying property (from the Brits?)¬†……

shall I go on? Perhaps there’s a massive pay down of debt occurring. The destination of all these euros is rather curious though. Maybe there’s a similar thing happening as to when Greece (2 years ago) ran into difficulties; the herd back then sent 100’s of millions of euros abroad (Suisse banks) and many bought into London property at drastically high levels. And then of course there are the spanish footballers; I understand their contracts are now being traded as debt too. Maybe there are a few spanish towns buying footballers debt but I doubt their degree of sophistication.

I anyone has any insights on this I’d love to know what is really happening in Spain. One thing is certain though is that things are beginning to look as though it may get very ugly in Club Med (Spain, Italy, Greece, Portugal) before long.

Stand by for a substantial equity and bond re-rating. Ostensibly a 1987 style crash that may make the 23% daily correction back then look like a walk on a Costa Brava beach.

Sell EUROS Buy GOLD (the new global currency).

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