Well…at least it seems that way.  This morning I was thinking about the 120 billion euros the rest of Euroland (read….Germany and France) is giving to Spain to bail out their ailing banks.

Don’t you ever wonder where that money comes from and where it goes…and why?

Well here are the answers in very simplistic terms (remember we at Craven Capital are simple folk):

1. The money is printed (digitally at first but some is ultimately circulated as paper…that’s where the tress come in).   So this money is an accounting fiction, nothing more.  It was never the result of prudent saving or smart investing or the result of efficient manufacturing or even the conversion of something real like gold.  It is created by bureaucrats with the modern age equivalent of the good old printing press.

2. The money goes to shore up the capital reserves of banks in Spain so that they don’t collapse as their customers get scared, withdraw their savings and put them under the bed…or send them to a “safer” country…like Germany (sense a bit of a merry go round here?).

3. The banks need the money because they made stupid loans to over-extended developers who sold overpriced condominiums to investors who thought they could make a quick..or a slow buck by on-selling to another fool.  So, just like in the good ol US of A, when the value of those condominiums dropped because, quite simply, there were more sellers than buyers, the value of the bank’s underlying collateral collapsed.  The remaining developers went broke (the smart ones were long gone with their profit), the property owners defaulted, the new buyers evaporated and the banks were left holding assets that were worth a lot less than the money they had loaned on them.  The 120 billion euros will go to help fill this vacuum.

The problem is that there is still a lot more vacuum to be filled.  So, look out below…and keep a very close eye on Italy.

The good news is that there may be even better seaside bargains in Spain to come.

But if you fancy a lovely Spanish casa del mar, don’t forget that while Spain is Europe’s 4th largest economy by GDP, it has only been a real democracy for the past 35 years…after a horrible civil war in the late 30s and the equivalent of martial law thereafter.  With 50% unemployment among its highly spirited youth, anything is possible.

What’s that old saying about history repeating…or rhyming?