Crossposted from ZeroHedge
From Mark Grant, author of Out Of The Box, a follow up to our "A Few Quick Reminders Why NOTHING Has Been Fixed In Europe (And Why LTRO 3 Is Not Coming)" from March 2012.The bigger the real-life problems, the greater the tendency for people to retreat into a reassuring fantasy-land of abstract theory and technical manipulation.
Many people have little or no understanding of what is presently taking place in Europe. This is because it is reported nowhere, discussed in public by no one and carefully hidden in the data supplied by the European Central Bank.
What I will discuss today is the prime mover, in my opinion, of the destabilization of the European economies and yet, like the debt to GDP ratios on the Continent; just because it isn’t counted does not mean that it does not exist. I will endeavor to explain it as simply as possible.
A bank in some European country such as Spain lends money but the collateral, Real Estate or commercial loans, are going bad. The bank then securitizes a large pool of this collateral and pledges it at the ECB to receive cash. In many cases to take the pool the country has to guarantee the debt. So Spain, in my example, guarantees the loan package which is then pledged at the ECB and is a contingent liability and which is not reported in the debt to GDP ratio of the country but nowhere else that you will find either. “Hidden” would be the appropriate word.
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