The country is being unrealistic in its view and is now facing a financial crisis that will likely worsen.
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New York, NY (PRWEB) November 16, 2012
In a recent Investment Contrarians article, editor and financial expert George Leong reports that the Bank of Spain recently estimated that Spain could see its economy contract by a worse-than-expected 1.5% in 2013. (Source: “Spanish Economic Picture Darkens,” The Wall Street Journal, October 23, 2012.) Leong adds that, in a recent interview with CNBC, Spain’s finance minister Luis de Guindos claimed, “Spain doesn’t need a bailout at all.” (Source: “Spain FinMin’s ‘No Bailout’ Remark Causes Laughter,” CNBC, October 5, 2012, last accessed November 12, 2012.) According to Leong, if the country cuts spending more to avoid asking for a bailout, the negative impact on growth and the country’s recession could drive the financial crisis.
“It would appear that Spain is still somewhat delusional regarding its ability to avoid having to ask the European Central Bank (ECB) and International Monetary Fund (IMF) for emergency capital,” states the Investment Contrarians expert. “… the country is being unrealistic in its view and is now facing a financial crisis that will likely worsen.”
Leong points out that Spain’s unemployment remains high, as one of every four of its citizens has no job to go to. He also notes that the ECB’s bond-buying program represents a bandage solution to a financial crisis. The financial expert suggests that 10-year yields on Spain’s bonds would need to drop below three percent for the program to help.
Leong points out that Spain, like the United States, is facing muted growth; he reasons that a tough austerity program would bind Spain’s spending and would impact its ability to climb out of its recession.
The Investment Contrarians expert explains that the massive reduction in spending means stagnant economic growth, which, in turn, translates into less tax revenue for the government at a time when the national debt is estimated to rise to nearly 840 billion euros or about US$1.0 trillion by 2012, according to the IMF.
“What Spain needs to do is reorganize its finances, just like a company that is struggling with its books would,” concludes Leong. “The idea is that Spain would receive bailout funds to help grow its economy, create jobs growth, and pay its debt, while it puts together a tough austerity program.”
To see the full article, and to get a real contrarian perspective on investing and the economy, visit Investment Contrarians at http://www.investmentcontrarians.com.
Investment Contrarians is a daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”
The editors of Investment Contrarians believe the stock market and the economy have been propped up since 2009 by artificially low interest rates, never-ending government borrowing, and an unprecedented expansion of our money supply. The “official” unemployment numbers do not reflect people who have given up looking for work, and are thus skewed. They believe the “official” inflation numbers are also not reflective of today’s reality of rising prices.
After a 25- to 30-year down cycle in interest rates, the Investment Contrarians editors expect rapid inflation caused by huge government debt and money printing will eventually start us on a new cycle of rising interest rates.
Investment Contrarians provides unbiased research. They are independent analysts who love to research and comment on the economy and investing. The e-newsletter’s parent company, Lombardi Publishing Corporation, has been in business since 1986. Combined, their economists and analysts have over 100 years of investment experience.
Find out where Investment Contrarians editors see the risks and opportunities for investors in 2012 at http://www.investmentcontrarians.com.
George Leong, B. Comm., one of the lead editorial contributors at Investment Contrarians, has just released, “A Problem 23 Times Bigger Than Greece,” a breakthrough video where George details the risk of an economy set to implode that is 23 times bigger than Greece’s economy! To see the video, visit http://www.investmentcontrarians.com/press.