So it's happened, again. The banking and financial industries got another bailout. This time it was in Spain. While it's not being billed as yet another bailout for Wall Street and our banking institutions it's hard to look at it any other way. I've written about this before (here and here) so I will simply say that what's going on amounts to little more than robbing Peter to pay Paul.
A financial circle jerk, if you will.
While the bailout is not billed as part of our on-going Quantitative Easing (QE) bank welfare program the bailout of Spain is really part of a larger effort to save our economic bacon. Without these bailouts European institutions would have to dump U.S. stocks and bonds, which would depress market prices.
This would get everyone closer to a market stampede mentality here in the U.S.
Instead, with our bailout in perpetuity program, the European debt crisis and the on-going bailouts keep European banks afloat. This allows them to continue supporting our debt drenched financial markets which keeps our derivative laced markets going.
While the bailouts keep the banks afloat the policy is really a financial blood letting. It does little more than inflict slow motion pain on the European workforce (unemployment is 24.1% in Spain, 21.7% in Greece, and 15.3% in Portugal) because of how it continues to dump money into financial institutions while imposing austerity measures on the general population.
In fact, keeping individual banks afloat with regular money dumps - while squeezing the money supply for jobs and other make work projects - has created a mentality that a British journalist once dubbed “sado-monetarism.” It's a perversion of what governments are supposed to do and how markets are supposed to work.
Put another way, it is yet another example of why we don't have free markets.