Spanish deflation?

Worrisome, esp as individual EU member states and the ECB are not in internal agreement as to proper macroeconomic fiscal and monetary responses to all the problems Europe faces. If this spreads to other weakened economies - Ireland, UK, Italy, look out:

As Prices Fall, the Specter of Deflation Rises Over Spain

Excerpts, emphases mine:

“Alarm bells are going off,” said Lorenzo Amor, president of the Association of Autonomous Workers, which represents small businesses and self-employed people. “Economies can recover from deceleration, but it’s harder to recover from a deflationary situation. This could be a catastrophe for the Spanish economy.”

Deflation is not just a Spanish concern. Luxembourg, Portugal and Ireland have reported price drops, too. While the declines have been slight — and prices rose modestly after factoring out food and energy prices, which can fluctuate widely — other figures released this month suggest the risk of deflation is growing.

In Germany, wholesale prices dropped 8 percent in March from a year ago, the steepest fall since 1987. In Japan, wholesale prices fell 2.2 percent on an annual basis. In the United States, the Consumer Price Index fell 0.1 percent in March, year over year, the first decline of its kind since 1955, though prices rose 0.2 percent excluding food and energy.

“It doesn’t mean it will spread here to the U.S., but we need to look closely at Spain and other places to understand the dynamic,” says Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and a former chief economist for the International Monetary Fund. “It’s like the front line of a new virus outbreak.”

Two hints of future US bank bailouts, and a devastating assessment of the PPP

Bailouts:

1. The Spanish leading the way?: Spain bails out first bank in 16 years
2. Geithner suggesting a similar outcome in the US?

The key line from Geithner:

“Some banks are going to need some large amounts of assistance,” he said yesterday on the ABC News program “This Week.”

These "large amounts of assistance" would be on top of the new PPP, folks.

If only we'd get this over with sooner rather than later, per Mr Wolf. Alas.

Devastating video:

Speaking of the PPP, if you have 12 minutes to spare you must watch this video, which demonstrates how banks will make a killing - and taxpayers take a bath - by forming shell companies to buy toxic assets from themselves at full price yet only risk 7 cents on the dollar: YouTube - Geithner Plan II ("The problem of banks buying assets from themselves")

Stick with it the whole twelve minutes - the last three are priceless, in a manner of speaking (from the Khan Academy http://www.khanacademy.org/ , which I'd not heard of until today, but will for sure be following in the future...my bad on that one)

Should this scheme take place - and the case for it from the bank POV is, ummmm, compelling - expect another round of populist anger. Just one far more justified than the AIG bonus fiasco, since this time taxpayers will be hosed to the tune of $800 billion+, not a mere $160 million.