Spanish Bank Bailout Bankrupts Italy...Simon Dixon explains

http://www.simondixon.org Simon Dixon comments on Press TV about the 100bn Euro Spanish bank bailout (@SimonDixonTwitt)

The EU's recently approved bailout to Spain has not been injected directly into job creation or the real economy, but to its beleaguered banking sector.

Press TV has interviewed Simon Dixon, CEO Bank to the Future.com in London about the unraveling of Western European economies and of the UK economy. What follows is an approximate transcript of the interview.

Press TV: In the UK there are two alarm bells ringing here, manufacturing in a slump - as a result we have consecutive contractions in terms of the quarters and that's been blamed on the Euro Zone countries; and then you have the Bank of England setting aside 125 billion dollars to help the banks to accelerate lending.

Two major alarm bells, but at the same time we don't see any indications of growth coming from the UK; and of course more money to the banks.

Dixon: Sure. And what we're not seeing is what this money that's going in to the banking system is actually going to be used for, which if we're going back to business as usual it's going to be used to stimulate a property market, a speculative market rather than getting into any kind of productive use that's going to be job creating as well.

So, not good signs for the UK, but then again we've been in a depression for a while and the figures are painted to be prettier than they actually are.

Press TV: Let's look at the correlation here... The troubles of Greece and other Euro Zone countries and the recession in the US since we just spoke to our guest there in the US and he mentioned the US - Aren't they all related to their trade deficits?

The countries with unemployment rates above seven percent have current account balance deficits while countries with unemployment rates below seven percent have current account surpluses.

And of course the deficits of countries like Spain, Greece, Portugal, France, Italy, Britain and the US.

Dixon: What we're seeing right now are countries deeply dependent upon ever increasing levels of debt and we're reaching the end of that cycle and governments, which their banking system, using the debt of other countries as collateral for their banking system, completely intertwined and completely collapsing together.

But it all relies on the banking system and the countries are trying to solve that with more debt. When the governments are focusing on where they're going to find the new market for their debt they're focusing on how to structure the best deal.

What we've seen with the 100 billion pound bailout for the Spanish banking system is you've seen... going to countries like Italy who have their own challenges and then lending money at 3 percent and they're having to borrow that money.

And the margins of what they're receiving between what they're borrowing and what they're lending are completely illogical because they're having to borrow from the market at 7 percent and lend at 3 percent and it's just not working.

So, now the Italian government is going to have their own issues just as a result of having to bail out the banking system in Spain.

Press TV: Our guest Ravi Batra talks about reforms coming out at the end of this year when the US elections take place. The only type of reform I can see coming from the US - I don't know if you agree with this - that's preventing that disaster there is that all of these debts are expressed in dollars.

The US can no longer service its debt, usually what they do is that they print US dollars - that's the only thing I see the US is doing. Is that what's happening?

Dixon: It's a bit of an illusion they're printing money because what we have to remember is that only about three percent of money in the US comes as a result of the government actually creating money, 97 percent comes from loans from the banking sector through the credit market.

So, what we're seeing is mass... what they're looking for is increases in bank lending as well so... if banks are going to be creating all that money then it's really important where that's actually directed.

But no, we're not seeing any real reforms. The biggest opportunity for reforms that I see are not from the US, but from the countries that are actually going to reject the Euro; that are going to rebuild and create their own currencies; and figure out how to reform their banking system away from one that pushes money into property and creates debt for consumer debt and credit cards and one that actually lends for businesses and job creating activities.

Press TV: And I assume that the first country would be Greece, correct?

Dixon: I think Greece have the perfect opportunity - whether they'll take it or not is another question, but they have that perfect opportunity really to reject the Euro, rebuild their own currencies and reform their banking.

@SimonDixonTwitt