I recently returned from several weeks in Spain. When I left the U.S. I was focused on our economic problems. Though I had read about Europe’s issues, I didn’t think that they could be as bad as ours. I was wrong!
When we arrived in Madrid the first thing I noticed on the ride from the airport was the large number of cranes. When I looked closer I discovered that some projects either had been abandoned or were moving extremely slow.
As we traveled on to Seville and Granada a similar pattern emerged. During a cab ride, I picked the brains of a Spaniard who spoke excellent English (since I can’t speak Spanish!). He confirmed that loose lending had resulted in numerous real estate projects being built. Furthermore, the rising fuel prices had put a dent in the locals purchasing power (gas is $8 – $9 per gallon in Spain). In fact, a week after we left Madrid the taxi drivers and then the truckers went on strike to protest the high taxes on fuel.
As we left Spain I had the feeling that this sub prime mess goes much deeper than the U.S. banking system. In addition, it might take much longer to work through the worlds economy.