Spanish Property Market Boost Or Is It

The European Central Bank began  buying Spanish covered bonds last week, which will hopefully prevent the Spanish property market from collapsing this week, but the long term effects are difficult to predict. Clearly the Spanish real estate market is undergoing a massive correction and I am wondering what exactly the effect is likely to be for the smaller investor.

Unfortunately, I am of the opinion that it is not good news for anyone except the large financial institutions. We now have all three major currencies being “quantatively eased,” the Dollar, the Euro and the Pound. For those of you who have been living in a cave in Afghanistan with the corpse of Osama bin Laden for the last two years, quantative easing = printing money.

60 billion Euros is the planned injection of new money, and my thinking is that this is a drop in the bucket, which will serve only to keep the banks afloat rather than filter down into the consumer markets. We will of course have to pay the inevitable price of inflation. Lose, lose as far as I am concerned. The idea of preventing the natural boom/bust cycle in a free market economy makes no sense to me. Unless I happened to own a bank – which I don’t. For a more detailed look at the possible effects and an explanation of the importance of Spain’s covered bond market - Spain Economy watch has a good report.