Spanish banks are scrambling to raise capital amid new rules upping the requirements for "solvency":
Under the new rules, [Spanish] savings banks must raise the proportion of core capital they hold to 8.0 percent of total assets from the current six percent, or 10.0 percent if they are unlisted.
So imagine you have assets (for example, loans outstanding on a house and a car), together actually worth about $250,000.
Up until now, if you were a Spanish bank, you'd have to have 15,000 simoleons stashed away to cover the "business." The new rules mean you're going to have to have 20,000, or 25,000 simoleons.
In your case, think IRA, or 401K, or your brokerage account. Or some CDs at the bank. How much do you have stashed away?
And then consider that the median amount saved for retirement in America is only $2,000. That means half of the country has more than that saved, and the other half has less than that saved. But even at the median, that $2,000 is less than 1 percent of $250,000 in assets.
Easily half of the US population is probably insolvent by this measure, as are many US banks.
My own bank operates under a Consent Decree requiring Tier 1 capital of 8 percent, and total capital of 11 percent. Roughly 10 cents on the dollar.
Most of America is built and runs on this kind of debt. And much of it is insolvent, even on these less easy, easy terms.
"Owe no man anything . . .."
