Editor’s note: This article was first published in May 2012, and its forecasts, including 25% unemployment, reflect that period. The prediction that Spain would probably leave the euro, restructure its debt and devalue a new currency did not come true; Spain kept the euro.
Jonathan Tepper is an economist who frequently appears on CNBC, the BBC, Bloomberg and other major business media, where his particular view of things carries real weight. He was responsible for the report published in 2009 by Variant Perception which stated that Spain was the mother of all housing bubbles and that unemployment in Spain would reach 25%.
His words were blunt at a time when it seemed we had a sound financial system. Tepper said that only someone who had smoked crack could claim that the Spanish financial system was one of the soundest in Europe. Those words did not go down well at the time, although three years later it seems clear that more than one politician has faced the public after taking a large dose of crack.
Tepper has to some extent been shut out in Spain, which is why he hasn’t been seen on Spanish television channels: it seems that what he has to say would not go down well with Spaniards, and even less so with political leaders who are probably delaying the only viable measures for getting Spain out of the crisis. Even so, Jaume Barberà, of the programme Singulars (Catalonia), interviewed the economist for the second time.
In the interview, although the presenter speaks in Catalan, Tepper gives his explanation in Spanish (from minute 4). The interview and his explanation are well worth watching from start to finish.
The measures Spain should take to get out of the crisis, and which it will probably end up taking, would be:
1. Leave the euro and go back to its own currency (the peseta or similar).
2. Restructure public and private debt, because Spain’s debt cannot be repaid.
3. Devalue the new currency by 35%.
Tepper argues that on other occasions Spain has been able to get out of bubbles by devaluing its own currency, but this time, having joined the euro, no member country controls its own currency.
On the question of whether or not to pay off the banks’ debt, he is blunt, and now I understand why they don’t want Tepper on television: his argument is that taxpayers should not pay the banks’ debt, and that it should be paid by whoever bought the banks’ bonds, taking the losses that fall to them, as in any capitalist system.
As I said above, the interview is well worth watching and, the truth is, it sounds very convincing. Is he right? Are there other viable measures? Has Spain really been smoking crack? 🙂
Featured image: Kippelboy, CC BY-SA 3.0, via Wikimedia Commons.
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