Spain likely to default...again

Carmen M. Reinhart and Kenneth S. Rogoff, authors of "This Time Is Different: Eight Centuries of Financial Folly", show that over 800 years of debt markets, Spain is by far the biggest visitor to debtor's prison. Unfortunately, it appears they are heading there again. And the country's return trip to debtor's prison will likely rock the euro zone and could potentially hit the global economy.

Consider some of the following facts, courtesy of Phoenix Research and the Spanish Government. Spain is too big too fail and too big too save. The only plausible way out is for the weaker countries to ditch the euro, default and restructure with a weaker currency.

This likely takes years to fully play out and won't happen before the ECB realizes that it is the only way to fix the problem.

• Total banking loans are equal to 170 percent of Spanish GDP.
• Troubled loans just hit an 18-year high.
• Banks are drawing a record €316.3 billion from the ECB
• €65 billion left the banking system in March.
• Over half of all mortgages are owned by Spanish CAJAS. (Credit Union).
• The cajas' primary lending market during housing boom was subprime
• Banking system is saturated with toxic mortgage debt that makes the U.S. in 2008 look good.
• Worldwide banking exposure to Spain is well over €1 TRILLION. Leverage is 26 to 1.
• Unemployment is almost 25 percent and 50 percent for those under 25.

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