And then the music stopped, with the investment banks stuck holding the bag

Remember these words from Manias, Panics and Crashes.

"This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'."

And then right on schedule, this headline from today, and a plethora of words that seemingly were ripped out of Manias, Panics and Crashes and plopped right into this story of what's going on:

Credit markets leave banks saddled with £250bn of debt

Leading investment banks on both sides of the Atlantic are saddled with almost $500 billion (£246 billion) in agreed leveraged loans that they are unable to parcel out to other investors.

New figures from Dealogic reveal that in Europe the banks are struggling to clear a backlog of $208 billion worth of leveraged loans that they would normally have sold on through syndication.

In the United States, the figures also show that investment banks are stuck with $269 billion of agreed loans that they are unable to syndicate.

News of the glut of debt on the banks’ balance sheets comes as the shake-out in credit markets produced new casualties as global markets were racked by further volatility.

Guess what folks - when the banks are stuck with massive LBO and CDO on their books and they can't sell it off to the next sucker down the line, what do they do? They damn well don't issue more debt.

Welcome to "Discredit". And welcome to a severe contraction in the ability to take out a new loan to buy or refinance a house.

We have way too many houses, way to few able buyers, and it's just gonna get worse.

Financial Times: "Spanish property boom ends in panic"

Two articles yesterday here in Europe should give those of you in the US a peek at headlines to come there... Ah, the end of a grand worldwide game of musical chairs. Textbook financial mania (always followed by the textbook panic and crash). And remember, the rush to cash can be fierce.

Pero suzanne lo investigó!!!

First this one in the Financial Times:

Spanish property boom ends in panic

Spain's overpriced property market came crashing down yesterday, with panic selling of real estate stocks signalling the end of a 10-year-old construction boom.

The sell-off dragged down related industries such as construction and banking and caused a 2.7 per cent drop in the Ibex 35 index of leading shares.

The fall also rippled through other European markets as investors worried about its knock-on effects.

And then this one in the Independent:

As Spain falters, is the world's property boom coming to an end?

Panic selling of Spanish real estate stocks this week sent shudders through property markets worldwide. As investors bet that Spain's 10-year construction boom is finally over, we take a look at global property hotspots to see who will be the next casualty.

For Brits fantasising about sipping sangria while watching the value of their Spanish holiday-home soar, the dream is over. After five years of double-digit growth, house prices rose by a relatively modest 9 per cent in 2006 and are expected to slow dramatically this year.

A constant stream of bad news has shaken foreign buyer confidence in Spanish property, while relatively high prices and competition from cheaper destinations such as Morocco and Bulgaria has drained demand. Corruption scandals linked to property deals have been rife - in Marbella, several municipal councillors are in jail awaiting trial for allegedly taking kick-backs.