The 'Lost Generation' versus bank bailouts

Regular readers of this blog know that I tend to focus on how to fix the global financial system.  Today, I am going to focus on why I think this is important.

The Guardian ran an article discussing how as a result of our on-going financial crisis, youth, referring to people who have graduated from high school and college, unemployment is surging globally.  In Spain, it has reach 50%.

This is a level of unemployment that is significantly beyond what is reasonable for any country.

I don't need to tell the Spanish government that this is a problem that needs to be addressed immediately.  They know it.

However, the Spanish government thinks that its hands are tied by the need to bailout the Spanish banking system for all the bad debt that is hidden on and off its balance sheet.

The question is how to free up the funds dedicated to bailing out the financial system to addressing the youth unemployment problem.

Regular readers know the answer is that the Spanish government's hands are not tied by the need to bailout their banking system.  While retaining a functioning financial system, the banks can absorb the losses today and recapitalized themselves by retaining future earnings.

It is the fact that the banks can recapitalize themselves from future earnings that frees up the Spanish government to spend money on its youth unemployment problem.  The same is true for other countries.