They missed Castilla golden generation (Soldado,De La Red,Javi Garcia,Miguel Torres,Granero,Mata,Balboa..etc ) in the mid 00 , you don't get generation of generations of great footballers sometimes a generation stands out above the rest.
when Castilla rose to dominance few years back it was a terrible time @ the club with lots of instability and the galacticos were still trading water.
sadly the generation prior to that (pavon,Bravo,Mejia,Portillo..etc ) made the suggestion of promoting a youth team a very scary one due to the failure the previous guys suffered , in a way they were indirectly responsible for the lack of chances these guys got, they were crap /beyond the required level and were lucky to play lots of games but fucked up their career and Real Madrid as well .
It also gave a wrong impression about the players level in segunda and third division (a scouting /assessment problem)
that's why the loan deals seemed like the best test for those players.. they play in the first division and the club can monitor them well if they can cut it for the first team or not as they meet teams who play on the same level as Real . some make it like De La Red,Granero ,Soldado (although in another team ) , Mata ,Diego Lopez,Javi Garcia and even Parejo .. some just disappear totally like Nieto *Capello gave him his debut * , Balbao (flopped in Benfica ) ,Portillo and the most disappointing case was David Moreno who people (and cule's in the old forum ) said he is the closest thing to Messi .. plays now in Almeria B team .
not everyone can cut it @ a club like Real and not every star in a small team can be a star in a big team .. (on a side not i hope Negredo revive his career cause so far he isn't doing well with Seville which will kill any chance of him returning to Real next summer )
we have made many mistakes in the last decade with the youth team and the current Castilla team is suffering due to lack of proper setup and talent picking in most cases. at least the C and Juve are in better shape atm .
the deal for Canales is another hunt for the required quality for the future thankfully our man in charge of Racing (Miguel Portugal ) helped the current management snatch Canales (well sort off ) but i also understand how hard it is to get fooled by 3rd division stars when there is bad selection criteria and lack of proper planning .