Sunday, 4 November 2012

Greece, Portugal, Spain and Ireland erase current account deficits and record surpluses.

The Euro has been in the news a lot for the past 4 or 5 years. It is the currency everyone loves to hate. * It seems like the only way to pump the dollar's tires is to bash the Euro. It doesn't matter where I look, I see everyone pumping the dollars tires. The New York times....ZeroHedge..  I love ZeroHedge but its a closet dollar bulls hotel. We wouldn't want some facts to get in the way of a good Euro bashing now would we.... ? If I had a Euro for every time I heard some jackass say "the dollar is the best horse in the glue factory"(The dollar is the best fiat currency) or some bullshit, I would own a hell of allot more gold. Remember that even before these adjustments, the Eurozone as a whole was a net creditor.

In August and July of 2012, Spain reported two consecutive current account surpluses, the first ever since joining the Euro.
 Greece's current account deficit has become a surplus

Portugal is in surplus

 Ireland is in surplus
And what about the US ? You know, the best of the worst currencies in the world.....

 So the Dollar is the best currency eh ? Considering these recent deficits turned surpluses by these countries, Peter Schiff was right again. This interview was aired in February 2010.

* Why they hate the Euro. Here is the short answer: When the US went off the international gold backing in 1971, they did this in order to raise the price of oil which, they hoped, would help them become independent of cheap OPEC oil. But they made sure that oil is always traded in US$.

Now this imposes a huge tax on their allies in Europe. These had to first export something into the US in order to acquire US$ and could then use these US$ in order to purchase oil. The US, in contrast, could just increase their own credit volume and pay for their oil with newly created US$.
On top of this, they were able to make sure that the oil producers invested the majority of their US$ surplus back into the US (real dollars) and UK (eurodollars) financial institutions, providing additional reserved for further credit expansion.

For a long time, this was a perpetual motion machine that allowed the US to get free oil and free funds to run their government (read: military) whereas the Europeans were automatically conscripted to funding this enterprise whether they liked it or not. (if all oil is sold for US$, what other option did they have?)

Do you think the Europeans liked it or did they not? This is the explanation for why the Euro exists today, why the Europeans want gold back into the international monetary system, why there will be no return to a gold standard in Europe, but why the Europeans will eventually shot the gold price to the moon, and finally for why the Euro will not break up.

It also explains why the Euro is the most serious danger to the US and UK financial systems and why US and UK fear the Euro and bash it whenever possible


  1. Good grief!

    Current accounts of euro-countries includes transfer payments to them. The selected countries have received hundreds of billions of euros in bailouts ... meanwhile, their destitute citizens cannot afford to buy food ... or expensive imports. Unsurprisingly these countries have current account surpluses!

    European exports have to compete with the Chinese versions, there are no shirts or shoes labeled 'Made in Ireland' or 'Made in Portugal' in the stores. Meanwhile, Europe is dependent upon the Middle East and Russia for motor fuel and natural gas ... all to be paid for with loans. There is no return on the waste of the fuel, there is no organic earning to pay for it. Europe has gone from risky to underwater to insolvent to bankrupt and is now collapsing ... due to its fuel imports and the cost of fuel-waste infrastructure ... plus the added cost of the credit needed to pay for these things.

    That crude must be paid for with dollars is a wives' tale. Oil producers accept any currency freely traded in currency markets. Why wouldn't they? The forex market is liquid and available anywhere in the world and at any time. Most of the world's currencies can be traded w/ a cell phone, there is the even larger currency swap market, transactions can be easily hedged.

    What form the future might take is impossible to make out from the perspective of the present, it is fair to assume that any return to a gold standard would require economies that would not resemble any economy of today.

    There would be zero automobiles to start with and (sparse) citizenry would be focused intently upon finding something to eat. I'm not sure this 'golden age' of 'honest money (dishonest men)' is something to look forward to.

    1. Wrong.

      As interest rates go up, the current account deficit will go up even if the trade deficit is shrinking.

      These aren't your US style "bailouts" either. They are injections that are meant to keep the EU banking system afloat. Unlike the Fed, the ECB is not the biggest holder of any one governments debt.

  2. Remember Iraq? They wanted to sell oil for Euro's. That would remove that pesky tax the EUro(peans) were paying. Guess what, many EUro(pean) countries did not want that to happen and supported the war against Iraq. Then came Libia, they even subsidized EUro(pe) with cheap oil. America asked, EUro(pe) acted and helped bombing the shit out of the country. Making oil even more expensive for depression ridden Greece, Italy and Spain. Other EUro(pean) countries also suffered from rising oil prices. Then we have Iran. Wanted oil in Euros. What the hell said EUro(pe), lets cut all oil imports from there and kick them out of Swift. Oil gotten more expensive again. Support the dollar was the motto!

    Now what about that structural Dollar support? The EUro gave them lots. They were even prepared to switch away from treasuries and handed that stick over to the Chinese. Since they did not want mortgage backed securities. Of course they knew the mortgage backed securities were even more toxic then treasuries but hey, someone had to pick up that new slack. They were willing to sacrifice the EUro(pean) banking system to support the dollar.

    After the creation of the EUro they could have sold many now useless dollars and return some of that wealth to the population. Did they do that? Of course not, just let inflation destroy their value and let the Americans keep the wealth. We dont want to threaten the dollar now do we?

    Ofcourse EUro(pe) could have made their own rating agencies to counter the US rating influence. Ofcourse they did not. Gotta support the dollar! Of course EUro(pe) could have made their own offense industry strong. No way, gotta buy that super expensive American stuff. Gotta support the dollar use. Etc etc.

    As a final insult we gotten the Goldman Sacks EUro(pean) division head as Central banker who was responsible for the swaps that destroyed Greece and thus supported the Dollar. Its rumored in his GS role he did the same to Italy and that that surprise is still in the pipeline....

    Yes I like gold but if we get (semi) freegold. It will not because of EUro(pe). They are good little vassals. Remember who wanted EUro(pe)? It was the America.

    EUro(pe) had many chances to stop supporting and subsidizing the dollar. They did not and will not I sadly had to conclude based on observations.

    Question, where do you think the surplus of the countries is going to? A) To the people of that country, B) pay back the trillions in dollar loans Europeans made in 2008, C) continue dollar support D) other (hope u explain)

    Btw, in my EUro(pean) country I have to pay tax on my gold holdings and you cannot buy it at any bank. The last (very small) bank that offered that was taken over by Deutsche Bank and the first thing they did was to close that goldwindow.

    1. Interesting comment Hugo.

      Its understandable to hear your frustration with Europe's support for the dollar.

      I am going to run your question by some experts. Its a good one. Because you may be right. These countries could in fact be paying back dollar loans.

  3. The greatest threat to the USD is REALITY. The model that the world, and the world's economic "leader," employs defies reality as it relies on perpetual growth on a finite planet. The greatest growth media has been OIL, and with its decline in cheapness (for all) goes the growth model. This currency stuff is merely shuffling the deck chairs on the Titanic. Either one has actual physical resources or one does not: the currency stuff is about DECEPTION to distract from the sense of urgency/desperation over a lack of physical resources. When you go over a (very tall cliff) what difference does it matter what speed you were going when you left the edge?


  4. @ Seer

    "The greatest threat to the USD is REALITY"

    Good comment. Funny how this is how Keynesians themselves viewed the aftermath of the Asian financial crisis yet somehow the laws of economic gravity do not apply to the west..

    At the time, Asia had acquired a burden of foreign debt that made the continent effectively bankrupt before the collapse of its currency.

    ^This is precisely where the US is.

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