Podcast
by
charleshughsmith
Executive Summary
- Energy plays a key role in sovereign economic (un)sustainability
- The export boom is imploding
- The neofeudal model is collapsing as 'serf' nations enter default
- Take preparation now, while it still matters
If you have not yet read Part 1: Why Greece Is The Precursor To The Next Global Debt Crisis available free to all readers, please click here to read it first.
In Part 1, we examined the core dynamics that expanded Greek debt to its current unmanageable size—currency/trade deficits and bailouts—and the enormous transfer of private bank debt to the public ledger via the Troika bailouts, only 10% of which trickled down to the Greek people.
There are two other dynamics beneath the surface theater, dynamics which are not unique to Greece but are characteristic of the most heavily indebted nations.
Food and Fuel Imports Drive Structural Imbalances and Debt/Currency Crises
In our recent podcast, Chris mentioned this chart of imported energy by nation. Note that the nations with crushing structural debt loads (the so-called PIIGS—Portugal, Ireland, Italy, Greece and Spain) also happen to be major importers of energy.
What does this have to do with Greece’s debt crisis? Let’s go back to the key driver of Greek debt—imports that far exceeded exports, not occasionally but structurally, year in and year out. Money was borrowed to pay for those imports, interest accrued on the loans and then austerity was pressed on the debtor nations by the lenders as a means of extracting interest on the rising debts.
If a nation does not generate a significant percentage of its own energy and food needs, or export enough goods and services to offset its imports of energy and food…
More Sovereign Defaults Are Coming
PREVIEW by charleshughsmithExecutive Summary
- Energy plays a key role in sovereign economic (un)sustainability
- The export boom is imploding
- The neofeudal model is collapsing as 'serf' nations enter default
- Take preparation now, while it still matters
If you have not yet read Part 1: Why Greece Is The Precursor To The Next Global Debt Crisis available free to all readers, please click here to read it first.
In Part 1, we examined the core dynamics that expanded Greek debt to its current unmanageable size—currency/trade deficits and bailouts—and the enormous transfer of private bank debt to the public ledger via the Troika bailouts, only 10% of which trickled down to the Greek people.
There are two other dynamics beneath the surface theater, dynamics which are not unique to Greece but are characteristic of the most heavily indebted nations.
Food and Fuel Imports Drive Structural Imbalances and Debt/Currency Crises
In our recent podcast, Chris mentioned this chart of imported energy by nation. Note that the nations with crushing structural debt loads (the so-called PIIGS—Portugal, Ireland, Italy, Greece and Spain) also happen to be major importers of energy.
What does this have to do with Greece’s debt crisis? Let’s go back to the key driver of Greek debt—imports that far exceeded exports, not occasionally but structurally, year in and year out. Money was borrowed to pay for those imports, interest accrued on the loans and then austerity was pressed on the debtor nations by the lenders as a means of extracting interest on the rising debts.
If a nation does not generate a significant percentage of its own energy and food needs, or export enough goods and services to offset its imports of energy and food…
by
JW
by
JW
by
Nomi Prins
by
Nomi Prins
Executive Summary
- The banking system runs on liquidity
- Banks will do anything to keep it flowing — including raiding their depositors
- The risks of a global liquidity crunch are dangerously high today
- Why extracting physical cash from the system is highly advised
If you have not yet read Part 1: In A World Of Artificial Liquidity – Cash Is King available free to all readers, please click here to read it first.
It's All About Liquidity For The Banks
Liquidity is the buzz-word that central banks used to justify their policies of keeping short term rates at zero (give or take) percent and buying bonds from banks in return for giving them more of it. Central banks say their primary responsibility is to balance full employment with low inflation, but that’s just code for being able to keep the largest banks solvent in times of emergency by all means possible. This current emergency has lasted nearly seven years and counting.
Here are my laws of liquidity behavior:
The first law of liquidity – when it is most needed, it will be least available.
The second law of liquidity – the easier it is to get, the less value it holds for the recipient.
The third law of liquidity – the harder it is to find, the greater its systemic cost.
Banks gain on multiple fronts from “accommodative” monetary policy with respect to their liquidity needs. First, they can borrow money at next to nothing. Second, they can hoard that extra cash under the guise of complying with capital reserve requirements and get brownie points for passing stress tests because they are holding the cash or high quality assets bought with the cash, that central banks provided them to begin with. Third, they can sell bonds they don’t want or need at full value to central banks, and afterwards mark similar bonds at higher levels than the market would otherwise value them.
This is all shell-game finance. It is why people should be diligent about…
They’re Coming For Your Cash
PREVIEW by Nomi PrinsExecutive Summary
- The banking system runs on liquidity
- Banks will do anything to keep it flowing — including raiding their depositors
- The risks of a global liquidity crunch are dangerously high today
- Why extracting physical cash from the system is highly advised
If you have not yet read Part 1: In A World Of Artificial Liquidity – Cash Is King available free to all readers, please click here to read it first.
It's All About Liquidity For The Banks
Liquidity is the buzz-word that central banks used to justify their policies of keeping short term rates at zero (give or take) percent and buying bonds from banks in return for giving them more of it. Central banks say their primary responsibility is to balance full employment with low inflation, but that’s just code for being able to keep the largest banks solvent in times of emergency by all means possible. This current emergency has lasted nearly seven years and counting.
Here are my laws of liquidity behavior:
The first law of liquidity – when it is most needed, it will be least available.
The second law of liquidity – the easier it is to get, the less value it holds for the recipient.
The third law of liquidity – the harder it is to find, the greater its systemic cost.
Banks gain on multiple fronts from “accommodative” monetary policy with respect to their liquidity needs. First, they can borrow money at next to nothing. Second, they can hoard that extra cash under the guise of complying with capital reserve requirements and get brownie points for passing stress tests because they are holding the cash or high quality assets bought with the cash, that central banks provided them to begin with. Third, they can sell bonds they don’t want or need at full value to central banks, and afterwards mark similar bonds at higher levels than the market would otherwise value them.
This is all shell-game finance. It is why people should be diligent about…
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