Radio Free Market

From Charles Gave of Gavekal Research:

“Germans might as well load much of their auto exports headed to eurozone  countries on to a boat and sink it outside of Hamburg. It would do as much good  as selling Audis in exchange for IOUs issued by bankrupt countries.”

Mr. Gave goes on to point out the the ECB’s TARGET2 balances continue to increase. TARGET2 is an accounting fiction at the ECB whereby bank deposits in deficit countries do not have to fund deposits that their customers transferred to more responsible banks in more responsible countries.  They simply get to carry a gigantic overdraft balance at the ECB.  The responsible nations carry a credit balance that is unfunded.  It is a backdoor bailout that few understand.  As of the end of August the Bundesbank’s (Germany’s central bank) TARGET2 credit balance stood at 573 billion euros.  That is money that is owed Germany by the ECB.  It represents nothing substantial, not even mostly worthless Greek bonds.  Yet Germany continues to deny that it is being robbed by the rest of Europe via the misconstructed European Monetary Union.  It has better wake up before its economy is completely depleted of capital.  Patrick Barron

From Open Europe news summary of September 11, 2013 (my highlights):

In his ‘state of the Union’ speech in Strasbourg this morning, European Commission President José Manuel Barroso said, “Not everything needs a solution at European level. Europe must focus on where it can add most value. Where this is not the case, it should not meddle.” However, he also said, “Let me say to all those…who rejoice in Europe’s difficulties and who want to roll back our integration and go back to isolation: the pre-integrated Europe of the divisions, the war, the trenches, is not what people desire and deserve…I believe a political union needs to be our horizon.”

What is now called the European Union started as the European Coal and Steel Community in the early 1950’s.  Its purpose was simplicity itself: free trade in coal and steel, the foundation of the modern industrial state at the time, to remove the necessity of war to acquire these goods for the autarkic, warfare state.  The Europeans had finally learned Frederic Bastiat’s dictum that when goods do not cross borders armies will.  Later the idea of free trade was expanded to include almost all goods plus services.  Then it was expanded to allow the free flow of capital and people.  None of this requires a European state.  The people of Europe want freedom, not another layer of parasites taxing and regulating them into poverty.  There is nothing that the European Union can offer that cannot be obtained from unilateral free trade.  Barroso is disingenuous to equate the building a European super state as the only alternative to war.  Patrick Barron

My good friend Godfrey Bloom, member of the European Parliament for Yorkshire and North Lincolnshire, explains housing market realities to statist politicians in the European Parliament.  Perhaps the crime of which he speaks is so apparent and so widespread that none dare speak its name.  What the politicians and central bankers on both sides of the Atlantic (and Pacific) do not understand is that THEY are the criminals, perhaps criminals by neglect and negligence, but criminals nonetheless.  Patrick Barron

I disagree with this news article that Peru is the dollar counterfeiting capital of the world.

Here is its evidence: “Over the past decade, $103 million in fake U.S. dollars “made in Peru” have been seized…”

The Fed’s QE3 program injects $85 billion into the economy each month; therefore, Peru’s counterfeiting operations over the last ten years represents only 52 1/3 minutes of money printing by the Fed.

It is beyond a doubt that the Federal Reserve Bank is the largest counterfeiter of dollars in the world.

Patrick Barron

From today’s Open Europe news summary:

Le Monde reports that the Spanish government is planning on putting “one quarter of the national heritage” up for sale in order to tackle their budget deficit. Euractiv Le Monde

The Spanish people have plundered their nation’s heritage over a few decades’ of socialism.  It Is no different than if thieves broke into the Prado, stole all the El Greco’s, and sold them in order to live a life of leisure for a few years.  Now the money is gone and everyone must go back to work…or steal something else.  Patrick Barron

From today’s Open Europe news summary:

The FT reports that motorways in Portugal are deserted due to the recession, the introduction of tolls and the overinvestment in roads funded by the EU, which has left Portugal with four times more motorway per inhabitant than the UK. FT Open Europe research: Structural funds

So much for the idea that infrastructure investment by government spurs economic growth.  I saw the same phenomenon last summer in Spain; i.e., brand new but empty motorways.  Infrastructure investment MUST follow economic growth, because no one can predict where growth will arise or in what form.  In the nineteenth century Bethlehem Steel built its own railroads to transport its products to market.  Oil pipelines and other infrastructure must be built where the oil is discovered.  I think it is safe to say that most of the new motorways in Europe would never have been built, if private capital funded them.  This is not an indictment of the shortsightedness of private capital, but an indictment of the irresponsibility of government.  Does anyone really doubt that government contracts and union labor jobs were not influential in all this useless infrastructure investment?  How long will it be before these now beautiful roads fall into disrepair from lack of adequate toll receipts to fund their maintenance?  Patrick Barron

Re:  Argentina Loses Debt Appeal

I have read many otherwise reputable economists state that defaulting on one’s sovereign debt is not such a bad thing, often citing Argentina as an example.  Well, read what sovereign debt default really means.  Your assets, even your military assets, are seized.  Your president doesn’t fly in a private jet, for fear that it will be seized.  And…you wind up paying anyway! Patrick Barron

UK may have to help third Greek bail-out  COMMENT: Godfrey Bloom, UKIP MEP

http://www.express.co.uk/news/uk/423861/UK-may-have-to-help-third-Greek-bail-out