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Sovereign Self-Interest Versus European Hegemony
Blain's Morning Porridge, via Mint,
“Markets can remain irrational longer than we can remain solvent… “
There were moments yesterday when it felt we stood at the edge of the abyss preparing to take a giant leap forwards. The morning’s fears were palatable –the lack of market direction and escalating concerns setting us up for a tumultuous slide. By the afternoon everything rosy again! Despite miserable German confidence numbers the feared sell-off has not developed. Fear is still there tho! Fed keeping long term rates low should not be a surprise. In Europe, we’re watching how the news flow develops.
Spain – more of the same. Will they, wont they take the OMT bailout? Rumours this morning say a limited Euro 60 bln is being discussed for the banks and regions, but who knows. Spain has completed 2012 funding – so what’s the rush or the need asks the Spain DMO? Perhaps Spain signing up for reasons of “prudency” could provide the market with the kind of leg up it needs to rejuvenate the rally?
Greece is being touted as a crisis averted. If you believe all the guff from yesterday’s list of items on which there is apparent agreement: labour reforms, privatisation, new loans, etc. I shall say it quietly… we’ve heard it all before. Greece is not solved. Just delayed. Germany saying its waiting for Troika report and IMF considering outstanding issues sounds like noise designed for domestic electoral consumption. It’s quite clear Europe is not going to let Greece go – so it’s a question of paying the minimum to keep them in the family photographs.
Apparently Draghi did a great job meeting German legislators yesterday – persuading them that far from bailing out profligate southern spendthrifts, the ECB is acting in German’s best interest by protecting them as Europe’s largest creditor. High circus I’m told! I can just imagine him as snake oil salesman.. or worse.. a bond broker! After all.. didn’t he work for…
However, it does feel the crisis is developing in some new directions. Until recently it’s been about sovereigns and banks – but now we’re seeing corporates struggle. That’s a new dimension when corporate credit spreads are so tight, but names from Peugeot, Iberdrolla, Telefonica, Nokia are now France Telecom all have doubts notched against them. S&P’s warning of further Sovereign and Corporate downgrades to come summed up the mood. As we said yesterday – global recession is a fact and its bound to increasingly impact markets. I suspect a fair amount of the new corporate supply launched over the last 2 month new Issue feeding frenzy could end up back in circulation – we’re seeing it already!
Changing tack for a moment, I’ve not seen that much critical comment on the recent French bank bailouts – they seem to have been pushed under the carpet. But they have important implications for the basis of the Europe crisis.
There is a general consensus France had no choice but the bailout Peugeot’s finance arm PSA. Auto manufacturing is a critical part of the French State’s Industrial-Complex in terms of employment, and without a financing arm it’s questionable if it could remain so. As it is, French auto’s account for a tiny proportion of global auto demand. So compare and contrast French Auto Inc with Volkswagen.
Volkswagen managed to flog 7 mm new cars between Jan – Sept making Euro 145 bln in sales with 80% outside Germany. In the same period Peugeot managed to put only 2mm jalopys on the roads making 45 bln in sales. Moreover while VW is watching profits soar (up 40% this year, and its increased global market share to 12%... well when was the last time your neighbour showed off his new French car? And watch what happens when VW launches its new Golf in a few weeks time. Euro 200 bln in 2013 sales looks nailed on. I aint hearing similar Va Va Voom numbers…
So why are the problems of the French car industry so important for the Euro? If French industrial policy is founded on preserving the country’s manufacturing base is that really something German/Finish/Dutch taxpayers could have been bailing out through a single European banking union. Perhaps not! From this perspective there is little difference in making political decisions to allow hairdressers to retire at 50 and political decisions to preserve manufacturing capacity to placate unions. These are national choices that illustrate sovereign self interest not European hegemony. I simply ask the question how is Europe supposed to move towards closer Union when national interest remains paramount?
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Allow me to summarize; The working class (that actually produces things of real value) is tapped out. The banking and financial class (which produces nothing of real value) has purchased the politico and is saying "fuck you, pay me". Yes, there are a whole bunch of idiots in between, but guess what motherfuckers? something has got to give and will.
Why is the working class tapped out? Wages have not kept up with real inflation. Yes unfortunately these folks need to go places and eat. So yes, in their world food and fuel does indeed matter (fuck you bernanke)
Hedge accordingly.
Just came over the wire: Ford fires 1500 in UK
Just happend today:
Ford closes plant in Belgium, fires 9000 people.
Ford offloading staff across Europe, eeek, probably beginning of a new wave of automotive redundancies, they must have pulled the short straw to announce first
2nd leg down begins in the real economy, gonna get rough
That should help speed things up. 1,500 tax payers now becoming liabilities. "Winning" fine with me, those who know their labor is of real value have nothing to fear in a collapse and everything to gain. Yes, many innocent bystanders are slaughtered along with the "idiots in between" during such corrections thoughout history, but guess what? Nature and the laws of physics make no promises regarding anyone's survival. You are an idiot (sucker to the elite) if you believe that any man-made institution can somehow insure your health and well-being.
Why has Nature been so successful, there have always been real consequences (in most cases in Nature this is death) for bad models, bad behavior, and failed designs/ideas (these bad ideas/behaviors/systems die and go away).
Nothing changes until the issue of moral hazard is addressed and there are real consequences for bad behavior AT ALL LEVELS of society.
Hedge accordingly (it's all you can really do anyway).
Yep, nature can sure teach man everything he needs to know about how the world works, and why ours doesn't
Freedom (no rules whatsoever), competition, individualism and no central institutions or soft pillows
People cannot be told, they'll have to learn the hard way ..and still might not 'get it' as the Greeks keep re-stacking the wrecking-ball institution of Govt everytime it flattens their country into pulp
I blame State education and MSM, teaches people to believe and swallow rather than think and go your own way .......will the dumb get dumber, watch Greece
Those tax payers were bigger liabilities before they were fired. This is actually a step in the right direction.
It's cheaper to put someone on foodstamps (whatever welfare system you choose) than it is to pay them to make cars that cannot be sold.
The increase in welfare is actually a sign that things are improving. This is the pain that is required in order to make the system more profitable.
The european union was created with full knowledge that this would happen.
the foodstamp or unemployment cues is a sign there's a clear out but i disgaree it makes anything better
the only thing that'll improve the economy is the complete dismantling of Govt (including Law and Judiciary) which in turns collapses the entire Monopolist Matrix (big corpse dependent on Govt money)
the addition of unemployed around the bloated belly of Jabba the Hut Govt just adds to the burden on the productive to fund this grotesque corrupt monstrosity
and thr US Govt pig knows it and has added over 10,000 IRS staff to ramp up the rape, theft and pillaging of what's left of the productive economy too greedy, deranged and stupid to stop themselves making the economy worse and given their insane spending, with zero chance of ever reaching the maths numbers to satisfy their obesity
the usual suicidal fucking dumb greedy Govt
Free of the biggest parasite and all its hangers-on in society and free of the strangulation and protection racket of Law we have a free market (and free society)... that's when green shoots will explode into life and we recover, not before
That is one way to look at it.
However, I see that the government employment is simply another form of welfare. So people who can never be productive are given a job in the government. Yes, some public servants get paid a lot but the average wage is not as high as the private sector (in australia anyway).
So it is actually cheaper for the people to be given jobs with the government than if the government subsidised the private sector so it could afford to hire labor at a higher rate.
It is a sick scenario but you may find that it is cheaper to expand the government, when you really think about it.
Until such time as the private sector can bring new products to market and reignite growth the government sector will continue to expand. I see the government expansion as a symptom of private contraction, NOT a cause of that contraction.
You are under the illusion that the government and "private" sector are two different entities. FAIL.
Who the fuck do you think owns the politicians?! The people?
Bah ha ha ha ha ha ha!
I didn't say that at all.
In fact my argument would accomodate the notion of private and public sectors being controlled by the same powers.
Those controllers can operate the government as a welfare system for when there is not enough work in the private sector.
I think all that is happening is that the USA is finally realising that the dreams of the founding fathers were only that; dreams. And the sudden realisation that it was all just a dream is painful for people such as yourself.
Yes, the politicians are owned, manipulated, and controlled by other powers. But this has been the state of play for thousands of years. All that's happening is you are finally working it out and are angry that the fairytale you were told in school is not real.
Stores like Walmart with their China-made products have made it possible for the sheeple to live on peanuts while TPTB have lined their pockets. Great era.
As illustrated in the food stamp infographic, there are 14,000 adult food stamp recipients per Wal Mart supercenter. This is how they mask what should be a bread line with 44 million Americans in it.
people don't like to stand in line anymore. It drives them crazy
+100
A two pound sack of walnuts is $13.00 and that's hard to afford when you lost your job!
The Asians love all kinds of nuts. One reason we expanded our walnut and pecan operation in 2010. Have faith, that which is not sustainable, won't be sustained.
Yup. Asian girls love my nuts!
It sure sucks to be you, which is why I'm not.
More of the same......finish the last batch before we serve the next batch.
over capacity in doldrum ridden over-equipped EUrope, where there are more cars than horses and Bayonets!
Yes, PSA, Ford, Opel, maybe even the upper echelon germans, will get pulled into the suction pump of economic attrition if this recession becomes permanent fixture in Euroland; where the vibrant segment is Korean and euro production in Tcheko and Slovak lands.
Europe can help restructure this situation thru concerted economies of scale and by arbitrating who wins who loses. Its not just cars...alas!
answer: because it must
Who gives a fuck about auto production (and consumption) in the West anyway? Thanks to too many hungry mouths and too few teats in Europe and North America, the BRICs and the Rest of Asia are where it's at, baby.
http://www.gbm.scotiabank.com/English/bns_econ/bns_auto.pdf
The people residing in the West that aren't Third World illegals do "give a fuck". That is, they want cars made with them in mind, not simply an adjustment to a Third World- design.
Start penalizing pliancy of labor (and Third World ownership of First World companies) and the Third World becomes quite displeasing.
The West has forgotten that it is in competition with the rest of the world for scarce resources. A bloated state can no longer be offset with gunpowder.
[Edit] But if Western nations want to try sustaining their growing sovereign debt by turning their respective economies into museum pieces, I say let them.
You keep on using a word fit only for sports and not international relations - competition. It is usually stated by people who imply a deficiency that does not exist. In this case, you are suggesting that the West has a deficiency that really doesn't exist.
In addition, enough of that proverbial gunpowder can offset alleged excesses of such countries. The US has enough of it that the only problem is giving out the order. The Third World can only steal so much before the First World decides to turn it into glass.
If the US has to get imperial and neutralize the Third World (and those in the private sector) to survive, then that is what the US will have to do.
I have a Peugeott bicycle, can I keep it?
Europe can also remain in denial longer than the world can remain solvent.
Europe's going to be first to collapse
...that'll set off a chain around the world
The US Great Depression was kicked off not in the US, but by a foreign sovereign debt crisis your bankers were heavily invested in ...sound familiar?
also the decision of going out of the irannian market this year, wich was the second biggest market of Peugeot, with 455 000 cars sold in 2011.
France decided to play drums of war, instead of selling hundreds of thousands cars... french industry and people didn't felt bad about the iranian market, but new president holland, felt more important to fallow Europ/USA/Israel geopolitics....
this is the only reason for Peugeot economic problems, that no one want to say
and why you could ask ? European sanctions and ... GM agreements that took 7% in Peugeot. so i think it s time, in did, for helping national interests.
and why you could ask ? European sanctions and ... GM agreements that took 7% in Peugeot. so i think it s time, in did, for helping national interests.
Maybe they need to keep things simple again.................
www.youtube.com/watch?v=UFFart3xVkg
The article posits that the choice is between bailing out national interests (Peugeot) and supranational ones (EU, EZ, IMF, etc.). That's foolish. So long as we have ink, we can do both.
YouTube - Here's a Voter Who Wouldn't Take It Anymore
and that's the way the cookie crumbles
I thought State subsidies were a no-no (or non-non) in Europe today? Seems that in Europe some are more equal than others (duh) and that France is getting away with subsidizing their car industry. Not that they make bad cars though, apart from Renault perhaps. Peugeot is losing 350 euro on every car they sell. They can boost their car sales if they would equip them with engines that give you much higher mpg. But that would not make their oil industry happy and soon France would have a no-flying zone imposed on them.
When something threatens Western Europe, the rules on subsidies go out the window.
As does in the rest of world. Both Airbus and Boeing are sibsidized. American car industry in trouble? Sure, why not bailout GM. Same for banks. The only ones that do not get a bailout are working people.
hidden communism in europe? why isn't this surprising?
covert.ias3.com/expose
Food, clothing and shelter ... interesting, creative activities ... people can produce these for themselves, locally, no gigantic industries are necessary. What's left?
Automobiles and 'defense' hardware. The Europeans are doing everything within their power to support their auto industries even as sales collapse. Of course, in a diverse auto-manufacturing environment some makers must fail first (Opel, Saab) while other fail last (VW/Audi) they all hang on with additional subsidies until the cost fabric tears and every single manufacturer is ultimately gone.
High fuel costs + high real credit costs = destruction of the auto industry and all of its dependencies/destruction of modern industrial economies: fuel supply, heavy construction, finance - insurance - real estate, big government(s), highways, mining and materials, defense/militaries ... all of these and more are crashing right now under everyone's noses.
We are all Greece now.