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Portugal - Back In The Penalty Box

Tyler Durden's picture




 

Submitted by Mark J. Grant, author of Out of the Box,

"Last night, Darth Vader came down from planet Vulcan and told me that if I didn't take Lorraine out that he'd melt my brain."
 
                        -George McFly
 
Mário Alberto Nobre Lopes Soares is a Portuguese politician who served as Prime Minister of Portugal from 1976 to 1978 and from 1983 to 1985. He was then the President of the Republic from 1986 to 1996. He is a senior and well respected statesman and hardly a voice of either the radical left or right.
 
Official projections put Portugal's debt to GDP at more than 124% by the end of this year. Utilizing Europe's continuing fantasy accounting; this is the number that Portugal and the EU posts for general consumption. However by counting liabilities and using American addition, subtraction and division I come up with a number of about 236%. The problem, as I keep reminding everyone, is that choosing not to count debts does not erase them and so time passed, some of the liabilities came due, and Portugal is on the verge of bankruptcy once again.
 
It was March 3, 2011 and the title of Out of the Box was, "Portugal Goes Down." Then in May 2011 Portugal did bite the dust and received $101 billion in bailout funds. Since then it has bobbed up, devastated its citizens with trying to meet the demands of the European Union and been hailed by both Brussels and Berlin for its imposition of the mandated austerity measures. Today I can assure you; Portugal is going down again.
 
Now Mr. Soares, over the weekend, took a different and surprising tact. He has called for all of the opposition parties in Portugal to "bring down" the government. Specifically he said, "In its eagerness to do the bidding of Senhora Merkel, they have sold everything and ruined this country. In two years this government has destroyed Portugal. We absolutely have to end this austerity." He also said that Portugal will "never be able to pay its debts however much it impoverishes itself. If you can't pay, the only solution is not to pay."
 
Pretty strong words for this elder statesman!
 
Now in the recent round of easing debt extensions were granted to Ireland and Portugal but Portugal's was tied to the imposition of further austerity measures. This is just after the Supreme Court in Portugal declared certain austerity measures unconstitutional and blew $1.7 billion of them out the window and out of Portugal's budget.
 
The country was already the poorest in Western Europe, with a minimum wage of $630 a month.
Unemployment is the third highest in the Eurozone, with 17.4 per cent of the country out of work and a 37% unemployment rate for people under 25. Quite large tax increases have hit everyone hard, with train prices soaring by 25% and VAT on electricity leaping from 6% to 23%.
 
Now a careful reading of what the EU is now demanding reveals an actual shortfall of about $6 billion and where Portugal is going to come up with that is a good question. The Prime Minister may be one of the favorites of Europe but that is not exactly the case in his own country as politics are about to get very nasty. The debt extension was one thing but when Portugal lines up again at the window, which is coming shortly, one has to wonder what new one-off solution will be forthcoming this time. Will it be the depositors again transcribed in Lithuanian, the subordinated or senior debt of the country postulated in Slovenian or some new scheme? Given the politics of Germany at present I find it highly doubtful that the answer is going to be a hand-out courtesy of the taxpayers of other countries.
 
Grant's Rules 1-10, "Preservation of Capital" are flashing red! If you have exposure to Portugal I would be heading towards the exit doors. Failure to do so may be a quite expensive proposition.
 
"The itsy bitsy spider climbed up the water spout. Down came the Goblin and took the spider out."
 
              -The Green Goblin

 

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Mon, 04/15/2013 - 22:17 | 3454639 thedrickster
thedrickster's picture

For its size, Portugal has a shit load of Au reserves.

Mon, 04/15/2013 - 22:24 | 3454676 otto skorzeny
otto skorzeny's picture

ripping off the natives in s and c america will get you some. easier to steal it than to mine it

Mon, 04/15/2013 - 22:48 | 3454773 BoNeSxxx
BoNeSxxx's picture

If they trade their gold for filthy fiat, they deserve whatever they get...

Mon, 04/15/2013 - 23:12 | 3454867 nuinut
nuinut's picture

 

 

At $10k/troy oz Portugal's immediate problem of finding $6bn would require only 20mt of physical from their reserves.

@$5k/oz $6bn=40mt

@$20k/oz $6bn=10mt

@$50k/oz $6bn=4mt

Just need to be rid of this idea that an IOU denominated in gold should trade at par with the real physical thing, and the value of physical would be found to be somewhere in that (higher) direction.

 

Tue, 04/16/2013 - 00:00 | 3454996 ghengis86
ghengis86's picture

So at $1k/oz, we're in the neighborhood of 200mt or just over half their reserves.

Not a bad deal...if you're the ECB!

Tue, 04/16/2013 - 00:06 | 3455008 DoChenRollingBearing
DoChenRollingBearing's picture

"The US Treasury could just put out the call that it would buy any and all gold for an arbitrary high price: say $5000 or $10,000.  Freegold would soon follow."

Tue, 04/16/2013 - 01:21 | 3455114 illyia
illyia's picture

Maybe the EU would take gold derivatives... same as the real thing.

Tue, 04/16/2013 - 00:30 | 3455044 Kirk2NCC1701
Kirk2NCC1701's picture

GS to Draghi: "ripping off the natives in portugal will get you some. easier to steal it than to mine it." [LOL]

Draghi:  "yessi' master"

Tue, 04/16/2013 - 02:03 | 3455165 thisandthat
thisandthat's picture

Being ignorant evidently won't, otherwise you'd be rich... that gold is pretty much all 20th century, almost all accumulated during the 3 1/2 decades Salazar reigned on the country's economy (and politics): 695 tons out of a total of 866 tons held by 1974 (just to be depleted to less than half in another 3 decades)...

Mon, 04/15/2013 - 22:25 | 3454684 thedrickster
thedrickster's picture

14th, 382 tonnes.

Mon, 04/15/2013 - 22:46 | 3454763 Manthong
Manthong's picture

Demand the gold back first.. negotiate later.

Tue, 04/16/2013 - 01:04 | 3455092 thisandthat
thisandthat's picture

That worked out well for Germany...

Mon, 04/15/2013 - 22:46 | 3454764 Manthong
Manthong's picture

..dupe

Mon, 04/15/2013 - 23:37 | 3454938 FieldingMellish
FieldingMellish's picture

Same amount that is consumed by the electronics industry every year, never to be seen again.

Mon, 04/15/2013 - 22:43 | 3454754 Groundhog Day
Groundhog Day's picture

They were once the reserve currency holders of the world....maybe they learned a thing or two

Mon, 04/15/2013 - 23:31 | 3454926 stocktivity
stocktivity's picture

Speaking of shit load...doesn't it look like the guy in the picture went to let out a fart but it came out solid?

Tue, 04/16/2013 - 04:03 | 3455271 spdrdr
spdrdr's picture

I think that it is an image of a Portugese player in the infernal European Poofball Cup.

panem et circenses

 

Tue, 04/16/2013 - 06:46 | 3455379 Rip van Wrinkle
Rip van Wrinkle's picture

The question is.....for how long do they have a shit load of Au?

Mon, 04/15/2013 - 22:18 | 3454645 FieldingMellish
FieldingMellish's picture

Leave the Euro... simples.

Tue, 04/16/2013 - 01:03 | 3455091 thisandthat
thisandthat's picture

In European Portugal, the Euro leaves you...

Mon, 04/15/2013 - 22:21 | 3454662 RiverRoad
RiverRoad's picture

When Portugal's gold hits the fan, look out below, fer sure.

Mon, 04/15/2013 - 23:37 | 3454772 sampo
sampo's picture

And when Italy's and Spain's gold hit the news saying that it will be or won't be sold to Chirmany, the LBMA has already levered the bet by 40x and gold will be priced down to...

 

$-3000?

Mon, 04/15/2013 - 22:56 | 3454669 otto skorzeny
otto skorzeny's picture

PopoZao means "bring that ass" in portugese-I learned that from a K-Fed song.

Mon, 04/15/2013 - 22:25 | 3454678 NoDebt
NoDebt's picture

"However by counting liabilities and using American addition, subtraction and division I come up with a number of about 236%. The problem, as I keep reminding everyone, is that choosing not to count debts does not erase them and so time passed, some of the liabilities came due, and Portugal is on the verge of bankruptcy once again."

Mark, buddy, they're ALL higher than the official number.  This is nothing shocking.  This is everywhere in the developed world.

Let me sum it up quickly and succinctly as I can:  it's called the "developed world" for a reason.  It's developed.  Notice the -ed on the end of the word developed?  That means it's already done.  Past tense.  As in, we're finished working on it.  If you aren't happy with the results, please feel free to drop a complaint in the suggestion box and management will get back to you.  Maybe.  Eventually.  But don't hold your breath.

 

Mon, 04/15/2013 - 22:26 | 3454679 ebworthen
ebworthen's picture

Yet another Southern European nation suffering under the yoke of the Euro and the Central Bankers.

Leave!  Leave the Euro!  Leave the cabal of bankers!  Restore your sovereignty!  Restore your currency!

p.s. - ZH, Tyler, what is the status of Bitcoin in this maelstrom?

Tue, 04/16/2013 - 04:26 | 3455285 Treason Season
Treason Season's picture

When the local elite feel the EU is stealing too much and they're not getting their usual % cut THEN an EZ country will secede from the union. It has nothing to do with patriotic appeals to nationhood. There are grounds for hope  though in considering the psycho-greeds heads in Brussels overplaying their hand.

Tue, 04/16/2013 - 08:06 | 3455522 Non Passaran
Non Passaran's picture

Citizens of those countries are almost powerless.
Everyone owes significant part of their current or future income to the welfare state.
Treason Season is right.
Some serious shit has to happen to make 15-20% of the people go mad.

Mon, 04/15/2013 - 22:40 | 3454737 lolmao500
lolmao500's picture

Good. I hope they go bankrupt fast... that'll give more votes to the anti-EU party in Germany so that things can really change...

Mon, 04/15/2013 - 22:49 | 3454775 Jovil
Jovil's picture

The only escape for Portugal is to sell their precious gold and who better than the central bankers who are begining to accumulate it to purchase it with fiat. Who is keeping Portugal's gold JPM or London?

Tue, 04/16/2013 - 00:57 | 3455088 thisandthat
thisandthat's picture

Since it's (supposedly) in the US, probably the chinese?

Tue, 04/16/2013 - 02:27 | 3455191 morning
morning's picture

I think a substantial part of it is held at home, downtown.

Tue, 04/16/2013 - 03:49 | 3455256 fajensen
fajensen's picture

Well, it seems like someone, perhaps The Vampire Squid but more likely DB using its insider connections with the german government to good advantage, managed to frontrun that deal.

Mon, 04/15/2013 - 23:05 | 3454835 autofixer
autofixer's picture

I thought Felipi I rehypothecated Portugal's gold to Madri in 1581? 

Mon, 04/15/2013 - 23:19 | 3454876 Yen Cross
Yen Cross's picture

 I've detached myself from Cyprus.   Italy,Spain and France repaying LTRO in 2014? I can't stop loosing sleep over that one!

Mon, 04/15/2013 - 23:20 | 3454888 RaceToTheBottom
RaceToTheBottom's picture

All the countries of Europe should just become their own reserve currencies.  Problem solved

Mon, 04/15/2013 - 23:22 | 3454891 RaceToTheBottom
RaceToTheBottom's picture

Funny how all the countries that run into problems all have Gold....  Italy has a bunch as well....

Next?

Tue, 04/16/2013 - 00:06 | 3455011 knukles
knukles's picture

(John Wayne voice)

Just need a Goddamned liberation, pilgrim.

Mon, 04/15/2013 - 23:41 | 3454946 bagehot99
bagehot99's picture

They still have Cristiano Ronaldo, you horrible mean girls!!

Tue, 04/16/2013 - 11:10 | 3456303 autofixer
autofixer's picture

But he plays for Real Madrid.

Mon, 04/15/2013 - 23:44 | 3454950 bagehot99
bagehot99's picture

I am starting to look forward to the denouement. It will warrant a quarter pound hot dog and a 48 oz soda. 

Mon, 04/15/2013 - 23:56 | 3454986 Spectre
Spectre's picture

Tick Tock.... Tick Tock....

 

It's gonna be an awesome explosion in the Euro credit markets.

Tue, 04/16/2013 - 00:26 | 3455040 thisandthat
thisandthat's picture

 

Mário Alberto Nobre Lopes Soares... blah blah... He is a senior and well respected

You just lost me there...

Btw, remember this senior was responsible for the previous 2 (two) IMF interventions in this country...

Tue, 04/16/2013 - 02:25 | 3455188 morning
morning's picture

True. And maybe a bit too senior, he's been talking utter agitator crap for the past 25 years as if his own party through Socrates didn't fuck up whole loads of cash for 16 years.

Tue, 04/16/2013 - 01:05 | 3455096 delivered
delivered's picture

Is the fear of leaving the EU and dumping the Euro that great? I mean these countries are being forced to sell their best and only remaining assets including Cyprus gold, Greece islands (I believe I read recently where a wealthy Middle East oil Tycoon purchased certain Greek islands), and Portugal - to be determined. Is Germany's leverage that great or maybe its just plain old blackmail? I don't know but at some point you have to wonder if any politician in these countries have any balls at all to simply do what is necessary - leave the Euro. If not, the populations are all but assured a life of slavery, forever repaying debt but finding out the most painful lesson of all when you're in too deep. All that work and effort expended over the past year to repay debt has resulted in guess what, even more debt being accumulated (and being further underwater). The hole gets deeper and deeper each year with no way out. Hasn't anyone figured this out yet?

I understand that the immediate pain will be severe as the soverign currency is re-introduced with a major devaluation all but assured (and the population taking a major standard of living hit). But at least do it why the country still has valuable assets remaining and capital (i.e., some type of hard currency) is available to operate. Remember, the very best time to enter a BK proceeding is when you have some liquidity/capital to manage through the process. If you wait too long, until you're desperate for cash, its too late as you are completely at the mercy of the creditors who will stop at nothing to get whatever they can. 

Remember, those who default first default best (and can clean house to start the rebuilding process). Just can't believe that nobody in Europe has figured this out yet but then again, maybe the almighty "socialist god" will pay a visit, save the day, and save their souls. Hell, maybe they've been blinded for just too long to see the light of day or maybe they don't want to. Or maybe the blackmailing going on is just too great. Hard to believe the politicians are selling out their citizens but I guess this is what it has come to. Once proud countries and cultures being reduced to a generation of being able to do nothing but "Dance for the Man".

RIP Southern Europe. Just hope I have a chance to visit and experience the culture before your nothing more than a vacation spot for the wealthy banksters.

Tue, 04/16/2013 - 03:27 | 3455185 JOYFUL
JOYFUL's picture

Nothing so easy as a 'vacation spot' or dance emporium be planned for those benighted places on the Mediterranean map...

their planned fate is to repeat the roles assigned them in far off days, when the lust for loot was the prevailing mania of the Phoenecian forerunners of today's Phariseuitical Pillagers...and from Egypt to Greece & the Pillars of Hercules, the Semitic forerunners of 'modern capitalism' enslaved the populace with wicked abandon...Diodorus reported on the gold mines of Egyptian surroundings:

 

For the Kings of Egypt condemn to these mines not only notorious criminals, captives taken in war, persons falsely accused,
 and those with whom the king is offended, but also all the kindred and relations of the latter. These are sent to this work either as a punishment,
or that the profit and gain of the king may be increased by their labours.

 

The mines of Iberia(what is now Spain and Portugal) were to the Carthaginians what Mexico and Peru became for the later Spaniards...with their superior weapons they enslaved the populations there to work the mines....said Diodoms:

These people, though by their labour they enriched their masters to an almost incredible extent, did it by toiling night and day in their golden prisons. They were compelled by the lash to work so incessantly, that they died of the hardships in the caverns they had dug. Such as by great vigour of body continued to live, were in a state of misery which rendered death a preferable fate.

And now history repeats, with new slavemasters, in bespoke suits, directing the lash of their puppet politico overseers onto the backsides of the new neo-serfs of the fallen nation states of the south of Europa.

Who will rise, in a new and bloody 'revolt of the slaves,' or die lashed to their places in the caverns of hell which their homelands become.  This has nothing to do with Germany, and everything to do with the same slavemasters by whom the Teutons as well are oppressed and defrauded of liberty.

Tue, 04/16/2013 - 15:18 | 3457583 delivered
delivered's picture

Great reply and spot on. I guess the old saying still holds as the more things change, the more things stay the same. Greed, power, and control obviously has no limitations, whether it be today or ancient history.

Tue, 04/16/2013 - 03:57 | 3455262 Notarocketscientist
Notarocketscientist's picture

Recall Greece wanted to have a referendum on this?  What happened?

Papandreau was thrown out and an EU dictator installed.

Recall similar Italy and Sylvio?  Thrown out and dictator put in place.

 

MESSAGE?  Nobody Fucks with the Jesus http://www.youtube.com/watch?v=IONyLZn0pLI 

Anyone who does is a dead man - imagine how powerful these fucks are - they can even unseat the biggest Mafioso in Italy

Tue, 04/16/2013 - 06:36 | 3455368 agent default
agent default's picture

Looks like Sylvio will be back with a vengeance.

Tue, 04/16/2013 - 03:57 | 3455263 fajensen
fajensen's picture

What has happened it that government has become more "business oriented": Therefore, the modern politician represents the citizens in much the same way that the modern CEO represent shareholders and investors - by looting, fraud, smash & grab "innovation", price manipulation, asset stripping, cronyism, e.t.c.

Tue, 04/16/2013 - 06:33 | 3455366 TNTARG
TNTARG's picture

The only thing it's being socialized here is banks losses on derivatives, The unregulated global casino for banks. Those "leaders" aren't socialists, they're half men with no balls or just corrupted people. They all deserve to be prosecuted and jailed. Hope some day they will end up in prison.

Tue, 04/16/2013 - 08:35 | 3455601 smacker
smacker's picture

 

What you find in most of the ClubMed countries is a strong desire among the populations to stay in the EZ but for 'others' to bail them out because they think the debt crises wasn't their fault.

Many of them wanted to join the EZ in the first place because they were sick and tired of being run by corrupt political elites and they thought that by joining up, it would force their elites to become more professional and less corrupt.

It hasn't worked. All their elites have done is to borrow/spend, borrow/spend and bury their nations in unrepayable debt. Little or no policy actions were taken to raise productivity in any of these countries which is the only way they could have survived, being up against the likes of Germany.

Now the whole bubble has burst and the populations are paying the price with bail-outs and austerity which is destroying their economies and creating social disaster.

Tue, 04/16/2013 - 05:24 | 3455264 news printer
news printer's picture

"Last night, Darth Vader came down from planet Vulcan and told me that if I didn't give Angela Merkel some GOLD he'd melt my brain."
 
                        -George McFly Prime Minister of Portugal

Tue, 04/16/2013 - 04:05 | 3455273 Hobbleknee
Hobbleknee's picture

Why doesn't the ECB use the Bernanke template and buy up $85 billion per month?  That would cover 14 Portugal shortfalls, amateurs!

Tue, 04/16/2013 - 04:12 | 3455278 Joe A
Joe A's picture

Don't worry. The EU is working on a banking union. What follows then is wealth confiscation from middle classes in Nothern Europe in order to bail out Southern Europe. Result: a wiped out middle class everywhere and much rejoycing among rich classes and bank elites everywhere.

Tue, 04/16/2013 - 04:22 | 3455282 Notarocketscientist
Notarocketscientist's picture

Muppets selling off into this inferno and GS Soros etc (who lit the fire) saying suckas as they buy at 1300+  What a joke.

In all seriousness though - someone is very scared of something.   It could be too many people demanding PM so central banks crash PMs and the redemptions are used to cover....

But if that is the case then hold on tight - because that is only a short term solve - more and more people are getting scared (esp after Cyprus) and SURELY they are demanding PM.  

And this sad attempt to put them off PM will not work.  A lot of people will just see this as a good opp to buy low and hold - and they will DEMAND Physical.

 

Tue, 04/16/2013 - 04:26 | 3455284 daxspeculator
daxspeculator's picture

Mr Mário Soares is senile. Yes, he IS responsible for the previous 2 IMF interventions and his fellow colleague Mr. José Sócrates is responsible for this one.

As Margareth Tatcher said once: "The problem with socialism is that eventually you run out of other people's money."

Tue, 04/16/2013 - 04:38 | 3455294 Treason Season
Treason Season's picture

Just reiterating my post above, when the local elite feel they ain't getting their usual % cut from the EU Then will see a secession. Maybe Soares is signaling to his fellows just that message.

Tue, 04/16/2013 - 04:45 | 3455298 zenshi
zenshi's picture

Agreed.

Mário Soares is a socialist, and worse, he is a senile socialist.

The rest of the opposition in Portugal, aside from the socialists, are the communists, the green party and the "Left Block", which is another left-wing "liberal" and progressive party.

In the government we got social-democrats and conservatives fighting to see who can be more socialist.

What can go wrong?

Tue, 04/16/2013 - 06:01 | 3455343 Joe A
Joe A's picture

The problem with runaway capitalism is that eventually you run out of future generations' money.

Tue, 04/16/2013 - 06:39 | 3455371 agent default
agent default's picture

I hope you are not using the term capitalism to describe the system we have here.  Capitalism is a very tough game for the JPM and GS boys to play.

Tue, 04/16/2013 - 07:53 | 3455499 smacker
smacker's picture

 

Except that what's been going on in the EU/EZ for 15 years is not related to capitalism.

There are very few members of the EU political elites and no EC-crat who have the first understanding of free market capitalism.

The whole of Europe is essentially socialist (whatever political labels they give themselves) and it has always been the case that socialists meddle, interfere and manipulate free markets to achieve political goals. But they don't understand how capitalism works. The result is always economic/social disaster.

This is the downfall of the Eurozone and (hopefully) will be the downfall of the EU itself.

But they still will never learn. They should have listened to Margaret Thatcher saying "you can't buck the markets."

Tue, 04/16/2013 - 06:00 | 3455342 Sudden Debt
Sudden Debt's picture

Old people can die in their sleep if he doesn't watch it...

Tue, 04/16/2013 - 06:51 | 3455386 democratickindeling
democratickindeling's picture

Everybody in Portugal wants to work for the Government, go for long lunches, take loads of holidays and retire on guaranteed pensions. It's only the older generation that toil in the fields, growing cabage and raising pigs... Try and start a business... my local hardware store had to install a shower above the till...mandated by some beaurocrat 'in case of a pesticide spill'...the rules change every 6 months and multiply like fleas on a dog... Socialism...gotta love it!

Tue, 04/16/2013 - 07:29 | 3455447 Non Passaran
Non Passaran's picture

"European culture" has spread across FPIGSS.
The Socialist Union.
Glad to see they're all on the same page.

Tue, 04/16/2013 - 07:34 | 3455454 JOYFUL
JOYFUL's picture

Yu are absolutely correct...

and upon reflection, what amazes me most is that this point has not been made a hundred times before...as it is equally true in all of the 'western world' countries of the moment.

The alternative to (re)learning the meaning of "work" will soon nuff be learning what it means to live within a "work camp"...where one is expendable if the ability to produce more than the cost of one's upkeep slips...and as we all know...pigs eat pretty much everything! Life is about to become 'nasty, brutal, and increasingly short...for those who remain complacent in the face of  Euromerikan ZOGista terror.

 

Tue, 04/16/2013 - 07:05 | 3455405 shovelhead
shovelhead's picture

Hey Portugal,

Hide the Maserati in the garage cuz the EU repo man is coming.

Gonna find out that easy money ain't free money.

Just like the US will eventually, you're gonna find out that bad govt. is REALLY expensive for the proles.

Tue, 04/16/2013 - 07:39 | 3455462 smacker
smacker's picture

Soares says: "In its eagerness to do the bidding of Senhora Merkel, they [the current government] have sold everything and ruined this country. In two years this government has destroyed Portugal."

He's right of course, but whooaa... Portugal has been a poorly governed country for all of my life. All we've seen since it joined the EU & EZ is a final hype from overdosing on political corruption and breathtaking incompetence. Why the EU ever allowed Portugal to join the EZ in the first place is the question which needs answering. Same applies to Greece, Spain and many others. Political dreams rool. Now it's the citizens of these countries who pay the price. The political elites of all these countries need to be made an example of.

And a similar story applies to every other member of the EZ and of the EU itself. All wrecked by political elites and unelected EU-crats craving to grab ever more power and kudos.

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