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Charles Gave: "Get Out Of Banks, Get Out Of France - Get Out Of The Euro"

Tyler Durden's picture


Authored by Charles Gave of GK Research, A Gavekal Company,

Last month we laid out the reasons why France was On The Brink Of A Secondary Depression—in short, due to a deadly collision of French politics with Frankensteinian monetary union. Unfortunately, subsequent data confirms the bleak trajectory:

The INSEE Business Climate Survey has fallen below 88 (or two sigma below the mean). This indicates France is entering into a recession as nasty as 1993 and perhaps as nasty as 2008-2009. She will enter into this recession with government spending at 57% of GDP, an all-time high, and with a debt-to-GDP ratio close to 90%—and that’s not including the liabilities for civil servant pensions. If they were included, the debt to GDP ratio could double, according to some estimates (see the report on public finances by Michel Pebereau).

Even Francois Hollande is beginning to wake up to just how destructive and anti-business the French agenda is. On Monday, Hollande announced measures designed to encourage the French entrepreneurial spirit - essentially by watering down programs he himself imposed after winning the presidential election last year.

The new agenda includes cuts in capital gains taxes. The effective capital gains tax will now decline by 2 percentage points, to 32.5%. This is better than last year’s outlandish move to effectively bump up the capital gains tax to as high as 62% in some cases. But the president’s reversal is the desperate move of a cornered politician, not a sign that we will see a steady hand on the tiller of reform in coming years.

Take a look at the table above. France is a serious laggard against most of the other major European economies (except Italy) on almost all tax indicators.

  • Between 2000/2011, the overall tax to GDP ratio went down about -1.6 percentage points across the European Union: -2.6pp in Germany, -1.4pp in the UK, and -7.2pp in Sweden. In France it contracted by just -0.3pp. France is now poised to overtake Sweden as the most heavily taxed major country among the 27 nations in the European Union, with an overall rate of 44% vs 39% for the EU as a whole.
  • French implicit taxes on capital gains rose by 4.3pp in 2000-2011, an increase surpassed only by Italy and sharply at odds with the declining trend in Germany (-5pp), the UK (-9.1pp), Sweden (-16pp) and the Netherlands (-7pp), not to mention euroland as a whole (-2.7pp).
  • In absolute terms French implicit taxes on capital are a gigantic outlier at 44.4%, compared to an average of 27.2% among the 17 nations in the euro area.

In this context, Hollande’s reversal on capital taxes reminds me of the guy walking up the steps to be hanged, who slips, falls and says “could have been worse.” France remains one of the deadliest environments for entrepreneurs.

Debt trap

As France crashes into a secondary depression, tax revenues will shrink and automatic stabilizers will kick in. The French budget deficit is going to explode upwards. See the chart overleaf: the recession in 1980 saw the primary balance deteriorate by 2% of the GDP, and the 1993 recession led to a deterioration of 4%. By 2008-2009, the stakes had risen to 6%.

If we compute the average deterioration for the last three recessions, we get a 4% target, which would take the French primary deficit by the beginning of 2014 to 7% of GDP (that is more than 16% of the private sector GDP). If we instead extrapolate the trends (2, 4, 6...) we arrive at a primary balance equivalent to 11% of GDP, which is not to be ruled out since, as I have already said, France is going into a depression.

Needless to say, the government “forecast” of the budget deficit falling this year and next is totally risible, and on par with forecasts made by the Spanish or Greek governments over the last few years.

Typically, the cost of borrowing rises as a country sinks deeper into the quagmire: thus the “trap” in debt trap. It should be noted this time interest rates are very low in France, and may remain so. But even so, French debt ratios will keep exploding, since the growth rate of the nominal economy will be much lower than the average interest on public debt. See the black bars on the chart below: this will surge big time. Moreover, this will occur around a time (2015) when, the past debt issued to deal with the economic collapse of 2008-2009 will become due.

France may thus have to issue debt equivalent to a large percentage of her declining GDP (15% to 20%?) year after year and for the foreseeable future.

Knowing this, why then are French rates so low? The usual explanations (purchases by the Swiss National Bank and Mrs. Watanabe buying) have some merit, but other factors may also be at play. France has a large financial sector, with huge international positions. Some entities may be selling international holdings which demand large reserve requirements. The proceeds are then brought back in France to buy French government bonds—against which there are no reserve requirements.

The economic impact of such a trend would indeed be benign for interest rates. But ultimately, it raises the risk on the French financial balance sheet: less diversity, and more vulnerability to a problem with the local sovereign.

In any case, in a bond market, one should look at two things: the return ON capital and the return OF capital. The return ON capital is pitiful and the return OF capital is far from certain. Sell the financials in Europe - and in France especially.

Really, the euro is on its last legs. France is in play.


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Mon, 05/06/2013 - 09:06 | Link to Comment jubber
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10y France presntly at ATL 1.69%

Mon, 05/06/2013 - 09:14 | Link to Comment flacon
flacon's picture

The financialization of people's minds has caused them to forget what the true meaning is behind the "assets" they buy. Take bonds for instance:


Most people (baby boomers especially) don't realize that a Government BOND is a contract of ENSLAVEMENT for their children's generation. Government BONDAGE. 

Most people think it's just a cute play on words.... but oh how WRONG they are! There is also no TREASURE in the TREASURY - except the slave contracts known as BONDS for the souls of the working man. 

Let the chips fall where they may.


(Ask the typical man-on-the-street 'investor' what a bond is, and where that interest is coming from... chances are they don't know the correct answer - all they know is that they receive interest from 'somewhere' and as long as they are receiveing interest they don't care to know)

Mon, 05/06/2013 - 09:17 | Link to Comment BLOTTO
BLOTTO's picture

Mathematics says, "you can't escape"

Mon, 05/06/2013 - 09:25 | Link to Comment GetZeeGold
GetZeeGold's picture





I knew there was a catch.

Mon, 05/06/2013 - 09:45 | Link to Comment fightthepower
fightthepower's picture

The EU is a creation of the demonic Rothschild family.  It is a blueprint for the New World Order. 

Mon, 05/06/2013 - 09:59 | Link to Comment HardAssets
HardAssets's picture

Sounds like Charles gave up.

Mon, 05/06/2013 - 09:27 | Link to Comment Quinvarius
Quinvarius's picture

I never considered that the debt based financial system was based on the souls of present and future generations.  From a Biblical perspective, things make more sense.  I can now understand how a complete lunatic would get satisfaction from heaping endless debt onto the public if he were inclined to Satan worship.  More debt equals more souls for the overlord of the underworld! 

Mon, 05/06/2013 - 11:19 | Link to Comment Bananamerican
Bananamerican's picture

Satan worship

It's hard for "modern people" to conceptualize that it even exists.

Italy is one its oldest stomping grounds...

There is a central force, or locus, of evil that exists as certainly as a God of light/creation does....

...and please snarkers dont bother to respond with atheist cracks or the usual Bernanke jokes...

You only come off like fish scoffing at the existence of the Ocean...

Mon, 05/06/2013 - 12:03 | Link to Comment mirac
mirac's picture

Belgium is no slouch either-the home of the EU...

Mon, 05/06/2013 - 13:19 | Link to Comment Hengist
Hengist's picture

Ah but if the fish was a Buddhist the ocean would be an illusion.  Mind you so would the fish itself but religion doesn't have to make any sense.

Mon, 05/06/2013 - 13:22 | Link to Comment 1000 splendid suns
1000 splendid suns's picture the Vatican with their 'LUCIFER' telescope....

Mon, 05/06/2013 - 22:25 | Link to Comment Muppet
Muppet's picture

I always believed 'evil' was a temporary behavior and that good intent lies within all men.

In my forties, I first encountered real people who worked everyday against good.  Not just temporary behavior, these were people dedicated and working everyday to earn profits by preying on the weak and exploitable.  They often laughed and enjoyed their work.  Truly evil.  (coincidently they were in NYC)

I've since told my kids that evil is not some concept, but in fact truly exists.  There are evil people.  I explained to my kids how heartbroken I was to learn this and so late in my life.  I told them that you can hope to avoid evil, but when it confronts you, you must run away from it.  You cannot try to accomodate it or think it will pass.  I am not overly regilious but I was moved to prayer.

Mon, 05/06/2013 - 09:29 | Link to Comment Doctor of Reality
Doctor of Reality's picture

So true; and also true that MOST don't care who's paying into the PONZI, as long as they get more out than they put in. Who cares about our children and grandchildren... 

Selfish, shortsightedness... but when those in the age range of (18-38) see the PONZI for what it is, we may end up seeing "Logan's Run" and/or "Soylent Green". Sad.

Mon, 05/06/2013 - 09:37 | Link to Comment kurzdump
kurzdump's picture

Money is debt. In the past money was used to "pay" tribute to the gods. Now its used to pay tribute to TPTB. Nothing has changed since then. Well, something has changed probably - people are not smart enough nowadays to realize it.

Mon, 05/06/2013 - 11:04 | Link to Comment Peter Pan
Peter Pan's picture

People who invest in government bonds will be Cyprussed as there is no way that future gnerations can or will pay for poltician's unfunded promises.

Mon, 05/06/2013 - 09:21 | Link to Comment DeadFred
DeadFred's picture

Just go beg Draghi for help and submit to IMF austerity and all will be well. No worries.

Mon, 05/06/2013 - 10:00 | Link to Comment Fuh Querada
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The new yen carry trade

Mon, 05/06/2013 - 10:31 | Link to Comment SheepDog-One
SheepDog-One's picture


Mon, 05/06/2013 - 09:07 | Link to Comment Divine Wind
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".... reminds me of the guy walking up the steps to be hanged, who slips, falls and says “could have been worse.”

LOL. Pretty funny.

Mon, 05/06/2013 - 09:08 | Link to Comment Bearwagon
Bearwagon's picture

"The Euro is on its last legs" Bullshit! That sentence was "formulated by people who vastly underestimate what the Euro means for the Europeans, for the Euro area. They vastly underestimate the amount of political capital that has been invested in the Euro."  ;-)

Mon, 05/06/2013 - 09:16 | Link to Comment InvestmentMind
InvestmentMind's picture

No Plan B.


Mon, 05/06/2013 - 09:53 | Link to Comment Headbanger
Headbanger's picture

Plan 9 From Outer Space then?

Mon, 05/06/2013 - 09:57 | Link to Comment Bearwagon
Bearwagon's picture

+1 for Edward D. Wood Jr. reference. ("Bride of the Monster" would also have been appropriate.)

Mon, 05/06/2013 - 12:57 | Link to Comment Non Passaran
Non Passaran's picture

There's no plan A, let alone plan B!

Mon, 05/06/2013 - 09:23 | Link to Comment fightthepower
fightthepower's picture

The EU was constructed as a method of enslaving people, destroying freedom.  Its going to go down in flames and cause another European war. 

Mon, 05/06/2013 - 09:33 | Link to Comment GoldBricker
GoldBricker's picture

Or provide the US with an excuse to intervene and decide the outcome for the third time within a century. That's why there's been no war in Europe: not the EU or the euro, but the implicit US threat to knock heads.

Mon, 05/06/2013 - 09:25 | Link to Comment andrewp111
andrewp111's picture

True. The EU won't  let the Euro go down without a lot of furious kicking and screaming. But the current order is on its last legs. To save the Euro, the EU must have true political union. If the remaining vestiges of State-level sovereignty remain intact, the Euro is doomed.  Within the next few years they will have to make a binary choice - complete political union or breakup.

Mon, 05/06/2013 - 10:50 | Link to Comment Vince Clortho
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Political Union?

Does that mean that all the "citizens" of Europe will have the same slavemaster?

Mon, 05/06/2013 - 09:27 | Link to Comment Oldwood
Oldwood's picture

As long as the hope of free money is alive, so will the Euro be. They really have no other path but to dream that money comes form heaven or at least Germany. To abandon the Euro would force them to look at their own empty pockets. So far they have only been willing to take a quick peek and they didn't like what they saw. So know they stand with false pride while they reach out with an empty palm, begging for a handout, and threatening that if they don't get it they might well break a few windows if not burn the house down. Detachment from reality tells me that the Euro will go until the very end, and a grim end indeed.

Mon, 05/06/2013 - 09:28 | Link to Comment NoDebt
NoDebt's picture

There's my favorite quote!  They need to have that quote thown in their faces over and over and over again.  Arrogant bastards.


Mon, 05/06/2013 - 09:31 | Link to Comment GoldBricker
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Political capital? Invested?

So, what's the current risk-free rate of return on political capital? Can it be used as Basel 3 collateral?(actually, it probably can, if Greek bonds can)

I say this only to emphasize that this is a nonsense word, one of many which are coined, tossed out to a compliant media, which then repeats them without asking for a definition. The presence of such words indicates a slogan, not an analysis.

A lot of political capital was invested in the League of Nations, Bretton Woods, and even Solyndra. But when the financial capital dried up, those projects disappeared into thin air.

Yes, the euro is great for cross-border travel within the zone. Beyond that, it seems a lot shakier than it did just 5 years ago. It's not dead yet, but the direction of the trend is clear. What's the long-term scenario in which this all works out? Please provide links from the political capitalists.

Mon, 05/06/2013 - 09:32 | Link to Comment Bearwagon
Bearwagon's picture

I don't know if you have read this:

So I repost it just in case.

Mon, 05/06/2013 - 09:45 | Link to Comment youngman
youngman's picture

What amazes me is how the EURO is still at  a 1.30 to 1 range and not a 1 to 1 range.....way over valued I think...I was in italy when it was .88 to 1 in 2001......Italy was better off then I thought...

Mon, 05/06/2013 - 11:07 | Link to Comment desirdavenir
desirdavenir's picture

yeah me too... Except you forgot the 0, I guess you mean 1€ = 10$... If not now, at least it will happen once the Fed will have printed the way out for the US banks. Also, remember that in spite of 0 growth for 20 years, 1$ = 160Yen. So even with the currrent figures, Japan's growth in USD terms is more than 2%/annum. It's true that Eurozone is taking the same road as Japan, but at least we won't destroy our currency in the next 5 years.

Mon, 05/06/2013 - 09:52 | Link to Comment Boeing Boy
Boeing Boy's picture

Means fu*k all to me and I am european.

Mon, 05/06/2013 - 10:05 | Link to Comment Fuh Querada
Fuh Querada's picture

Presumably you mean political/financial elite force. No EUR zone country whose debts would be devalued, or derivative positions impaired, by returning to a national currency will be allowed to leave. Period!
I have never seen an analysis of precisely WHO would have to do WHAT and WHEN for a country to leave the EUR currency zone. Proabably with good reason.

Mon, 05/06/2013 - 10:08 | Link to Comment Bearwagon
Bearwagon's picture

I think you got me right. NO Plan B. Period!

Mon, 05/06/2013 - 10:32 | Link to Comment orez65
orez65's picture

What the Euro means to Europeans and what the Euro is are two different things.

I just returned from Spain and found Spaniards, in general, would like to stay with the Euro.

But they can't explain the reason that they are losing their jobs, aka the Euro.

Mon, 05/06/2013 - 10:52 | Link to Comment Vince Clortho
Vince Clortho's picture

Are Spaniards as brainwashed as Americans?

Mon, 05/06/2013 - 11:01 | Link to Comment desirdavenir
desirdavenir's picture

the reason they are loosing their jobs is the same reasons americans working in homebuilding lost their jobs: extremely bad gvt policy lead to a bubble that attracted millions of workers, and when the bubble popped these workers had not jobs anymore. 

Remember, during its high growth years, Spain alone was constructing as many home as Italy, Germany, and France combined. If you think that leaving the euro will make real estate construction boom again, please explain how !

Mon, 05/06/2013 - 09:11 | Link to Comment francis_sawyer
francis_sawyer's picture

"Reports of my death have been greatly exaggerated"

~Sincerely, THE EURO

Mon, 05/06/2013 - 09:12 | Link to Comment fonzannoon
fonzannoon's picture

Looks like someone talking his book loudly.

Mon, 05/06/2013 - 09:28 | Link to Comment gjp
gjp's picture

+1 Fonz.  I'm tired of all these financial masters of the universe shouting from the rooftops about all the problems in this country or that country.  The problem is absoultely global, and the lynchpin is the US dollar.  Shut up about the Euro already, it's a sideshow.

Mon, 05/06/2013 - 09:40 | Link to Comment TeamDepends
TeamDepends's picture

Yes, this is a global problem.  However, US and European banks are joined at the hip.  So when the Euro dies, the Yankee Dollar will last approximately two weeks before it is also relegated to the dustbin of history.

Mon, 05/06/2013 - 09:15 | Link to Comment The Abstraction...
The Abstraction of Justice's picture

Time for France to cut its budget, a good start would be to send home its third world foreigners.

Mon, 05/06/2013 - 09:34 | Link to Comment swiss chick
swiss chick's picture

and a third of the government workers...

Mon, 05/06/2013 - 10:34 | Link to Comment orez65
orez65's picture

"... a third of its government workers ...??!!

How about 90% of its government workers!

The same thing that we need in the US.

Mon, 05/06/2013 - 10:57 | Link to Comment americanspirit
americanspirit's picture

Government 'employees' perhaps, or government 'timeservers', but government 'workers'? Not a chance.

Tue, 05/07/2013 - 00:36 | Link to Comment Tapeworm
Tapeworm's picture

BBBbut they'll starve to death. Do you want that on your concience?

Mon, 05/06/2013 - 11:58 | Link to Comment Floodmaster
Floodmaster's picture

One state worker cost more than a whole Rom/Gypsy camp.

Mon, 05/06/2013 - 09:15 | Link to Comment madbraz
madbraz's picture

Their pensions buy their Btans (bonds), their banks buy their Btans - we've seen this many times over.  


Problem is that the french bond market is enormous and the yield is ridiculously low vis-a-vis the fiscal and economic prospects.  Car sales are down 15% year on year, that goes hand in hand with GDP depression.  Their 30 year yield is lower than ours! (2.82% versus 2.96%).  They can't print Euros, we can.  This is absurd mispricing - it will not last.

Mon, 05/06/2013 - 09:27 | Link to Comment andrewp111
andrewp111's picture

Everyone assumes that since France is the founder of the EU, and France+Germany largely controls the EU, that the EU will print whatever France needs.

Mon, 05/06/2013 - 09:22 | Link to Comment Fuh Querada
Fuh Querada's picture

According to J Rickards (whom I find plausible on this point), you have to distinguish between EUR denominated bonds, EUR bank accounts and the EUR currency itself. The former two can go down the toilet without affecting the viability of the EUR as a currency, which is a political project and prototype for the NWO single electronic currency and will be defended even as club med and Ireland go down the tubes.
If the EUR is destined to break up, why is Greece still in? The economy is a smoking ruin. Answer: the political class has been offered attractive inducements to stay in or "disincentives" to leave.
The author of this article is being disingenuous in my view.

Mon, 05/06/2013 - 09:49 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

Greece is a smoking ruin because its capital ration has been extracted.


The longer it can stay in the Euro system the more capital France will get to play with.


This is the smallest tram town so far at just 46,000 people. (also a legion town)


When you add up all these projects they come to quite a sum of real capital.'Aubagne

Mon, 05/06/2013 - 09:17 | Link to Comment Dr. Engali
Dr. Engali's picture

Nothing a little printing can't take care of. Oh pretty please frau Merkel....please print for us. Do it for the children.

Mon, 05/06/2013 - 09:26 | Link to Comment Bearwagon
Bearwagon's picture

Please, dear Dr., you know that she doesn't have any children of her own, do you? (And that is the reason why I'd never call her "Mutti", too: She doesn't deserve it.) But, as always, I'm more than willing to assist you:

"Verdammt nochmal, Merkel, alte Gesichtsbaracke, sieh' zu, dass sich der Draghi an die Presse schert! Und das ein bisschen plötzlich! Du hast im September 'ne Wahl zu gewinnen."


Mon, 05/06/2013 - 09:25 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

The French plan is quite simple.


Extract as much capital from the Greeks and the rest of the PIgs as possible.

(Its using this to engage in the biggest rail investment seen for 100 + years.)


When all this is done eject & devalue .


Global (inter euro -asia) trade will then flow back to France where it has cheap available elec power and the means to transport workers to factories.

Mon, 05/06/2013 - 09:52 | Link to Comment desirdavenir
desirdavenir's picture

you're too optimistic there, bro !

The french plan is: economy is cyclic, so after the rain (recession) the rainbow (recovery). It suffices to wait sufficiently long... Hollande is a very nice guy, but completely unable to come with any kind of divisive decision unless it is imposed unto him. In a way, he is very good in organizing a journey (group management, logistics, ...) but will never decide where to go.

Mon, 05/06/2013 - 10:24 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture


The value of the Franc will decide where to go................


France has probably the most usable physical overcapacity in Europe. (rail and nuclear)


Ireland has perhaps the least usable overcapacity (houses and roads)


 1980 ~ was very important.......

It was the time of Euro birth............



The last rural branch lines in France were closed that year.......

Now they are rebuilding a few  - why ?


Mon, 05/06/2013 - 10:54 | Link to Comment desirdavenir
desirdavenir's picture

this crisis is about over-manufacturing and cost of energy. In costs of Energy France has good chances, but I think it's an illusion to think we should aim to produce more. Transport is good, but dependent on the North-South european exhanges, so its future is mixed (for international traffic). But what you forgot is agriculture, which I believe will be more relevant in the future. France's capacity to massively produce wheat, milk, meat,... is underestimated, because of their current prices. However these are "calls" on the world's welfare, and the capacity of other nations to buy food provided by a limited number of usable land. 

As for your question, what happen on the ground is that:

- high cost of housing lead people to buy a home far to where they work (not a good thing)

- high cost of gasoline then make them unhappy about transportation

- local elected then strive for the reopening of public transportation because of the increase of the population in rural area and their complain about high fuel cost

Basically, it's a 50-50 situation in terms of efficiency: the source is a housing bubble in urban centers, so it shouldn't have happened in the best of the worlds, but the solution is long term, and at least it is accepted (by right and left) that gas subsidies are bad in the long term, and that energy-efficient public transportation should be as ubiquituous as possible (given the cost constraints).

Mon, 05/06/2013 - 11:12 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

Sure I agree - food is key.

Both Ireland and France are food surplus areas and if the agri business increases the now dead French market towns (post 1980 / post euro ?) may come back to life.

But there is a crisis of intermediate consumption in Irish farming , with trucking becoming too expensive for irish farms cash flow ( the banks will not give them credit for feed , fertilizer etc etc)

The French have been busy relaying lines flowing into La Rochelle etc etc.....


They are most likely planning for the end of trucking for cattle , grain etc etc.

Mon, 05/06/2013 - 11:40 | Link to Comment desirdavenir
desirdavenir's picture

planning is a big word, given the guys making it, but it happens to go in the right direction for the future, I agree... 

Re. Ireland, I just went one week to Cork University, so I have completely no insight on what happens there.  From here, it just seems that Ireland, Portugal and Spain should consider wind (+solar, for SP+Por) power generation, with a conversion to liquid hydrogen, but that's for after 2020 at best. The thing is that Europea-wide, there is a mis-allocation of alternative energy power generation which is located in rich countries (that have enough powder to develop it) when it would be more efficient in the south and atlantic-facing countries

Mon, 05/06/2013 - 13:41 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

Wind is a joke on this windy requires gas turbine back up but we now cannot afford the gas........


Ireland has always used Peat in times of stress but EU carbon and monetary policy has destroyed it.

Carbon taxes favour France.


Its a crisis of primary & basic secondary production.

The European entreport "value added economy " is sinking.

The Italians were sunk after they gave up Nuclear in 1986~

Ps check out Irish energy balance figures for 2012.
They are quite shocking.

In particular Irish Indigenous production.
Y1995 :4,105ktoe Peak (because of Kinsale gas peak and good peat production during that hot summer)

But the recent figures point to a crisis of the Irish peat industry because of both European carbon policy , the wet summer last year and a general long term attack on domestic labour value since 1980~

Total indigenous production

Y2011 :1,801
Y2012 :1,413

In particular look at peat production
Y1995 :1,697 
Y2011 : 760
Y2012 : 316

Mon, 05/06/2013 - 09:20 | Link to Comment Quinvarius
Quinvarius's picture

Nothing better than cheap gold when you need it most.

Mon, 05/06/2013 - 09:22 | Link to Comment Element
Element's picture

At least its not an emergency, they're still printing, all's good.

Mon, 05/06/2013 - 09:27 | Link to Comment Inthemix96
Inthemix96's picture

At this point,

Its all bullshit.

Carry on.

Mon, 05/06/2013 - 09:29 | Link to Comment caimen garou
caimen garou's picture

I'm sure ben would be glad to help in any way he can, ben's printing press rental! call for a quote today while supplies last!

Mon, 05/06/2013 - 09:37 | Link to Comment TahoeBilly2012
TahoeBilly2012's picture

You don't have to go to France to experience the insanity. Right here in Sacramento the State Gov is desperately trying to grab loot from bank accounts for "owed taxes"....and with the other hand they are trying to help these very same broke people. It's insane! I know many people experiencing both the give and take that exists in more and more voilent way. Geez how about just backing off or "you can help by NOT helping!".

Mon, 05/06/2013 - 09:37 | Link to Comment yogibear
yogibear's picture

"Get Out Of The Euro"

The rest of the market will be the last to realize it.

Like Goldman did before gold crashed. The dumped it and then annouced it. 

Don't do what Goldman says, look at what they do.



Mon, 05/06/2013 - 09:46 | Link to Comment desirdavenir
desirdavenir's picture

Add to this the complete denial of french MP about the current state of the economy. Basically they (the majority member ones) think that some gouvernment-sponsored here and there will be enough to mitigate this disaster, and that they must in no way alarm the layman people, because the rosy scenario they hang on rests on confidence and the belief that with enough confidence the economy will be fixed. Basically, let's cover our eyes and mislead people, and maybe it will turn out to something good. Hardly the kind of leadership you would expect to sort out this mess.


Mon, 05/06/2013 - 09:49 | Link to Comment smacker
smacker's picture

"...with [France's] government spending at 57% of GDP..."

It's rough and ready, but if one believes on a size of government scale of 0% (anarchy) to 100% (totalitarian) that ~"25% government" should be the upper limit to avoid the private sector being stifled by State meddling, excessive interference and too many regulations, this implies that France has more than twice as much government compared to what is healthy to create a vibrant and prosperous nation. And of course State spending matches the excessive size.

But it has always been like this in France. Where they have hi-ranking educational establishments dedicated to producing State apparatchiks, trained to run the socialist/corporatist State.

As France slowly sinks into a sunset of wine lakes, it may learn to reflect on where it went wrong. The UK and most other EU member states should take heed.

Mon, 05/06/2013 - 10:23 | Link to Comment desirdavenir
desirdavenir's picture

A stat I like is the amount of healthcare contributions returned to pay for healthcare. Some sort of measure of the efficiency of the health spending (you give 100$ for health insurance, how much will you get in return in terms of health benefits ?). Private insurance plans have an efficiency of around 75%, mutual insurance (bottom-line redistributed to customers) has efficiency around 85%, and mandatory state-sponsored social scurity has an efficiency of around 95%. If we see the overhead as a measure of the bureaucraty of a system, this implies that mandatory social security is actually less bureaucratic than private insurance plans. Actually, this makes a lot of sense, as you don't have to pay for ads, for the geniuses running the company, for the lawyers,... 

Having a lot of government is not  bad as long as it permits to be more efficient, as in the case for social security (actually, France could do better, see e.g. sweden and germany, but certainly not the USA). Given that these 57% percent include:

- ~11% of social security (~15% in the USA)

- ~4% of child policy (in particular incentives for having kids, school starting at age 2 or 3, state-subsidized nursery for younger child)

- ~1% of GDP for free universities (including medical and law studies, btw)

remove these 16% of public spending GDP, and you'll have a much more inefficient economy, though maybe more satisfying to you. Alternatively, you can think that it's better to pay high bonuses to corporate mogul, to educate women so they can stay at home, or to unsanely high university professors (and administrators). Of course some parts can be made more efficient (retirement, health care, overhead costs in education which are way too high), but again, equating public spending with bad is simply a dogma, and as every dogma is wrong.

Mon, 05/06/2013 - 11:57 | Link to Comment falak pema
falak pema's picture

WHile your arguments are valid in some areas please note the BASIC lie in the french construct today it is NOT government control of sectors. It is the unnatural monopoly agreement between government sector and private sector of monopoly partnerships, where all transparency of public accounting is NONEXISTANT and where this crony capitalism pays for the political parties via backhanders and "I'll scratch your back if you scratch my back" logic, nostalgic legacy of Colbertism and Bonapartism combined.

Of which Francafrique is the most scandalous and criminal enterprise since 40 more years. The Oil gravy pump that Eva Joly partially and unsuccessfully exposed that now spills over to Mr Gueant's plate. Both Socialists and Gaulists ate at this table, and its symptomatic of the most incendiary geopolitical plays in Africa by France, along with the UK and USA, all for BIG BUSINESS interests. 

The Rwanda tragedy is a pure example of 1 million people dying in a remake of Fachoda a hundred years after that incident, with Tutsi and Hutus aligned on opposite sides this time round. Radio Mille Collines calling chimes. And our government subsequently just walked away from that...Mali and Libya being the next staging posts of that geopolitical play in Africa; whatever the "terrorist" cover, it is basically big business interests to feed the deprivation of those of african people. Thank you Foccart for having created the Francafrique crony brigade; Bongo n Congo et al. If you ever visited Gabon/Congo in the 1970s and again today, if you ever compared how much of that local oil pumped out was used locally under french would know the size of that lie.

I repeat this system is : monopolisic, corrupt and totally opaque, where PUBLIC accounting is a FARCE, we NEVER know the actual costs of the system. WORSE, when entrepreneurs come face to face with these monopoly systems in front of law courts, THEIR CASES ARE THROWN OUT, as state policy and the government procurer's office (under executive control contrary to European law) make sure the judicial tables are not level playing fields. That is a terrible testimony of the ENA concoction's contribtion to "raison d'état" in France of today.

Let me just give you a few examples :

1° Energy and Electricity; where EDF reign supreme like a government protected monopoly and the disgraceful way entrepreneurs were ripped off after having invested in alternative energies. Also Areva in Mali today, as before Total/ELf in Gabon/Ivory coast/Congo benefitted from the economic rape of Africa under Foccart's Francafrique. I know that first hand.

You don't have to be very intelligent and informed to understand that the KWH cost in France is a LIE, since 1979, when TMI crisis in USA proved that decommissioning and nuclear waste treatment should be included in that OVERALL cost. This has NEVER happened in France; Our statist ruler friends LIED on KWH costs for 40 years!  Our cost structure of nuclear KWH will sky rocket in catchup ball play now, even though the government has given 20 years xtra time for the 55 old reactors. Their decom costs and the decom costs of the NEW replacements will now have to be factured in in double whammy style! 

2° The Vinci type monopoly on the autoroute systems. Totally opaque accounting and monopoly gravy with all sorts of kickbacks. As for the water treatement and municipal housing NATIONAL sectors which are all dominated by the old Gen Eaux/Lyon Eaux/Bouygues oligarchies in one form or the other. 

3° The Ecoemballage municipal waste treatment and other similar schemes partnered with the biggest companies of each sector is a huge opaque cost structure racket. Rip off of money at the municipal level to the benefit of these big companies. Why the government makes these monopoly "poachers" (Coca Cola, Danone, Nestle) the annointed waste "gamekeepers" is the biggest insult to fair market systems, all under ministry of Environment benediction. Try taking these guys to court for dominant position! Just like for EDF... 

4° Government hospitals and medicine; all dominated by big company, pharma and construction lobbies. 

Sorry the french government is one huge Mussolinian type combine of crony french big companies and ENA bureaucrats running these combines. Totally incestuous at the top : Lauvergnon, Proglio and friends. 

5° French Banks.....LOL, now we come to the heart of the french "fuck up" when you talk of Paribas and Soc Gen and Axa; all at the crony heart of this awesome meltdown of Euro finance in the making. Imagine Life insurance if the interest rates do a knee jerk. Life Insurance is where a lot of savings are placed...WOW, what a time bomb.

Its time the french government got more democratic, transparent and the ENA oligarchy was less often involved in these "french genius" five legged schemes like France telecoms, Areva, EDf, Eco emballages, Autoroutes de France ....the list is just tooooooo long. Economic inefficiency incorporated.

Mon, 05/06/2013 - 12:25 | Link to Comment smacker
smacker's picture

Reducing the size and cost of French government does not automatically mean making society less efficient. Far from it. Plenty of evidence available to show that once government butts out of something, most things actually run far better, especially if state monopolies are not simply replaced by private sector monopolies. And the reverse is also true, that when government butts in, things invariably take a turn for the worse (eg: UK government funded and controlled new NHS computer system which cost ~£20 billion to develop but was then consigned to the bit bucket after the lead contractor pulled out due to ongoing govt meddling and the medical profession refused to use it).

Do you think we would have an economic crises at all if it were not for government and its obsession with manipluating all things financial and economic?

Government should limit itself to acting as the 'enabler' or 'facilitator', not the 'provider'. And every regulation should pass some sort of 'necessity test'.

In France and elsewhere (certainly in the UK), a lot of the excessive government is not to make things happen or to happen more efficiently, it is simply to provide the state with mechanisms to manipulate and control what goes on or to regulate activities to ensure things happen in the way 'it' wants.

In the UK 1997, so-called "regulatory compliance" cost the private sector about £11.5 billion per year. After 13 years of the Blair/Brown govt that had risen to about £84 billion per year. What they omit to admit is that every £1 spent on regulatory compliance is added to the cost of the goods/services we all pay for.

I remain of the view that most Western countries have far too much government and it's way past time for a massive reduction of it and the associated costs which are unaffordable.

Mon, 05/06/2013 - 09:52 | Link to Comment Craxi
Craxi's picture

Can anyone paint a scenario in which Italy and Greece exit the Euro? I am not trying to be cute here. These countries can feed their populations. What is a plausible exit supposing assasination of political class.

Mon, 05/06/2013 - 09:57 | Link to Comment BigJim
BigJim's picture

But they make such excellent pastries!

Mon, 05/06/2013 - 10:59 | Link to Comment americanspirit
americanspirit's picture

And cheese! Any country that can make cheese that grows hair is a winner in my book.

Mon, 05/06/2013 - 11:36 | Link to Comment Floodmaster
Floodmaster's picture

I am desperately searching for one good loaf of bread in the US.

Mon, 05/06/2013 - 10:06 | Link to Comment forwardho
forwardho's picture

The effective capital gains tax will now decline by 2 percentage points, to 32.5%. This is better than last year’s outlandish move to effectively bump up the capital gains tax to as high as 62% in some cases.

Thats some kind of math there.

how does 32.5% + 2%=  62%?

Did it drop from 62% to 32.5%, or is this cherry picking with the qualifier of "some cases"

Sentiment of post understood, but twisting %'s for shock value should be left to BLS


Mon, 05/06/2013 - 10:16 | Link to Comment sschu
sschu's picture

Much like the US electing a “community organizer” in 2008 and again in 2012, could the French have made any worse decision than Hollande? 

Why does it seem like the electorate makes terrible decisions at the most important times? 

BTW, for those who still believe that some “politicians” are for the “little people”, take a look at the article about ALGORE on the above page. 

Government is the issue, the Fed (and CBs) are just opportunistic enablers of this evil. 


Mon, 05/06/2013 - 10:39 | Link to Comment orez65
orez65's picture

It snowed in Denver last week.

Al Gore was correct: global warming causes global cooling.


Mon, 05/06/2013 - 11:30 | Link to Comment sschu
sschu's picture

This is all so predictable, they were talking about this 3,000 years ago.

From 1 Samuel 8

10 Samuel told all the words of the Lord to the people who were asking him for a king. 11 He said, “This is what the king who will reign over you will claim as his rights: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. 12 Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. 13 He will take your daughters to be perfumers and cooks and bakers. 14 He will take the best of your fields and vineyards and olive groves and give them to his attendants. 15 He will take a tenth of your grain and of your vintage and give it to his officials and attendants. 16 Your male and female servants and the best of your cattle[c] and donkeys he will take for his own use. 17 He will take a tenth of your flocks, and you yourselves will become his slaves. 18 When that day comes, you will cry out for relief from the king you have chosen, but the Lord will not answer you in that day.”



Mon, 05/06/2013 - 15:24 | Link to Comment are we there yet
are we there yet's picture

Global warming causes long term solar cycles. Or is it, a need for new ways to screw the public causes global 'fill in the blank'.

Mon, 05/06/2013 - 10:34 | Link to Comment MFLTucson
MFLTucson's picture

Even Francois Hollande is beginning to wake up to just how destructive and anti-business the French agenda is


But not Obama

Mon, 05/06/2013 - 12:30 | Link to Comment JoeSoMD
JoeSoMD's picture

I couldn't find a reference / citation to the author's claim that Hollande is beginnig to wake up.  Anybody know where that comes from?

Mon, 05/06/2013 - 11:15 | Link to Comment desirdavenir
desirdavenir's picture

a- it's true that the average french guy is a sparing freak

b- but it's also true that a lot of capital has been allocated to housing which is still in a severe bubble instead of investment. I believe the figures are 700 billions are invested in companies, while 7 trillions are invested in housing. 

So prepare for a lot of variations in these graphs once the bubble will pop. 

Mon, 05/06/2013 - 11:31 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

It was just a question of creating artifical scarcity post 1970 /80 in France.

(the French drank far more wine once upon of time)


These corporate entities used this domestic surplus from the core to expand their (export) operations - turning conduit euro countries into Imperial markets until the recent oil price rises...........

Mon, 05/06/2013 - 11:22 | Link to Comment soopy
soopy's picture

What did Charles give?

Mon, 05/06/2013 - 11:49 | Link to Comment hungarianboy
hungarianboy's picture

Still the euro trades above 1.3000 so don't sell the euro.


Mon, 05/06/2013 - 13:43 | Link to Comment W T F II
W T F II's picture

Sacre Bleu....!! Who Knew...?? I am in Le Shock..!! Or, as we say in Brooklyn.."Friggin' MATH"...??!!

Mon, 05/06/2013 - 14:30 | Link to Comment bobbydelgreco
bobbydelgreco's picture

ok zhers here i go read at your peril if this guy is rite ( i think he is) 1 day but not very soon the euro turns to merde ( its french) then what happens to the dollar (hint the opposite of down) what happens to commodities including pm's (hint not what u guys think) soros (i know u don't like jews but listen anyway) is warning about this i think ben gets out but fatso takes the blame

Tue, 05/07/2013 - 06:07 | Link to Comment bichat
bichat's picture

I can't really take this Charles Gave seriously since he said that France was a communist country...

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