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The Ugly Truth Behind Spain's First Trade Surplus In Over 40 Years
Earlier today, Spain reported its first trade surplus since 1971, with exports of €20.3 billion finally surpassing imports of €19.7 billion and ending over four decades of constant trade deficits. Congratulations. That was the good news. The bad news is how this number came about. Because while the country will mark a GDP benefit as a result of the net trade number, the reality is that it was not due to a jump in exports, which rose by a lethargic €400MM Y/Y - hardly the stuff to write home about as can be seen on the chart below.
It is the second chart, however, that tells the true story of Spain's economy: that of imports, which in a stable or growing economy would be, well, stable or growing. Instead, Spanish imports collapsed by €3.5 billion Y/Y: the biggest such downside annual drop since the start of the depression in 2008.
Which begs the question: is the Spanish economy, after modestly growing in 2010 and 2010, set for the same spectacular collapse last seen in the days just following the start of the Great Financial Crisis? And what does this mean for the biggest risk factor for a nation whose banking sector has already been bailed out once, and where NPLs are slowly, or not so slowly, but certainly surely soaring behind the scenes?
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First
This is why the Euro is actually better then the dollar.
The question is will Spain choose Austerity as a means to fix it's problems, or will they try to aim to grow their economy before cutting spending. Every country is battling with this dilemma. One aims to strike a delicate balance between balancing the country’s finances and promoting economic growth. How to strike this balance is a question that should be left to economic experts, but sadly these are not always the people who make the decisions in government.
Very nice. <golf clap>
This is the demise of FIAT bitches, time to face reality which we didn't in 2008. You see this particular facilitator of commodity exchange is dead and it's time to evolve the defunct system which no longer serves us as a global population. We must develop a more closed loop system, taking into account enviromental ethics and social wellbeing whilst maintaining a level competitiveness or more likely to happen is complete and utter collaboration. You cannot live beyond your means at the expense of real non renewable resources forever, these things catch up with us and unfortunatley all the central banks are doing is delaying the inevitable by pumping liquidity into a zombie market via zombie banks. FORWARD>
Leave it to both - economic experts AND the government knows best ;-)
Mdb, I agree with you that this problem should be left to economic experts. I believe that economic experts are ordinary individuals. Things work better when individuals have the freedom of choice as well as the consequences of responsibility. When an individual lies about his finances to obtain credit, he can get away with it for only so long before reality strikes. Or when individuals live beyond their means it usually ends up bad and many family members get hurt. And besides, it was your so called economic experts (like greenspan, bernank, krugman, EU) that got the EU in trouble. Parties are fun but the next morning there is that inevitible hangover. What you call austerity is the hangover. If you decide to take a drink instead, you are just avoiding the problem which will ultimately end up in worse shape - guaranteed. Your alcholic-like economic experts should be in jail, not creating artificial economic growth which doesn't seem to be working very well.
Every country is battling with this dilemma...
So in the EU, each debtor country wants to be the Germany and Germany would like the others to carry their own weight? So if each had been carrying their own weight all along, Germany wouldn't be in the financial cat bird seat at this time, nor be the object of scorn by those nations whose geoclimatic assets promote a much more relaxed lifestyle. Seems to me a local currency based on localized values would benefit more to a greater degree than the one size fits all the euro promised to provide. The same holds true in the US with the fed providing NY and Chicago with the reins to direct the activities of people who could do far better on their own.
The question is WILL spain choose Austerity?
WILL?? They chose already. MDB you absolutely brilliant at playing the retarded.
El mundo sin iPhonos! Que horror!
POOM. The sound implosion makes!
Eurocrat: Trade surplus is proof that austerity and structural reforms are playing out. Country is on a good path and has made huge progress, see bond spreads. NPL no longer soar, all Spanish banks now have a stronghold balance sheet. Crisis almost over.
Comical, but all that really matters is the 'confidence' in the system.
Looks to me that if they do nothing their economy _as a whole_ is fixing itself.
The imports are just reducing to accomplish the rebalancing - beforehand Spain (like the rest of southern Europe) was living beyond its means, borrowing to cover the excess.
What they must also do is have a bank bail-in policy so that the new economic activity is not taxed out of existence to cover bailouts.
if they have a bank bail-in, you crush savers, and trip off runs on the banks.
The problem with the euro thingy is that it prevents domestic consumption from happening............
Real domestic consumption is in fact increased domestic consumption without a rise of corresponding imports.
Think of Beer consumption in Ireland pre 1980
Wine consumption in France pre 1980
What happens in euroland is a collapse of all activity as the banking system pushes resources beyond national borders into the German entrepot black hole.
Only a national currency can turnaround this.
Spain has a extensive railway system
Domestic subsidy via the production of national fiat into this system would reduce oil inflow without the need for the place to come to a complete stop.
The euro is designed to destroy and extract all domestic labour value.
Its the most evil monetary construct ever created.
Pre 1980 /86 domestic goods were cheap relative to cash flow and external goods (oil, BMWs etc) expensive.
post 1980 /86 domestic goods became expensive (as local labour & capital was destroyed) relative to external goods .....i.e. you become a Imperial market.
Post 2007 both internal and external goods became too expensive relative to cash flow.....this caused the total collapse of the economy.
As the local hinterland & people within it was destroyed over that time period you cannot return easily to the old ways.
Spains Germanic attempt to become a little entrepot without oil & gas inputs will of course fail.
The trick is to reject value added products.
Keep production basic.
Exactly. Stunning how few people understand the role 'international loans' play in the destruction of local economies. Of course the elites want it that way so they can impress strangers with their financial success. A good short read that gives actual quotes illuminating the elite's mindset are in "Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism 1890-1913" by James Livingston. http://www.amazon.com/Origins-Federal-Reserve-System-Capitalism/dp/0801496810
Until people - not just ZHer's - understand the acidic role of corporate debt on society, nothing significant will change.
Yes
The problem is once oil price falls just a little bit the system will seek to destroy capital as efficiently as possible via the production of bank credit.
Spanish car consumption up 10 +% in April (although a extra 2 days helps)
Even Greek consumption is up............
http://www.acea.be/images/uploads/files/20130517_PRPC-FINAL-1304.pdf
Therefore you must export in a ever more manic fashion so as to afford your inputs.
The Eurosystem is a gigantic hamster wheel.
"it's not an economic system at all bit one that relies on oil and oil based distillates for it's liquidity. Production via a Marxian Das Kapital model is maximized and consumption throughout the supply chain is to be taxed. Higher prices are always to be welcomed. Interest rates can never be too low nor waste, fraud and abuse too high." scary...and something not only I but it would appear the entire US equity space (which generates trillions in free cash flow) agrees with. What this "game theory" cannot abide by is exceptionally low prices for an exceptionally long time (where Europe is heading) nor worse an out right alternative kneecapping the energy complex permanently. Obviously if I were a big energy company I wouldn't be happy with US based growthof around 2%. of course if I were Detroit i'd love it....especially with a war going on "and a product development team as the only means to pay for that." sorry for being out of commission these last two weeks folks...I was...delayed.
"Domestic subsidy via the production of national fiat " ????? WTF???
Krugmanomics???
Go do your centrally planned experiments in your own country!
All countries centrally plan.
If they did not they would not be political units.
Even villages centrally plan.
You wish the banks to centrally plan the production of credit so as to buy shit - thus extracting labour value and for no other purpose.
Banks make money by avoiding labour - even if the destruction of capital is on a epic scale.
Yes, caught in the biflationary vice grip which ultimately causes more and more demand destruction and imploding standard of living. Will the Spanish accept going back to being goatherds and picturesque peasants?
Spain makes some great wine. Rioja, Ribera del Duero, Albarino, Verdejo, Priorat, Mont Sant, Monastrell from Jumilla, Txakolina, Sherry...
Tyler, throw in the Italians there as well - everyone is scaling back on consumption.
Is anyone expecting a positive Euro GDP, bar Germany? That's so last decade.
CNBS and their ilk will spin it as Spanish austerity contributing to the lack of imports.
Always the negative. It is easier to cut imports than grow exports. Bravo Spain. I am glad I don't live there, but bravo anyway.
Maybe they count each spanish citizen that leaves the country value: $100000 as an export number....
the increase in Spanish exports is in part due to the fire sale of machine tools and other used industrial equipment to African countries...i.e. making firewood out of the furniture.
But why call this good news an ugly truth?
Might be because the Spainiards are too broke to buy shit beyond basic survival items.
Simple, the average Spaniard cannot afford foreign luxury goods anymore while with internal devaluation (salary cuts) their own products became more competitive but I guess you all already know that.
Even when Spain was still an empire -a long long time ago- they had to import more than they exported but they always had gold and silver from the Americas to foot the bill of their expensive religious wars and all the castles and cathedrals that they built. Eventually that dried up and their empire collapsed. Fast forward to Spain when it became a democracy and part of the EU and Euro. Cheap money -aka nowadays gold and silver- came in in the form of Euros borrowed from Germany and others. With that money they built modern days castles and cathedrals (real estate bubble). Then that cheap money dried up and it all fell apart. Some countries don't learn from their histories.
Well There one thing which is clear in Spain.
The income and new borrowing are in now in balance.
Both are much lower but new borrowing is close to none.
The fact that the trade balance is positive indicates that.
As for labor cost adjustements all the theories are wrong. People say that the cost of labor is so high that it would take forever to lower it....
Yeah right. Guindos did some reform.
If a German manufacturing company or a US or Korea or any other company decides to go in Spain, will the unemployed Spanish people say no to a job because it pays 25% less than what they were paid back in 2007? I do not think so.
So L shape is Spain NOW. BUY PERIPHERY BANKS IN ANTICIPATION OF BANKING UNION ANNOUNCEMENT POST GERMAN ELECTION AND THEN SELL ON THE NEWS.
"Winning."
Charlie Sheen (2011)
http://www.youtube.com/watch?v=pipTwjwrQYQ
Ole Bitchez
Yet more Macro charts showing that same general shape, of a multi-year slide into a chronic depressionary malaise.
Same as the Chinese electricity consumption chart ... and many others
How bad do you think the downturn in China will be ?