Euro Saves Germany, Slaughters the PIGS, & Feeds the BLICS

Tyler Durden's picture

Authored by Chris Hamilton via Econimica,

The change in nations Core populations (25-54yr/olds) have driven economic activity for the later half of the 20th century, first upward and now downward.  The Core is the working population, the family forming population, the child bearing population, the first home buying, and the credit happy primary consumer.  Even a small increase (or contraction) in their quantity drives economic activity magnitudes beyond what the numbers would indicate.

To highlight the linkage of Core populations to economic activity, the chart below shows the European 25-54yr/old population vs. the best indicator of economic activity, total energy consumption (data available starting from 1980).  The implications are pretty straightforward.  European economic activity (& resultant energy consumption) will contract for decades, at a minimum, with the declining Core population.  The pie is shrinking and now it's simply a fight for who gets bigger slices.


Given this, consider Germany was well aware of it's post WWII collapsing birth rate and the impact of this on economic growth as this shrinking population of young made it's way into the Core.  Consider Germany's Core population peaked in 1995 and it's domestic consumer base has been shrinking since, now down over 3.3 million potential consumers (about a 9% Core decline...remember a depression is a 10% decline in economic activity, which a 9% and growing decline in German consumers would have almost surely induced).


The chart below shows Germany's Core population from 1950-->2040...but understand this is no guestimate through 2040.  This is simply taking the existing 0-24yr/old population (plus anticipated immigration) and sliding them into the Core through 2040.  Germany's Core population is set to fall by over 30% or 10+ million by 2040 (far more than the 7 million Germans of all ages who died in WWII).


But Germany had a plan.  With the advent of the EU and Euro just as Germany's Core began shrinking, Germany was able to avoid the pitfalls of a shrinking domestic consumer base, circumvent the strong German currency, and effectively quadruple it's effective export market across Europe.  German exports, as a % of GDP, have essentially doubled since the advent of the Euro (22% in '95 to almost 50% in '16).  The chart below highlights Germany's shrinking Core vs. rising GDP (primarily via exports) since 1995.


And this had the desired effect of turning what was a rising German debt to GDP ratio during re-integration of E. Germany into a falling ratio (chart below).


So the German motivation for the EU and Euro are fairly plain as are the resultant economic transfusion from South to North.  But for Germany to be a winner, there had to be a loser in this shrinking pie game.  Hello PIGS (Portugal, Italy, Greece, Spain), you lost.  As the old poker adage goes, when you don't know who the sucker at the table's you.  Particularly when you "win big" at first and it all seems so easy...but then it all turns.


The chart below shows the PIGS Core population peaking about 15 years later than in Germany but likewise clearly rolling over.  By 2040, the PIGS Core population will be back at it's 1960 levels...down from the 2010 peak by 17 million or about a 30% decline.

But if we look at the PIGS combined GDP and Core population...we see a very different picture than in Germany.  The chart below shows the PIGS GDP turned down ahead of the Core population peak.  The rise in GDP in these nations was a credit bubble premised on cheap EU wide interest rates more appropriate for Germany.  Exports as a % of GDP (which were higher than Germany's in '95) have risen less than half of Germany's increase (rising as a % primarily due to declining PIGS GDP).  Low German wage increases and high quality German goods helped displace PIGS domestic manufacturing base.


To extend the game a bit longer (and multiply the harm), un-repayable government debt has been substituted to keep the PIGS consuming since 2007 (chart below).


How it played out...

The chart below shows the impact of the implementation of the EU and Euro on the different parties.  Clearly the PIGS were fattened up on cheap credit.  These nations became used to unsustainably fast growth and the good life, buying really nice German exports and undermining their own national brands.


But then the phony PIGS growth turned to real and deep contraction (chart below).  However, the slowdown was quick and shallow for Germany and the BLICS.  French GDP likewise turned upward after a shallow contraction but did so on a large increase in debt and continuing high levels of unemployment.  Quite the opposite of the trends in Germany.


The raw trade data confirms Germany's gain against an ageing domestic population came at the expense of the PIGS.



And just to square the circle, I need to talk a little about the BLICS (Belgium, Luxembourg, Ireland, Cayman Island, and Switzerland...yes, I understand Cayman Island is not in Europe, but bear with me as it is a British Overseas Territory).  These nations with a total population of about 24 million have been disproportionate beneficiaries of the new EU system.  These financier nations have been the biggest winners of all with huge amounts of money flowing through them (BLICS GDP below).


But why would small to tiny financier nations be the greatest beneficiary of the new EU?  Untold quantities of nearly free ECB money & distortions does wonders for those who can get their hands on it.  In this respect, a peek at these nations US Treasury holdings is quite telling.  These tiny nations are now five of the top 13 foreign holders of US Treasury's (Ireland is #3, and Cayman Island #5, Switzerland #6, Luxembourg #7, and Belgium has slipped to #13).  That these are America's creditors is laughable really!

I'm just guessing but the timing and size of BLICS Treasury purchases sure looks like it was front running in conjunction with the ECB's 2011 LTRO and subsequent 2014 TLTRO?!?  The chart below shows the BLICS Treasury holdings back to 2001.  "Financialization" writ large for nations that don't produce much of anything.


In fact, since the July 2011 debt ceiling debate (debacle?!?) when Congress determined the US would never live within it's means, it has been the BLICS that have done the heavy lifting to maintain the foreign Treasury bid while China (and cumulative BRICS) have been selling despite record dollar surplus' (chart below).  As an aside, from '00 through July '11, China recycled about 50% of it's dollar trade surplus into Treasury's...from July 'll China only continues to sell Treasury's despite record trade surplus...but luckily the BLICS stepped up just as China and the BRICS bowed out.


The chart below highlights that the BLICS are now, as of January 2017, the largest holder of US Treasury debt overtaking the declining holdings of both Japan and China.



As Europe's Core population collapses (and economic activity with it), the Euro and ECB seem to be serving a select few at the expense of the majority.  The imbalances and distortions will only grow as the attempts to mask who the Euro and ECB truly serve continue.  What little vitality exists is being transfused to prop up the few.  Hope this has been thought provoking and make of this what you will.

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marcel tjoeng's picture


The EU is based on the NAZI plan for economic Europe.

So, what is not surprising .. ?



TAALR Swift's picture

Is she also a Tasting Connoisseur? 

I.e. does she spit or swallow?

bob_bichen's picture
bob_bichen (not verified) Comtrend Apr 5, 2017 11:23 PM

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hardmedicine's picture

WOW BOB.........

i do certainly hope i never piss you off@

how are you at finding a 3rd grade lost friend?



space shitle's picture
space shitle (not verified) bob_bichen Apr 6, 2017 6:50 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

MuffDiver69's picture

Face and boobs are nothing special..Nice cooter..

just the tip's picture

i understand she has "body by fisher" stamped on her bottom.

bet this makes him popular in the club house.

GUS100CORRINA's picture


When birth rate of a culture is below 2.0, any culture is finished.

1.21 jigawatts's picture

Houston, we have a (((problem)))

Grandad Grumps's picture

Seems like a conspiracy to me.

quax's picture

lol - little vitality.

Unlike the US Europe has not deindustrialised. 

After the next round of major elections, the Euro zone will move towards implementing transfer mechanisms. Even Trump understands that now.

I must admit, he is a faster learner than I would have thought possible. 

OverTheHedge's picture

I think you mean Germany has not been de-industrialized. The rest of Europe - furniture sales and shoe-shops.

August's picture

Don't forget the quality pastries and hand-bags.

Sandmann's picture

Germany looks pretty de-industrialised around Frankfurt and in Sachsen-Anhalt and most of former GDR.

Teja's picture

You know that there are two Frankfurts, one in the center and one at the eastern border? Guess you meant the latter.... the former is industrialized as can be, and soon to be exploding with all the City of London banks building up huge offices there.

And for the former GDR being de-industrialized, not really. Young people moving away, that is the major problem. Once visited a smaller town there where I saw only a handful young people on the streets on a busy day, amongst crowds of pensioners.

quax's picture

Just of the top of my head:

  • Fiat - Italy
  • Airbus, Peugot, Renault etc. - France
  • Volvo Sweden
  • Philips Netherlands

I could go on and on ... 

Diatom's picture

Volvo now is Chinese owned...


quax's picture

And that turned out quite well for Volvo. They invested much more into their Swedish facilities and R&D than Ford ever did.

BTW Chrysler is owned by Fiat. 

SoDamnMad's picture

All furniture and shoes from China which suck.  Italian shoes still the best.

TAALR Swift's picture

Petty criminals and mobsters have Front Men.

Oligarchs have Central Banks and Front Countries. 

ebworthen's picture

Germany importing Muslims instead of having kids and attending a Christian church = suicide.

SoDamnMad's picture

Give what Germany gives to the muzzies to the Germany young families instead and you might have a much higher growth rate which will be Christian, educated, assimilated. Instead you give it to ... I best not say because Germany will have be banned, fined and arrested.

Germany is truly fuked.

just the tip's picture

That these are America's creditors is laughable really!

i don't understand the author's statement.  he's obviously poking fun at me.

surely he realizes the banking systems established in these countries was done by the TPTB.  for a reason.  and if the US decides to default, they will know in advance, as well as the US not having to worry about going to war with any/all of them, in the event of said default.  russia is way down the list with only $86billion US treasury.

i've never understood why the country of liechtenstein is not on this list of small creditor nations.  the country, afterall, is a bank.

and according to this list:

#4 on this list is quite the surprise.  no wonder the US is fucking with the brazilian gov't/country the way they are.  makes me wonder why venezuela is not on the list?

Sudden Debt's picture

Europe won't last forever. That's all I need to know.


And energy consumption is like the most idiotic graph in the world right now.


1. Energy costs are rising fast.

2. A solar installation costs 11.000 euro's and pays itself back in 3 years.


Everybody is installing these and about half already has an installation. Electrical companies will have a fucking hard time to survive in the next decade.

For now, they're still acting difficult if you want to add batteries to you installation but that won't stay so forever.


Teja's picture

Chris Hamilton's analysis has a point. I would not say that Germany PLANNED to profit on the back of the PIGS and other EU countries (the Euro more planned by France and others to be a vehicle bounding Germany's industrial power), but the German government surely did not reject the favourable results, and surely did not too much to help the PIGS get out of the trap. Thanks, Schaeuble!

I have always seen the European population development as a most critical point. Chris points out that it is important to look at the active part of the population and not at the total one to see the trend clearly. The issue is that NOBODY really thinks about WHY the population is shrinking.

The obvious answer to that would be the pill, together with rising education levels. People get children because they want to and not because something went wrong. But that is only half of the explanation. The semen count numbers going down, noone talking about that. People going into much effort to get pregnant, but it does not work out. So not that easy. My theses:

  1. Young people concentrating on consumption and lifestyle - this is a direct consequence of the neoliberal economics principle of consume or die... pushed into the brains by ubiquitous advertising. Buying a car or stylish clothing is most important. Kids come later... or never
  2. Higher stress levels by modern living in cities. Highest birth rate in Germany in a rural backwater region at the western border. Kids cant play outside in cities any more, too much traffic. Car ownership has an excellent negative correlation with birth rate, worldwide!
  3. Pollution by air, by processed food, by plastic goods, by...  direct influence of hormone-like chemical components on fish fertility is well known. Why not on people?
  4. Financial insecurity for large parts of the population, especially in the poorer regions of Europe. No money, no family. Eastern German birth rate went down steeply after the reunification.

So the neoliberal consumption economy is basically killing itself now. It is inherently instable, not like the radical Austrian economists thought. A bit like cancer, killing its own host body. The coup de grace will be the breakdown of the WW debt pyramid. Those with recipes to stop this process are ridiculed as "back to horses" Greens, or ignored, like the Amish (fastest growing population group in the US, afaik...).

Socialism is not the question here - socialists tend to be in favour of MORE consumption, only with better distribution towards the poor and to minorities. Therefore they tend to go along with modified neoliberalism like Blair and Schroeder. We need to change our VALUES, that is the core. And we need a vision where we as civilisation want to go, not the neoliberal eternal present filled with advertising noise and haunted by ghosts of a lost future.

The alternative is that this vision will be brought to us from outside, by Allah. Were you ever wondering why there are so many convertites in western societies?

Internet-is-Beast's picture

Europe has succumed to a flesh-eating bacterial infestation. The only solution is amputation.

hardmedicine's picture














back to basics's picture

The solution to the problem is simple and one that sooner or later the PICS will have to adopt. Dump the common curency and the myth that globalization is good. Protect and develop local production and force the merchandilist nations  (Germany and China) to rebalnce their relationship with the rest of the world.  And finally, default on the mountain of debt cheap credit offered by the money changers with their money conjured out of thin air created. Then people can start having babies again. 

Teja's picture

Basically, true. But how will you get rid of the CONSUME BUY CHEAP CHEAP MERCEDES IPHONE propaganda stuck in the heads of the voters? They will kill you either literally or at the ballot box.

Maybe it will come automatically with the debt pyramid breakdown. Not sure, though.

Fireman's picture

Jim Willie explained all this years ago.  Everything about the USSA and its IOU Saudi Mercan petroscrip "reserve currency" toilet paper dollah is as fake as Bilge Pump Don and his swamp deal.

We are in the collap$€!

whatisthat's picture

I would observe the corrupt establishment should be the primary concern not core population.

Teja's picture

That is an error. The core population will vote in a replacement corrupt establishment as soon as the old one ends up in prison or out in the political desert, to avoid their "lifestyle" and toys being taken away from them.

Lots of examples for this, especially in Latin America, but also in Europe. The US just did exactly that, by the way, if you had any illusions about Trump.

Faeriedust's picture

The possessive of "it" is "its".  No apostrophe.  Goddammit, can't even the PROFESSIONALS learn to write properly?

Last of the Middle Class's picture

You actually need a chart showing the effect of the EU on different parties? Perhaps you need another showing where feces comes from.

ipso_facto's picture

How many of the 2040 'Germans' will be white and Christian?

Teja's picture

2040 not that far away... white - whatever that is, most of them. Christian, less so, church members maybe, but true believers not that many.

Growth of Islam from currently 5.7% at maximum to 50% in the next 23 years or longer is total bullshit.
But of course it serves a political agenda to spread fear of it, and the aging population of Germany seems to be falling for this.

mog's picture

Abortion has worked exactly as planned.
White genocide.
The liberal left must be delighted.

gcjohns1971's picture

Economists have proven their 1-year estimates are consistently wrong.

Why should I believe their 30-year estimates through 2040?

ds's picture

PIGS had it from their own past Politicians. This is nothing new for outside of the PIGS, the same Predators are working on their piglets. it is a sad to watch the unfolding this tragedy while the PIGS (People) are still not in revolts. Are they so deluded not to see that the predatory instinct is not tempered by race, culture or religion ? 

any_mouse's picture

I was just thinking about "PIIGS", and trying to remember which nation the second 'I' represented.

Was it Ireland?

Now Ireland has moved from "PIIGS" to "BLICS".

Are the Greeks reduced to eating their elderly? No more riots? Everything is okay?

Whatever happened to the PIGS? We don't read much about them at all.

They were useful to the news cycle at one point.

Manipulism's picture

Erstens kommt es anders und Zweitens als man denkt.

yngso's picture

Finally an article by an Anglo who isn't simply wishing that the rest of the world loses and the US and UK win. It's become very clear that weaker countries can't simply hide within a large group. Reality sows up, and in this case sooner rather than later.

What's good about this article is the nuance. No sensational talk about collapse, but about inevitable changes.