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Europe's 'Off-The-Grid' Economy And Why PIGS Might Fly (The Euro)
Via 36 South Capital Advisors,
Who said pigs can’t fly?
We understand that when building a house in Spain a substantial part of the cost now involves paying people “off-grid” or “under the table”. This seems endemic and we imagine is partially historic but IF it is increasing in extent as a result of the financial crisis it is an important trend. Extrapolating this trend out to the whole population, one suddenly realizes that the private sector could be slowly going “off-grid”, further starving governments of revenue and thus the means of the economy’s and therefore the government’s recovery.
As more and more private transactions go “off-grid”, which will inevitably happen as taxes go up or the cost of living goes up, less revenue will flow to the governments in question, which will force them in turn to borrow to make up the shortfall or make more bureaucrats redundant. The latter will further stress the economies in question which will make private investors even keener on moving their business “off-grid”.
As the question of leaving the Euro pops up again in the country in question, all reasonable investors will start moving their money off-shore which will hollow out that country’s financial institutions. This money can only be replaced by ECB funding of which there is some logical limit. Banks in turn will reinvest the money in said government bonds because it offers: a) a high rate of interest; b) matching the duration of the three year loan with three year investment.
It WON’T lend to the real sector whose interest rates are artificially low and the sector looks comparatively risky.
Thus credit creation, GDP growth etc. will dwindle...
The downward spiral will continue until eventually social unrest will rise to the point where there will be a “European spring”. One country will ditch the Euro and/or their cumulative debt holdings and/or move back to their own currency. The pain of action will be less than the pain of in-action.
If the country in question defaults on their debt but stays in the Euro this raises an interesting question about how they can run their respective governments?
Well, firstly they now have no debt so they no longer have to make interest payments which had become a large part of the government budget! They can issue unsecured bonds at “junk” rates and still pay much less in total interest payments than before.
The ECB could step in to prevent a default and convert all current debt into Eurobonds with the understanding that no further Eurobonds will be created if the country in question has a debt to GDP ratio that is unsustainable e.g. 60% plus. In this way, European banks will be saved from massive haircuts on what they already own and respective governments who fail the debt-to-GDP test could issue more debt at “junk” rates as per the first option.
Lastly, the respective countries could ditch the Euro altogether.
Counter-intuitively, money will start to flow back into the country via the new devalued currency as money gets repatriated and investors sense opportunity. Other PIGS will look on and realize that maybe this path has less peril than first thought. There is an irrational bias towards herding behavior and others will follow as soon as they see that it offers a faint glimpse of hope.
Others will follow and the ECB and Brussels will be powerless to stop it.
So here we sit watching a couple of PIGS not trying consciously to fly but flapping their baby wings anyway. We watch on, content in the knowledge that PIGS can’t fly…
Until, that is, the first one takes flight.
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Pigs can and do fly (during hurricanes/cyclones & tornadoes).
http://www.baronbob.com/pig-catapult.htm
Article says stupidly that economy can't recover if governments aren't getting revenue due to "off the grid". That's ignorant. They're not the ones who make the economy go, we are, they only redistribute badly what they steal from us.
Where I live, people have been doing mostly off-grid economy for...well since long before I got here in '80 or so. Back to before the revolutionary war. It's nice.
Off grid might stress goverments, and great big monopolies, though. Lets remember that they only want to be the whole economy - but they are not the best ones to have in that position re any benefits to us.
True, and in the interest of having an on topic discussion thread near the top of the comments...
It occurred to me that the first thing governments will do is attempt to impose capital controls by limiting or banning cash transactions.
Now, I think this might prove difficult, especially for many small, single proprietor businesses (e.g. food carts). But let's suppose they make it easy, e.g. using free/subsidized phones for "smart" payments, etc.
As the real costs of inflation start to pressure critical inputs (raw materials, esp. energy), it seems this would necessarily create a thriving black market in those raw materials, but one based on using barter... In the form of gold and silver (and possibly nickle, copper and other tangibles) for those materials.
If they ban gold and silver, then the ban will either be ignored, or the system will collapse.
I can't see a flaw here, anybody care to poke a hole?
If silver and gold were illegal it's price per ounce would go way up in the country where it's illegal. If they were illegal in the U.S. it might go way up everywhere. Gold wouldn't be any good except for whores or in a country where it's legal.
Making anything people want illegal raises the price and creates more black market activity - looks what it's done for booze, coke, hookers.
But don't be so fast to assume that things like PMs are the only barter goods. That's only true in situations where non-trusted strangers are doing all the deals. Out in the country, almost anything becomes "barter stuff" and most mid size transactions don't even use a handshake or a spoken "owe ya one" - we already know that crap. Only big stuff requires some form of "money" to transact. We trade crops, wood (fuel and lumber), tools, human labor hours, anything that isn't nailed down I have and you want, and vice versa.
That's why I wrote "(and possibly nickle, copper and other tangibles)" ; )
...Anybody see any holes in my thesis?
I like your thesis, but I would not know for holes as I only know the known unknowns... not the unknown unknowns...
Off the grid. It cannot come too fast. Especially in energy and food.
Starve the beast.
This goes on in the U.S., too, but it's far more rampant in many areas of Europe, including Greece, Italy, Spain, etc.
I suspect that the initiatives the U.S. is taking in terms of Stellar Wind and other NSA programs will be used as much (if not more so) for domestic purposes in terms of trying to discourage/prevent/detect commerce from going underground (which would kill the fractional reserve banking cartel/Ponzi) than anything related to "national security."
Agreed, starve the beast into submission.
That makes sense.
So in that event, either PMs get used for off book transactions, or they get smuggled out of the country.
Pretty sure both happened during the Ruble. Also seem to remember the black market figured prominently.
Gold will never be illegal to own.
But transactions involving it will be taxed. Severely.
And that will be that for gold.
Hold all you want. Just never do anything with it unless you want to be taxed. And don't think you can do private transactions -- you'll never know if your counterparty is law enforcement.
you'll never know if your counterparty is law enforcement.
They are not omnipotent. In fact, they generally suck.
Nothing like a barter economy or cash payments to keep things moving nicely. Also a nice way to avoid central planners and taxers.
The masterPig has airforce one to get him from point A to B
For the First Pig it's a bit more difficult... They have to put lipstick on her to be able to fly...
I lived in Ital for 18 months in the late 80's.
Half their economy was off-the-grid, to use that term.
Many folks would leave the day job and head for the underground cash job and work a few hours, and then head home.
Italy may not fall as hard and fast as expected because of this.
Lots of money circulating there under the table...
I know exactly what you mean :)
The italian economy is almost 50% underground even these days.
'Paying taxes' are 2 words that where never translated into italian :)
YES, i agree, black market or off grid economy is the only way people have a chance to survive. In Argentina it was the only market left.
ONE DAY soon i hope people in this country realize it is a way to starve the beast, by NOT paying taxes,,, PEOPLE should be proud not to pay taxes to a criminal gov't like we have.
you know they say 20 percent of the economy is govt spending, i think it fed gov't spending is 20 percent, I believe but have no PROOF, that if you add state, county, city and other govt agencies ill bet the econmony is 50 percent government spending. I just look around me and make that opinion
WOW, according to this US federal govt is around 40 percent gdp add all the state, county and city spending, shit it might be closer to 60-70 percent
http://www.usgovernmentspending.com/us_20th_century_chart.html
Pigs have their own airplane - Air Force One
Non-flying pigs was the old paradigm, welcome to the Brave New World Order
Sheesh, "off-the-grid", you are still in the pig pen.
Off-the-grid & free range is the way to go bitches!
Like going Galt .. where one knows what its like to work for himself and not let others feed off the profits of his energy.
'Murrikans want to consider their off-grid options about now.
Or, ten or twenty years ago. This stuff takes practice. I'm slow, so having been at it 30+ years, I'm just now really mastering it.
If they are really going off-grid, I'm impressed.
God bless them and may we be next.
old saying: if you wrestle with a pig, you get dirty while the pig just enjoys themself.
Perhaps, but off-grid means leave the pig behind.
Off-grid means you tie the pig up and then eat it.
the first pig to fly will out of canon in response to social unrest....the pig to chose from are enormous - lagarde, sarkozy, merkel, the assholes governing greece, the asshole governing italy.....no, there are plenty of pigs to fly....
Well, firstly they now have no debt so they no longer have to make interest payments which had become a large part of the government budget! They can issue unsecured bonds at “junk” rates and still pay much less in total interest payments than before.
The one problem is that the sovereign debt does not just go away. Those obligations are still there and are usually renegotiated with lower interest payments in their own currency. Still a much better way forward.
This is the unintended consequences of over taxation and will happen anywhere over taxation exists. Governments believe they can force the citizenry to pay any amount of tax but there is a threshold. An earlier posting today suggested somewhere around 20%. At some point people start conducting a little business under the table and as taxes are increased more business goes under the table until you have a black market economy.
In the US today, the government is spending 2x to what is being taxed. So if we were to balance without cutting spending, taxes would need to increase 2x. You would be paying 2x taxes for the government to break even, which means you would still have the same crappy roads, bridges, schools, etc that you have today. So are people willing to pay double to have the same crappy infrastructure we have today?
Over taxation increases the incentive for an under ground economy. Also, I think corruption has the same effect.
It is the ultimate decoupling. People are avoiding paying incompetent governments that have nothing to show for their expenses and debt incurred in the name of the people, without their knowledge and consent . That monster we call government and political system is loosing its legitimacy, and if they try to enforce it, things will get violent.
agen default is my long lost twin. The Greeks aren't lazy or stupid, they simply stopped paying for a bloated government, when the public unions took control of the "democratic" process. The same thing will happen in the US. When "public servants" retive at 60 and then the Soc Sec retirement age gets boosted to 70+, things are going to get violent. The school teacher next door will have stopped working 10 or 15 years before you. Just think, every day for 10 or 15 years, you go out to your car to go to work, look over at your neighbor's driveway as their car is parked. You come back home 9 or 10 hours later and your neighbor is outside sunning themselves.
No, you both are MY long lost twins, so there. I've been actually living off the grid and under the radar for decades, it's pretty cool.
That's triplets bitchez!
"That monster we call government and political system is loosing its legitimacy, and if they try to enforce it, things will get violent."
Amen. Our government, and most others around the globe, is controlled by the Central bankers, and it is now plain to see by all who are watching that governmental legitimacy was thrown away when bank losses were socialized, while their profits remained private. That did it...end of the line for legitimate governance. Why should the general population obey the law and play by the rules? Who wants to be a sap? How many are tired of being the fuckee? Who wants to pay taxes to bail out and provide welfare for the wealthiest among us?
When this disgust reaches critical mass, there won't be enough IRS agents or courts to enforce tax collections. In fact, Congress has been reducing the IRS budget and cutting back on staff for more than a decade. As bad as the tax avoidance is by the large corporations, it is much greater in small businesses....and Congress simply will not allow heavy enforcement against small business owners, many of whom are very active in their communitities. Plus, they tend to pay attention and to vote in large percentages.
It is a fine stew these &%%^&*%!! bankers & bought politicians have put this country (and world) in.
You're waaay behind, friend. Off-shore? As in the Cayman Islands? Anyone who has that option has already done it, it isn't something that is done in response to a 'financial crisis' but before one.
off shore is fine if you have excess funds but if you are living check to check off the grid is the only way to go
I'll believe that the one of the piigs will leave the Euro when I see it. More likely they all get a Goldman yes man as their leader and Germany will get their gold.
This is precisely what happened in Argentina. As inflation increased, transactions increasingly occurred in USD and barter, including the exchange of labor. This deprived the government of revenue, which forced the government to print more money, thereby increasing inflation. This state of affairs continues to this day in Argentina. Inflation enlarges the "en negro" economy, which, in turn, increases inflation.
To make matters worse, inflation makes saving and accumulating capital difficult. As a result, there is no investment, which results in shortages of goods (which results in more inflation).
Unfortunately, given the totalitarian capabilities of the US government, this course of events is unlikely to unfold in the USA. My suspicion, in fact, is that the "en negro" economy in the USA is shrinking, as the power and reach of the Feds grows each day. All the more reason to flee if you can.
Why is it North Americans, Northern Europeans and Northern Asians so willingly line up like lemmings to pay their taxes and tribute and parking fines ! Most places on earth wouldn't tolerate our high levels of taxation and regulation ! Go off grid ! Tax holiday now ! Monedas 2012 In North Korea, Taiwanese Tweezers circulate as money and are expected in a wife's dowry....if a kerosene, kitchen immolation is to be avoided !
I guess one of the lemmings didn't like you pointing out that they are lemmings.
UPDATE: Make that two.
"Why is it North Americans, Northern Europeans and Northern Asians so willingly line up like lemmings to pay their taxes and tribute and parking fines ! "
Maybe because we like to be able to drink the water from the tap without getting a bad case of the runs, or worse. Perhaps it is because we like good hospitals, roads, education systems, and a generally more civilized society. Perhaps most citizens essentially understand that these benefits of society must be funded, and we don't mind paying for it...or at least we didn't mind it so much when it seemed more fair and reasonable.
Before our government became totally bought by bankers and multi-national corporations, we had a much more harmonious and pleasant country to live in. Like back in the old days when greed was not good, and we understood that fair trade was fine, but free trade was stupid.
Don't forget the need to engage in war with brown people.
BTW many of the services that You mentioned can be provided by private entities. It is called capitalism.
History proves over and over again that government is not the benevolent entity that it wants to sell itself as.
BTW many of the services that You mentioned can be provided by private entities. It is called capitalism.
In theory, yes. As practised today, it is called cronyism - working its way up towards full-blown fascism, the perfect alignment of the rent-seeking interests of both the government and private enterprise!
What history shows, in my opinion, is that *all* organisations, be it church, government or business are sociopaths in nature. When there are no laws to restrain them they will, having no internal incentive to be benevolent, behave according to their true nature and be total bastards.
To balance the inherently unstable triangle of Capitalists, People and Government we normally have The Election - but since Governements are now in league with Capitalists against People, we will instead have The Angry Mob(tm).
The gag question is: Will NATO bomb a clean path for the rioters when the Arab Spring(tm) happens in Europe? Suuure, they will, with flying pigs!
Maybe because we like to be able to drink the water from the tap without getting a bad case of the runs...
Please don't ever attribute those things to the state. Clean water was not invented by the state; purification, etc. were invented by individuals, then taken over by the state.
Possesion by theft does not imply creation.
The state delivers it, or regulates it's delivery.
I lived in a gated community once where we were serviced by a "Private" water/sewage company. What a freaking disaster. There was always some type of problem, especially on the sewage side.
Like it or not, we are much better off with some things managed by the state. That is not going to change. Try not to be stupid.
[...] further starving governments of revenue *and thus* the means of the economy's [...] recovery.
I honestly fail to understand the reasoning behind the "and thus"...
I mentioned this above. What the fsck where they thinking to write that ignorant crap?
Not so much off grid as under the radar. Agorism is alive and well. Nice.
Black market Bitchez...
http://www.youtube.com/watch?v=Y8b9EckGPx0
It takes just one flew over the cuckoo's nest to see who fucks who
so let the damn pig fly .....
Some day, maybe some body will get it.
You see, Germany went in and the first thing they did was confiscate their gold. Much like the trigger fish
turns over the crab or urchin, and rips out the soft underbelly, then sucks everything out of the shell in one gulp,
leaving a perfectly intact, empty, shell floating in the water.
That is what Greece is.
An empty shell floating in the water, abandoned.
Greece has already left the Euro, it's just not "official".
Yet..
Off grid skid marks ! Some Norkos are so adept with their tweezers.....some are capable of gleaning fecal corn before the feces hit the ground ! Monedas 2012 If the Norkos ever go Capitalist, and someday they will, they will make the Chinese look as stupid as Haitians in an earthquake drill !
In case any one was wondering what "brand" of MAD is being sold, it is the fact that if one goes, they all go, not just the euro.
One train.
One cliff..
"Never trust a Greek who is broke, he's got money hidden in the basement--ALL DRACHMAS!"
the "governance" is too expensive
Small fry black markets are already here in the US. It just isn't real large yet. It has been a little difficult because you can't talk about it on the Internet and social connections are having to be rediscovered in the urban, suburban, areas.
if pigs could fly
bacon would be more expensive and leaner
long pork bellies!
Pigs do fly....until they hit the ground...
Off-Grid is the only way to go even in the good old US of A.
-- We have been consistently documenting this "phenomenon" for a long time. It is definitely not restricted to Europe. It is a global event which I see as reflecting a change in overall human consciousness. Everything is moving towards System D and System D is a great liberator from a psychological standpoint because it frees people from pursuing what are almost metaphysical approaches to the false and ethereal God of money and allows them to relate directly to physical, tangible things without the intervention of the priests, otherwise known as bankers and politicians. -- Michael C. Ruppert
http://www.collapsenet.com/154.html