The Post Globalized World Part 2: Why The PIGS Are (Still) Out Of Luck

Tyler Durden's picture

A world of ongoing global integration leads to rising global trade and to rising competition between companies from different countries and to some degree also between the countries themselves. Some countries have benefited from rising global trade and strengthened their positions, expressed by rising trade surplus; other countries have come under pressure, expressed by rising trade deficit. These global trade imbalances are a consequence of competitive differences. Deutsche Bank note that investors invest in companies and the countries are the platform of the companies. Therefore, an understanding of global competiveness of countries is key for investors. It is most helpful to look at the combination of competiveness and hourly wages. The more competitive a country is, the higher its wages can be justified. There is a clear relation between the two variables. Countries below the regression curve have a strong competiveness rank relative to their labour costs while countries above the curve have a lower competiveness rank relative to their labour costs. Greece is one of the most extreme outliers, but Italy, Spain, and Argentina are also above the curve. They have a long way to go to get close to competitive.

Competitiveness vs hourly compensation costs...


and in detail - just why the PIGS are (still) out of luck:


See The Post Globalized World 1 here

Source: Deutsche Bank

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khakuda's picture

If I were the Greek finance minister, I would consider this the greatest day ever. Here’s what I would do:

  1. Promise to meet all conditions
  2. Take up Mario on his unlimited and generous funding offer
  3. Issue tens of trillions of bonds, or as much as possible
  4. Buy physical gold with all the newfound Euros
  5. Default and pretend to be sad when I get kicked out of the EU
  6. Reinstitute the New Drachma as the world’s only gold backed currency
  7. Scream "OPA", do a shot of Ouzo, spread the newfound wealth around and become a national hero, maybe even marry Maria Menounos
  8. Sue the EU for loaning me money they knew I couldn’t ever pay back, claiming I was defrauded by that greedy Mario Monti.

magpie's picture

You might have forgotten

7.5 Demand Germany pay WW2 reparations and its Target 2 debt.

Ahmeexnal's picture

Seems like the PIIGS have run out of lipstick.

trebuchet's picture

that is precisely why the REAL story today was the absolute conditionality. 


germany backed the ECB bond buying program which only activates under conditionality.

This is the carrot: the second plank in the Deutsche Republic of Euroland. 

The stick is the threat of no help - excommunication from the Euro-mark.

The thirds plank  which was agreed in the MAy Eurosummit to such an extent that it even had the UK prime minister coming back and muttering something about "we might need a referendum soon"  - is fiscal union backed by more political union. 

That Barroso - Draghi - Junkers plan which ended the last paragraph about " appropriate means" for political and fiscal union.... 

And that is How A. Merkel, with thing like target 2 and the next election to worry about - needs a well behaved Europe, sitting around the table doing what she says.

And once that happens (if the whole scheme doesnt blow up in their faces) then Draghi gets his payoff > next president of Italy?? IMF/world Bank president??   -  and the Bundesbank takes over the ECB, putting the house in order (what is left of it)






Dogbark's picture

By buyng gold Greese would spend all the money. A smarter way to do it this:

5. Package the new bonds with old Drachma (5% new bonds and 85% Drachma). Rate them by Moody or S&P as AAA. Insure them by AIG since they are AAA.. Pay both agancies with new bonds.

6. Sell the new bonds to Bernanke for the newly printed dollars.

7. Buy US, Australian and Candain resource companies like BHP, Chevron or Teck Resources and utilize thier currency (do not print your own shit - it requires paper, ink, presses, etc.).

8. Double eveybodie's wages, reduce working hource to 1. Start pention age from 18.

9 Food, medicine and services are free.

Wolferl's picture

The Greeks can issue as much bonds as they want nobody will buy them, stupid moron.

khakuda's picture

Yeah, you're right.  And no one will ever again make subprime auto loans, loan money to anyone to buy a house with a 3.5% downpayment and 3.5% interest rate, buy junk bonds down to mid single digit yields, leave funds in accounts with negative interest rates, etc, etc.  Humans are done doing stupid things.

CrashisOptimistic's picture

Guys, no, you're not following the process.

Draghi buys only on the 2ndary markets and that means he buys from the ESM and only from the ESM.

The ESM can't buy, per the agreement, unless the bailout requester meets the deficit/GDP ratio conditions.  It's CONDITIONAL, and the German Parliament votes on those conditions.  If they are not strict enough for a country, the G. Parliament says no ESM buying.  This means no presenting a plan to reach targets.  It means reaching targets.

The ECB can't buy the bonds from the ESM if the ESM never bought the bonds to begin with.  This big event today really didn't do anything.

asteroids's picture

As Greece has shown the "conditional" aspect is useless. The only trigger is country X (eg Greece)  will default unless we more, what do we do? They will print of course! Forget full sterilization too.

LawsofPhysics's picture

Meanwhile in the real discussion to save the EZ....

Blah, blah, blah, blah, collateral bitchez, blah, blah, blah.

wait what?

spooz's picture

The Global Competitiveness Report comes from the World Economic Forum out of Davos. Not so sure I would trust that the data coming out of these elites doesn't have an agenda The wiki talk section includes this about GCR:

"The article states that the report "has been widely cited and used by many scholarly and peer-reviewed articles." This isn't true, actually. If you click on the link that supposedly supports this assertion, it takes you to a list of citations in Google Scholar, all but one of which are citations for various editions of the report itself. Interestingly, the ONE journal article that does reference the GCR is a scathing critique of the report, it's methodology, and it's vailidity as a measure of competitiveness[4]. I am tempted to change this sentence to state that the opposite is, in fact, the case (the report is NOT accepted in the scholarly community) but the article is a bit old (2001) and the report has likely changed somewhat in its methods since. However, I still am not able to find any journal articles that make use of the report or its rankings in any way, let alone in a way that indicates agreement with the report. I'm going to just delete it, but would welcome any discussion of articles that actually do use the report for research purposes. Otherwise, I think it might be worth noting that scholars don't use it, and at least one has effectively trashed it.Shuneke (talk) 19:57, 5 February 2009 (UTC)"

The 2012 rankings for the "Global Competitiveness Report" shows Iceland on the bottom.  

"The (only) Western exception to this campaign of economic slavery is Iceland. Iceland’s government essentially threw the Western banking cabal out of its nation. It endured the attacks on its economy, and regained its economic sovereignty."

Even the IMF admits Iceland is looking okay.  But these banksters who create the competitiveness rankings think not.  I wonder why?

XitSam's picture

The X-axis of the first chart says "Hourly compensation costs in manufacturing (2010) in USD". How can that be used as the metric without taking cost of living in those coutries into account?  You might say that pay is related to the cost of living, but there is no evidence of that. Also the chart is using 2010 data on one axis and 2011 data on the other, what's up with that?

THE DORK OF CORK's picture

But if being competitve destroys your human and resourse capital base whats the point ? unless you are one of the few who wish to extract equity out of these countries and turn it into your immediate consumption on the international stage over and above domestic and declining former nation states.

The reason for the high price of the euro is so the capital extraction of these countries can means very little money is available for domestic exchange and more energy is available for pointless in the long run international trade......

Its very effective Neutron bomb economics.

Its a consequence of global oil /capital and its power to overcome labour but its really pointless.

These dynamic people withen ""Competitive" societies are simply more effective at obtaining declining BTUs via gaming of the system......

Eventually there is no society remaining and no BTUs either....


Very few inventions came from plantations competing against each other......the owner just sits back , sips some ice tea and gets his driver to work the slaves harder......

PS ..Ireland was really really competitive in the early 1990s .....but where did it get us ?
We did not build our internal capital base and even if we did we would not be competitve back then......

Its a chicken and egg situation......

The Cartel has built a system of external capital closly linked to oils ability to inflate and deflate societies....the remaining states must become Market states who invest less and less in internal capaital which makes external oil capital even stronger.

We must concede to the cartel wishes as Mario has stated today.
Its the Venetian Banks of course.

They love building and destroying these pointless systems.

You can't blamce them - its in their nature.
They are Vampires.....doomed non people trying to make everybody else a non person in their image.

are we there yet's picture

So PIGS can fly (up up and away) ... Nice graph but it needs another z dimension of debt to GDP for long term investors.

bigwavedave's picture

China, Taiwan, Singapore .... Get it?