France and Germany are no better off than anyone else in Euroland.

I've been writing for a long time about how "export economies" are nothing but vendor finance scams.  By this logic I suggest that France and Germany are in as bad a shape as the PIIGS that they so loudly complain about.   Recent news is proving me right as  Moody's prepares to cut the credit ratings of big French banks based on their exposure to Greek debt.  I assure you that it will only get worse for France as the reality sinks in that sovereign debt bond holder haircuts are unavoidable.  And it won't stop at France.  Germany is in just as bad of shape as everyone else in Euroland.  They will just look better on paper until the money they are owed is defaulted on and the customers who have been enriching their economies with debt notes have to scale back future purchases.  

When this happens, future export sales will dry up and Germany and France will be left with big debt that they took out to increase manufacturing capacity so that they could become over productive, greedy pigs.  That debt will eat them alive and they will end up dumping it on the people of those nations.  At the end of the day it is quite possible that they will be exposed to be even bigger pigs than the PIIGS.  Their sin: belief that you can make a legitimate, sustainable profit being a so called export economy.  The operative syllable in economy is CON.  By the way, very, very few besides The Economati currently think this fate for France and Germany is likely.  Time will tell who is right but I like my odds more and more each day. 

I maintain, as I have for years now, that France and Germany created the EU and the Euro for the express purpose of creating seemingly credit worthy customers for their exports in order to increase near term sales (i.e. pull in demand) by those who historically would inflate away their debts.  By pushing the PIIGS into a single currency it was sold to the world that the credit rating of PIIGS was somehow "magickly" better.  Of course, the illusionists conveniently ignored that, without the ability to inflate, the debtors would eventually have to default.  The grifters who set this all up wanted to sell the con that sovereign default was next to impossible even though math and history showed time and again that the only thing that stopped past defaults was the ability to inflate!  It was necessary to create this illusion of debt security in order to justify such large extensions of credit to those who could not possibly repay the debt.

Here's the deal: anything except straight across trade leaving a zero trade deficit is a con.  It doesn't matter that you might be really, really good at making something.  If your trading partners aren't just as good as making something else that you want to trade them for then you are being overproductive in order to turn a paper profit and that is an unsustainable economic scam.  It doesn't work because it cannot work mathematically in aggregate; by definition not everyone can be a net exporter.  Trade imbalances generally do not work like the tides with an ebb and flow where the debt is a sort of long term shock absorber for the imbalances.  They tend to just get worse and worse until the debts associated with multiple years of trade deficits are defaulted on.

OK, this probably sounds like heresy since most of the global economists and government "leaders" talk at length about the importance of exports to an economy's "growth" but their drivel does not stand up to common sense.  In truth, they push the concept of exports in order to support false arguments for subsidizing this industry or that - whichever industry comes up with the best bribes and campaign contributions (is there really any difference anymore between the two?).

Here is the common sense of it: a nation can only fairly produce what it can itself consume in near real time.  Sure, it can fairly and honestly overproduce a little bit today for its own future consumption in case of a future rainy day so to speak but it makes no sense to overproduce and store lots of goods.  Storage costs money.  Also, technology changes so rapidly that cars which are just 3 years old are not as good from an economic standpoint as cars built today.  Jeans and dresses from a year or 2 ago are out of style.  And too much food stored in silos is subject to wastage by natural events and pests.

Because of the above, justification for excess production is always found in trying to sell it to the neighbors even if said neighbors have nothing of value to pay for it with.   The con part comes in when people begin to borrow money in order to create more overproduction.  In their greed to turn a short term profit they enter into business which is completely unsustainable from a mathematical and economic point of view.  They never use their own money for this because the understand that it will collapse in the fullness of time.  It is always done using debt.  It should be noted that fiat currency and fractional (fictional) reserve banking are the primary enablers of the con men.  Take away this ridiculous fraud and all of the scams collapse for lack of capital to fund them with.

In general, the nation with better credit uses that credit to build out more unneeded/unjustified production capacity which it then "sells" to some other nation that does not have the production capacity to trade back in like kind.  The difference is made up in IOUs that will never get repaid.  The con men pay themselves outsized bonuses for such great sales performance at the start of the con even though all of the sales are effectively vendor financed.  The general population, who do not understand math or economics, end up getting the debt dumped on them after the scam eventually collapses.

Why is it a scam?  Simply because anyone who receives more goods from their trading partner than they themselves have goods to trade back is doing so because they don't have the ability to produce the goods represented by the deficit.  So they provide IOUs for future goods instead even though they have no ability to repay the "loan" of goods and no plan for ever acquiring such ability.  What cannot be repaid will eventually be defaulted on.  It really is that simple.  Now hear this government and academic economist con men:  The only honest, true and globally sustainable value of trade is the diversification of consumption, not the generation of profit.   The so called profit of a trade imbalance is always a fake profit since it is guaranteed to be defaulted on at some point.  The con men driving this agenda know this and so they play the game as long as it appears to the unaware that it is a viable game.  When the scam is near collapse under its own corrupt weight, the con men sneak out the back door leaving the inevitable losses on the backs of the patsies - generally the bottom 85% of the population.

Ever hear a government or academic economist or a politician state this simple truth (besides Ron Paul of course)?  No??  Of course they don't say these things because it will prove that focus on trade as a profit mechanism or a mechanism for economic stimulus is a load of crap.  Instead, the obvious is ignored and policies are put in place to stimulate something in the wrong direction.  Such are the wages of allowing central management of the economy by con men. 

So why do the ignorant sounding economists and politicians continue to talk, talk, talk about stuff they appear to have no clue about?  I believe that for every thing there is a reason even if you might not know what it is.  In this case I think the reason for seemingly stupid politician complicity with the scam is that they are on the take and that highly visible economists (i.e. those working in academia or for government) are simply salesmen for government policy.  They are part of the Grand Illusion, the Great Con. 

Having said that, I concede that there are plenty of honest, truth telling economists out there working in relative obscurity.