Great Analogy!

From Charles Gave of Gavekal Research:

“Germans might as well load much of their auto exports headed to eurozone  countries on to a boat and sink it outside of Hamburg. It would do as much good  as selling Audis in exchange for IOUs issued by bankrupt countries.”

CarMr. Gave goes on to point out the the ECB’s TARGET2 balances continue to increase. TARGET2 is an accounting fiction at the ECB whereby bank deposits in deficit countries do not have to fund deposits that their customers transferred to more responsible banks in more responsible countries.  They simply get to carry a gigantic overdraft balance at the ECB.  The responsible nations carry a credit balance that is unfunded.  It is a backdoor bailout that few understand.  As of the end of August the Bundesbank’s (Germany’s central bank) TARGET2 credit balance stood at 573 billion euros.  That is money that is owed Germany by the ECB.  It represents nothing substantial, not even mostly worthless Greek bonds.  Yet Germany continues to deny that it is being robbed by the rest of Europe via the misconstructed European Monetary Union.  It has better wake up before its economy is completely depleted of capital.  Patrick Barron

This entry was posted in News/ Lessons. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s