More Sovereign Defaults Are Coming…”Prepare for the turmoil beforehand”
by Charles Hugh Smith
PeakProsperity.com
Friday, July 10, 2015
In Part 1, we examined the core dynamics that expanded Greek debt to its current unmanageable size—currency/trade deficits and bailouts—and the enormous transfer of private bank debt to the public ledger via the Troika bailouts, only 10% of which trickled down to the Greek people.
There are two other dynamics beneath the surface theater, dynamics which are not unique to Greece but are characteristic of the most heavily indebted nations.
Food and Fuel Imports Drive Structural Imbalances and Debt/Currency Crises
In our recent podcast, Chris mentioned this chart of imported energy by nation. Note that the nations with crushing structural debt loads (the so-called PIIGS—Portugal, Ireland, Italy, Greece and Spain) also happen to be major importers of energy.
What does this have to do with Greece’s debt crisis? Let’s go back to the key driver of Greek debt—imports that far exceeded exports, not occasionally but structurally, year in and year out. Money was borrowed to pay for those imports, interest accrued on the loans and then austerity was pressed on the debtor nations by the lenders as a means of extracting interest on the rising debts.
If a nation does not generate a significant percentage of its own energy and food needs, or export enough goods and services to offset its imports of energy and food…
The Rest…HERE
