The question is: Is France living on imaginary money?
The answer is in part “yes”. The running costs of France S.A. are greater than the government’s income. They cant print money to pay the difference so they have to cheat. They have already raided various pension funds. Excuse me, but I remember a certain Robert Maxwell raiding the Daily Mirror pension fund. You just dont do that. The French government has done it. What happens when so many hapless French folk retire? They are going to be in trouble.
I’m sorry to say that the French have just voted in a socialist president. That’s the last thing they need. Way back in Part 1 of this saga I noted that capitalism is the system that pays socialism’s bills. We are in a bit of a spot because so much socialism across the western world has made a good attempt at muzzling capitalism. The trouble is, there is no longer enough money to pay the bills. Socialism’s days, in its present form, are numbered. The socialists have run out of capitalists’ money. The trouble is, capitalism isn’t looking too healthy in many parts of the world either. It’s a disaster in America, total chaos in China, and looking dodgy just about everywhere else.
The current way round this problem I noted in Part 2. Think War Bonds in 1940’s Britain. Do any of you remember what your parents or grandparents had to say about them? Does anybody know of anyone who got their money back? Of course not. That’s not how these things work. It’s fraud. It’s theft. It’s crooked accounting. It’s sleight of hand. It’s survival. And that is how France is surviving.
The banking system is bankrupt. Loans outstanding cannot be repaid. Everything hinges on the skyhooks provided by the ECB.
This brings us to one very simple question which no-one dares ask. How much is a euro worth?
Look at a sterling currency note, then look at a euro note. The sterling note is backed by a guarantee. Dont ask too closely what that guarantee is worth, but what’s on a euro note? Nothing, absolutely nothing. Who even issues it? It’s a joke. No-one guarantees anything. It’s just a bit of paper. It is worth what anyone says it’s worth. While people think it’s worth something, then so it is. When people lose faith in it, it becomes worthless. It’s a fib which people in believe because it is convenient to believe it. I would not like to put too much store by it. I think it is dangerous to have one’s wealth denominated in euros.
In this respect France is not much different from any other euro-zone country. On the other hand, France does have a world class economy. It will survive, euro or no. However, I would not buy into France any time soon. You would be buying into a lottery. Buy in Norway, buy in Singapore, but dont buy in France.
I dont know whether we are entering the end game of this particular mess, and I dont know how it will turn out, but I dont like uncertainty, and neither do financial markets. If you are thinking of putting more money into France, then change your mind. You can wait. France wont go away. Wait till the disaster happens, then buy.
There was a second question in that original email that started me off on this rant: why is everything so expensive in France? I dont know. Is it? I was last there about nine months ago and I didn’t notice. If things are expensive it is because the place is falling apart. That’s one of the things that happen. It means no-one can survive at the normal level, so the level is ramped up, and so many people are sucking value out all along the food chain. More evidence that all is not well.
The third question is: Is France falling apart economically speaking?
I dont think so. But it is not a healthy economy. Two points need to be made here. The first is; it’s the government that’s broke not the country itself. Secondly, it’s all very well to claim that France is a socialist country. That is simply not true. It is a capitalist country that spends all the profits of capitalism on socialism. That’s not the same thing at all. Being a capitalist country it runs on capital. That means it can only function properly with a clean efficient banking system. That it doesn’t have. If the banks are broke then the oil that keeps the wheels of industry turning is not available, and industry starts to creak.
France is not that much different from any European state. The tentacles of government have encroached so far into every aspect of life that it is, like ivy up a tree, slowly killing the source of its lifeblood. Things have to change, but I dont see that people are ready for change. After all, what is happening across Europe? Folks are voting for more ivy to suck more lifeblood from a stricken tree.
This thing has to get worse, and it is going to take time. There is a long way to go yet, and most of that journey is, I am sorry to say, down.
One other point. Countries are trying to pay down debt. Make it simple. Think of someone trying to pay off an underwater mortgage. The more money you throw at it the more money you are throwing down a hole. The money vanishes. Why? Because the value of the asset is decreasing, sometimes faster than you can throw money at the debt secured on that asset.
If you print money to pay off government debts what’s the difference? The money goes down a hole It isn’t spent, it was already spent before. You are trying to pay back a debt, not increasing the money supply.
Hold on, that means all this money printing wont bring on inflation. That means inflation wont eat away the debt. Deflation will continue making the debt bigger. Oh shit!
That’s what’s currently happening in Europe. The central banks are hastily printing money to fill a hole that gets bigger with each day. In short, this mess gets worse month by month, and will continue to get worse until someone stops playing silly buggers, and looks out the window and finally sees the massive train-wreck.
The cost of living may be going up, that’s because of taxation — money sucked out of the economy — and some commodities like corn, wheat, sugar, oil, and so on gaining in price, but how much are large items like houses going down? Balance one against the other and we have deflation not inflation.
My survival bill for the year is about £6,000. A 3% rise in that equals £180. My home was worth about £400,000. That’s decreased in value by 5% over the past year. That means I’m poorer by £20,000. Take off the £180: hey guys, that’s some deflation.
Back to France. One final small point. You should also remember that France’s financial system has a nasty habit of crashing. It’s done it four times in my lifetime. The £ sterling has been a reliable store of wealth at least since the thirteenth century. France has had four different currencies in my lifetime. Do you need me to spell it out?
Maybe one day in the not too distant future I will retire to southern France and live a disgustingly self-indulgent lifestyle drinking fine wine and eating far too much rich food. In the meantime I’ll wait until things get much worse. Then I’ll buy. But I wont rely on the French economy to provide me with a pension.