Siemens paid in EUR. Banks left holding the bag for EUR loans to a non-EUR nation... as usual. Good luck.
The financing of major parts of Orascom Construction and Siemens´ scope for the two power plants will be provided by a consortium of international and regional banks.
The credit facilities are largely covered by Export Credit Agencies. Representatives of the financing banks and Egyptian Electricity Holding Company (EEHC) came together in Cairo in the presence of the Egyptian Prime Minister, Eng. Sherif Ismail to ink the loan agreements.
Signed! Today, the two remaining loan agreements were signed for Burullus and New Capital power plants in #Egypt https://t.co/fTaJmHXniV /pe— Siemens Press Office (@siemens_press) March 9, 2016
15 comments:
Exactly, Matt! The entire framing of the debate about debtor and creditor nations is absurd when viewed from the fx and balance of payments perspective of world trade.
The financial risks of the transactions aren't borne by Siemens because of sovereign mercantilism policies that subsidize trade in German/European factories using sovereign hard and soft power for enforcement (NATO particularly). The structural "reforms" Germany is insisting the rest of Europe undergoes, forces all the European countries to become creditor nations, like Germany, which is only possible if they engage in risky financial bets that leave foreigners in a cycle of BoP crisis. It is important to the US because they are essentially counting on the United States to enforce their financial agreements using our financial system, military and diplomatic power invested into NATO when nations default.
If those policies were not in place, Siemens would set up a diversified manufacturing base spread around the world where it's customers are and European industry would not maintain large surpluses. Egypt has little Euro income!, good financial practices would drive Siemens would insist on payment in the Egyptian Pound and with a variable interest component to protect against inflation, if German/Euro sovereigns were not involved. It would be ideal for Siemens, and it would be ideal for Egypt. The only reason it doesn't exist, is because "orthodox" economists that control government have designed a system that forces trade to happen in dollars or euros and then have world bank and IMF sort out the rubble from the inevitable collateral damage.
It's so frustrating to watch over and over again, as the PTB frame the issue as degenerate foreign fiscal policy that leads to BoP crises.
Well Ryan,
Siemens people >> smart
Banker people >> stupid
Matt are they stupid when they know that every crisis they will be bail out and rescued by the government and all the idiots telling we are "running out of money"?
If crisis for financiers are never allowed to develop themselves and burn their stupid asses because governments are reassuring no liquidity and balance of payment crisis will ever happen is a free lunch for them to try to earn some monies by being the financier intermediaries (it's their job after all).
OFC corporations producing real stuff don't want to know anything about that crap (neither are on the hook with the government providing 100% insurance against any crisis).
"We are running out of money" except when someone has a BoP or liquidity crisis, then CB'ers and politicians are quick to bail out bankers and financiers. The whole thing is surreal.
Well until they exhibit some systemic understanding of these risks imo we have to assume they are too stupid to understand them...
Look at China lending USDs to Venezuela, China lending EUR to Russia.... how do you explain that?
Who is going to bail out the China entities lending USDs to another non-US nation when that stuff blows up?
The only other explanation could be that these foreign nations just dont possess the Knowledge/Skills/Abilities to run their own monetary systems... so they have to 'piggy back' on the USD system...
They could just chalk it up to "the business cycle!" or some other incompetent nincompoop ideas....
"Look at China lending USDs to Venezuela, China lending EUR to Russia.... how do you explain that?
Who is going to bail out the China entities lending USDs to another non-US nation when that stuff blows up?"
China has plenty of reserves to absorb the shock, specially considering the banks doing the lending are state owned entities. So they are providing the foreign reserves at a cost which will they charge for.
Is smart? Well, it isn't, may as well write down the lose already and be done with it, specially in the case of Venezuela, is lost money. But why they are providing the lending then? My guess would be that because it's pocket money, they are just buying leverage because then those nations will be owing to them. Is a risky movement but on aggregate is pocket money to those entities at the VaR is quite low.
Private western banks operate in the same way, because while not state-owned, they can plug in "taxpayer money" wherever they need it to avoid a crisis, or use the political leverage of their governments to get the money back eventually (as Ryan describes above).
Quite surreal Matt, it doesn't make sense to us, is no wya to operate any system, but I don't think they give a fuck!
Well all I'm saying is dont confuse "dont give a fuck" with incompetence/ignorance....
What is the public purpose for China to lend USDs to Venezuela?
Or what is the public purpose for China to buy Smithfield Foods here in northern Virginia for $6B USDs? They make processed pork products for regional distribution in the mid-Atlantic (cured hams, bacon, pork tenderloins...) .... what, is China concerned that the people here in the US mid-Atlantic wont get the best quality of pork products?
a lot of these people are just pre-programmed zombies....
The only other explanation could be that these foreign nations just dont possess the Knowledge/Skills/Abilities to run their own monetary systems... so they have to 'piggy back' on the USD system...
Not the only alternative. Another is that they are realize that if they move too far away from the Western dominated financial system, it they will loose the wrath of NATO on them. I think that they are biding their time, moving slowly, arming up, and building their economies internally and through alliances, while they "make nice" with the Western powers that be, until they are ready to go to war with NATO and be reasonably sure of winning. Now, they cannot win but they they can only deter unclearly. IN the meanwhile, NATO is also arming and surrounding them.
In addition, they need USD and EUR to buy Western technology that they are still behind its haven't yet developed the capacity to duplicate on scale. In addition, they wha to keep the doors open to exporting to the West. So their strategy is not so much to confront the West directly but to substitute and create alternatives that protect them while allowing them to stay in the game. The Western economies are still the world's largest in total and will remain so for some time to come.
This is a dynamic that is likely to play our over the next several decades, which is what is estimated for Russia and China to be able to match NATO conventionally.
BTW, when dealing with China, it IS a game of 15-dimensional chess, to use one of Dan Lynch's expressions.
This is why "the Oriental mind" is said to be 'inscrutable" in the West. It's also a reason the West regards Russia as more "Oriental" than European. In comparison the West plays a pretty shallow game. US strategists are left wondering what happened in Syria when they thought they had it all figured out.
BTW, China is propping up Venezuela and the Chavistas, because socially and politically they are on the same page. There is a limit as to what China and Russia can do in Latin America through because something called "the Monroe Doctrine." They also have a logistics problem being so far away.
But China believes that time is on its side and it will win globally in the long run. Then the favors its has done will come home.
Let's not get our ideas via Sid Blumenthal.....
You will not find these ideas expressed by anyone in the Establishment, publicly at least, for the simple reason that it is a ticket out the door.
US domestic and foreign policy is based on shallow thinking and wielding huge power rather than deep thinking. They don't think they need deep thinking when they have that level of power and are also increasing it more quickly that the opposition, which they conclude because the US is spending more munnie on weapons than the others.
Another factor to be considered. The US plan is not only based on the US of huge power but also on intimidation. In fact, it is chiefly a strategy of intimidation based on making examples. Mafia tactics. Crude but effective.
Tom: "BTW, when dealing with China, it IS a game of 15-dimensional chess, to use one of Dan Lynch's expressions...In comparison the West plays a pretty shallow game. US strategists are left wondering what happened in Syria when they thought they had it all figured out."
That's about right, although I'd just call it "chess" and leave Dan's superb line for the mental gymnasts and groupies who explain away their gods and prophets seemingly inexplicable descent from Mount Sinai and into the gutter. Washington is now saturated with neoconservatives, and they're just about the worst policy makers in history. Never will you meet a more Incompetent, stupid and arrogant bunch of people. Their arrogance is such that each disaster somehow enters their brain as a tremendous success. The Chinese and the Russians have had to deal with a Washington playing at a disadvantage, handicapped as it is with idiots inhabiting a land of make believe. Liberals make the best imperialists, and this is a rare breed in Washington these days, culled to near extinction by the "conservative" revival.
As for the Russians, Chinese and everybody else in international politics, as with domestic politics, what looks like a bad move may just be a pawn sacrifice. These are but the opening moves of a long chess match. The Chinese are on top. For the Americans to get back into this, if it is even possible, they'll need to find someone with the brilliance of Bobby Fischer. Obama and Kerry are trying to undo the damage of Dubya and crew. That's near impossible, especially when Obama, an ultra-realist in the mould of Brzezinski, keeps empowering neoconservatives. Then there is the issue of imperial decline, which Washington just cannot come to terms with.
Matt: "Let's not get our ideas via Sid Blumenthal....."
How about the declassified official documents? The Pentagon Papers proved that Washington knowingly lied to the American public from the Eisenhower administration all the way through to the Nixon administration. Four presidents and their administrations looked Americans in the eye and then told them absurd stories which saw the deaths of tens of thousands of Americans and millions of Asians. To prove that this wasn't an isolated example, we can add the cases of Nicaragua, Guatemala, Cuba, Chile, Iran, Iraq, to name but a few instances in Washington's long commitment to state terrorism.
Blumenthal is a Clinton groupie. You won't get much useful information out of him. Sensible people don't read Blumenthal; they read the American historians and journalists who are brave enough to report back the truth.
Washington's winning rhetorical policy seems to be "Who you gonna believe, me or your lying eyes?"
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