System D in international trade

Iran: Oil-for-food

Iran's main source of foreign currency, oil, transforms into a source of food. Iranian Oil Minister Rostam Ghasemi said that Iran will barter crude oil and petroleum for essential goods, including food.

Trend,

24 April, 2012

Iran is forced to conclude barter deals for exported oil after the introduction by the EU, U.S. and UN of economic sanctions aimed at curbing Tehran's nuclear ambitions. Iran is ready to accept payment for oil in gold and even food products instead of dollars.

Thus, Iran is going to get about 200,000 - 400,000 tons of wheat in exchange for oil. The deal will involve a number of trading partners of Iran. Also, settling will be made by supplies of palm oil, rice, corn, and Indian tea.

The main export partners of Iran in 2010 were China (17.1 percent), Japan (10.4 percent), India (10.4 percent) and Turkey (7.2 percent).

But despite the finding of an alternative method of payment for oil, Iran will lose a lot of economically trading partners. The EU and the U.S. continue to increase pressure on Asian countries, including China, Japan and South Korea, insisting that they should stop importing Iranian oil. Under this pressure, many countries - the major buyers of Iranian oil even if do not plan to give up, nevertheless intend to reduce the purchase of Iran's black gold.

As a result, in the first quarter of this year, Japan, South Korea and China reduced purchases by 22 percent. India, which is the second (after China) largest importer of Iranian oil, the daily supply to which is more than 300,000 barrels, which covers about 11 percent of the country's needs in this resource, also plans to reduce deliveries from 20 to 14 million tons of oil.

Above all, Iran is losing in the quality of the food. In fact, compelled to agree on barter of exported oil, a favorable atmosphere for business partners is emerging. For example, the Uruguayan rice supply for oil is an effective way to increase the country's rice exports to Iran, without tough international competition, which will allow it to get rid of a large number of low quality rice.

In addition, the imported goods for Iran become more expensive as the national currency devaluates. This, in turn, is due to the difficulty in obtaining money for the supply of oil as foreign companies cannot transfer payments to the accounts of Iranian banks for energy supplies because of sanctions.

Iranian officials have been very unsatisfied last year with the attempts to involve their country in barter transactions, but the need forced Iran to give up their words and start to barter.

'System D' in Volos, Greece

Greek Town Develops Bartering System

Greek town develops bartering system without euro. As Greece wonders whether its debt crisis will eventually spell its exit from the euro, one town in the centre of the country, Volos, has formed an alternative local currency. It works through a bartering system or exchange of goods.

http://thevictoryreport.org/

Ban on cash payments in Spain

Black Market in Spain: Cash Transactions Exceeding 2,500 Euros Now Banned

Mish's Global Economic Analysis,

12 April, 2012

Things are going so "well" in Spain that the Government banned cash payments in excess of 2,500 euros

Via Google Translate from Libre Mercado …

The Prime Minister, Mariano Rajoy, has announced on Wednesday that the plan to combat tax evasion on Friday approved the Cabinet prohibit the payment in cash transactions of over € 2,500 and n which at least involved a businessman professional.

During the control session the Government in the House of the Congress of Deputies and in response to a question about the tax amnesty made by the general coordinator of IU, Cayo Lara, the Prime Minister has revealed that those who violate the ban will face fines of 25% of the payment made ​​in cash.

Black Money

This measure aims to prevent the use of black money in commercial transactions and, in the case of companies, give them an obstacle to not resort to false invoices. The plan to combat fraud adopted on Friday, the Cabinet intends to raise up to 8.171 million euros in 2012.

I calmly predict that black market transactions in Spain will soar as soon as Spain is stupid enough to hike the VAT.

Sadly, such stupidity is just around the corner as noted in Slow Road to Hell: Spain Entertains VAT Hike

Real Anti-Fraud Plan

Once again I am stumbling for a precise translation but I happen to agree with this sentiment (emphasis mine) as translated by Google from the lead article.

The general coordinator of IU Rajoy called on a real anti-fraud plan, with more resources to the tax office, and has taken the opportunity to ask the president that when you announce cuts of 10,000 million euros "do it in Parliament.

Why Next Week Will Be Huge For Spain

Spain is taking a beating in the markets this morning, and that may have a lot to do with bond auctions next week, according to Dow Jones.

Business Insider,

13 April, 2012

The Spanish government prepares to auction treasury bills Tuesday and long-dated bonds Thursday. If yesterday's Italian bond auction is any indication, then investors will have ample opportunity to manifest recent recent cynicism and drive yields higher.

Spain front-loaded much of its debt issuance for 2012, and has already auctioned nearly 46 percent of the €86 billion ($113 billion) in debt it planned for the year at its lowest borrowing costs since 2010.

However, this is bad news for Spanish banks, which have purchased large amounts of government bonds with cheap cash from the ECB. Bank of America Merrill Lynch analysts estimated that Spanish had increased government debt holdings by €68 billion since November or €240 billion total—6 percent of Spanish GDP.

The worry is that ratings agencies could downgrade these assets, and banks holding large amounts of securities would be forced to face margin calls or write downs on these assets. This would exacerbate the weakness of the Spanish financial system.

Also on the horizon is a decision from Moody's on the credit ratings of Spanish banks' credit ratings. Morgan Stanely analysts predicted that this is likely to happen on the week of April 23.

The DJ report notes that bond auctions in Germany and France on Thursday will also draw scrutiny

SEE ALSO: 14 jaw-dropping facts about the Spanish economy 

'System D in Greece'

Excellent BBC video on 'System D' in Greece

Greek town develops bartering system without euro

As Greece wonders whether its debt crisis will eventually spell its exit from the euro, one town in the centre of the country, Volos, has formed an alternative local currency.

It works through a bartering system or exchange of goods.

The BBC's Mark Lowen reports

.

Meanwhile in Zimbabwe..

"NATO and the United States should change their policy because the time when they dictate their conditions to the world has passed," Ahmadinejad said in a speech in Dushanbe, capital of the Central Asian republic of Tajikistan

Zimbabwe: Villagers resort to barter trade

HURUNGWE — The dollarisation of the economy brought about relief to ordinary urbanites, but to most rural communities, it has brought anguish as the foreign currency has proved elusive to many

News Day,

12 April, 2012

Many rural communities have resorted to barter trade because they cannot afford the prices of commodities in monetary value.

“We have resorted to use animals and crops as a form of payment between ourselves because we cannot find money,” said a Hurungwe resident.

The situation in most rural communities has deteriorated to the extent that some schools are even asking for levies in the form of livestock.

“Yes, if the parents fail to raise the required amount in dollars we are encouraging them to bring goats or hens as a form of payment. We know most of the people are so poor and spend months without accessing a dollar,” said Petros Kaveyo, a headmaster in the area.

NewsDay toured some of the shops in the area and witnessed people buying sugar, kapenta fish and other groceries through barter trade.

An operator of a grinding mill in the area said they demand a gallon of maize to grind a bucketful of the grain.

“As a businessman, I should be sensitive to the people’s plight, this is the only way we can help people because our country is not producing any currency,” said Abel Howa, who has a grinding mill at Tengwe Gate shops.

Informal traders bring basic commodities to exchange for maize grain and livestock, among other things.

A goat is being exchanged for two litres of cooking oil and a 2kg packet of brown sugar. A 100kg bag of maize is being exchanged for four litres of cooking oil and five bars of laundry soap.

Some of the business operators bring cheap clothes from neighbouring Zambia in exchange for game meat, gold and soyabeans.

Media reports recently quoted Chief Magonde as saying that his area had been dealing with acute shortages of foreign currency ever since the government replaced the Zimbabwean dollar.

“We are in a difficult situation and we have no choice but to give in to the demands of the traders. Here in the village it is difficult to get US dollars or South African rands.

“This problem has forced villagers to lose their livestock and farm produce to the informal traders who have invaded our area. Those without farm produce are using gold as a medium of exchange,” said Chief Magonde.

Informal traders from as far as Harare have also flocked to the area. Some of the traders said they were engaging in barter trade with the villagers to fend for their families.

“Two bars of soap or a 2kg packet of sugar is exchanged for a 20-litre bucket of maize,” said Petina Gure, an informal trader.

“We do not resell the commodities obtained out of this trade; they are mainly for feeding our families. Most of us have discovered that we cannot afford to buy a 20kg bag of mealie from the shops every two weeks.

“We felt it was much better for us to exchange basic items for maize, which we stock in our houses and take to the grinding mill when the need arises,” said Gure.

The director of Social Services in the ministry of Labour and Social Services, Sydney Mhishi, admitted that rural communities were failing to get the much-needed money, forcing humanitarian organisations to give handouts to vulnerable members of the community.

He singled out the $20 being given to senior citizens by

HelpAge in Zvishavane.

“We are talking of a group of people who have no other means of income.

“They wait eagerly for the money they are given and they are now able to buy livestock and other basic commodities from the money,” said Mhishi.

Government announced early this year that it was going to give at least 300 000 economically disadvantaged families monthly grants of between $10 and $25.

The grants are supposed to help beneficiaries to meet food and healthcare requirements.

Mhishi said the government had already mobilised $45 million to cover the next three years.

He said the families were identified under a pilot project which ran from November 10 last year in the poorest districts of the country.

He said 60% of the households were headed by children and the elderly.

“There are over one million orphans in Zimbabwe and only 527 000 have registered access to external support.

“Traditional family and community mechanisms to support orphans have been under financial strain, resulting in more children facing difficulties in accessing healthcare, education and other basic amenities,” he said.

Once a household benefits from the programme, it will automatically access other social services support programmes in the country.

These include free education under the Basic Education Assistance Module, access to health services, farming inputs and food distribution schemes.

Richard Russell says fiat money will collapse

RICHARD RUSSELL: Fiat Money Will Collapse, The Barter System Will Be King, Crime And Violence Will Surge

Business Insider,

26 April, 2012

Richard Russell, long-time author of the Dow Theory Letters, continues to be bearish on the financial markets and the global economy

Lately, the only things he's bullish on is gold and...guns.

From King World News:

If the government does provide a large round of stimulus ... (we) will see the end of fiat money and probably a new monetary system and a new governmental system. Europe and Asia will both go through chaos. Immigration to the US will be huge.

The eurozone will come apart. The barter system will be king. Real estate, gold, silver and diamonds will be the main vehicles of wealth (along with weapons). Start now watching the stocks of Sturm Ruger (below) and Smith & Wesson.

Russell advice -- For ultimate safety over the long pull, buy and own bullion gold, silver, and gem quality diamonds as well as collectible treasures. If you don't believe me on collectibles, check the prices they are going for at auctions.

In this backdrop, Russell warns:

Get ready for a crime wave -- a large segment of the population will do ‘whatever it has to’ in order to obtain food. Hungry men and women can be desperate and lawless.

Growth of the "under the table" economy in Europe

System D, the emerging grid is an emerging world phenomenon that indicates people's response to collapse

Europe's 'Off-The-Grid' Economy And Why PIGS Might Fly (The Euro)

Zero Hedge,

11 April, 2012

Who said pigs can’t fly?

We understand that when building a house in Spain a substantial part of the cost now involves paying people “off-grid” or “under the table”. This seems endemic and we imagine is partially historic but IF it is increasing in extent as a result of the financial crisis it is an important trend. Extrapolating this trend out to the whole population, one suddenly realizes that the private sector could be slowly going “off-grid”, further starving governments of revenue and thus the means of the economy’s and therefore the government’s recovery.

As more and more private transactions go “off-grid”, which will inevitably happen as taxes go up or the cost of living goes up, less revenue will flow to the governments in question, which will force them in turn to borrow to make up the shortfall or make more bureaucrats redundant. The latter will further stress the economies in question which will make private investors even keener on moving their business “off-grid”.

As the question of leaving the Euro pops up again in the country in question, all reasonable investors will start moving their money off-shore which will hollow out that country’s financial institutions. This money can only be replaced by ECB funding of which there is some logical limit. Banks in turn will reinvest the money in said government bonds because it offers: a) a high rate of interest; b) matching the duration of the three year loan with three year investment.

It WON’T lend to the real sector whose interest rates are artificially low and the sector looks comparatively risky.

Thus credit creation, GDP growth etc. will dwindle...

The downward spiral will continue until eventually social unrest will rise to the point where there will be a “European spring”. One country will ditch the Euro and/or their cumulative debt holdings and/or move back to their own currency. The pain of action will be less than the pain of in-action.

If the country in question defaults on their debt but stays in the Euro this raises an interesting question about how they can run their respective governments?

Well, firstly they now have no debt so they no longer have to make interest payments which had become a large part of the government budget! They can issue unsecured bonds at “junk” rates and still pay much less in total interest payments than before.

The ECB could step in to prevent a default and convert all current debt into Eurobonds with the understanding that no further Eurobonds will be created if the country in question has a debt to GDP ratio that is unsustainable e.g. 60% plus. In this way, European banks will be saved from massive haircuts on what they already own and respective governments who fail the debt-to-GDP test could issue more debt at “junk” rates as per the first option.

Lastly, the respective countries could ditch the Euro altogether.

Counter-intuitively, money will start to flow back into the country via the new devalued currency as money gets repatriated and investors sense opportunity. Other PIGS will look on and realize that maybe this path has less peril than first thought. There is an irrational bias towards herding behavior and others will follow as soon as they see that it offers a faint glimpse of hope.

Others will follow and the ECB and Brussels will be powerless to stop it.

So here we sit watching a couple of PIGS not trying consciously to fly but flapping their baby wings anyway. We watch on, content in the knowledge that PIGS can’t fly…

Until, that is, the first one takes flight.