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The German Economy Caves, And Eurozone Bailouts Take On New Dimension
Wolf Richter www.testosteronepit.com
Last year, German exports rode to a new record, jobs were being created in massive numbers, real wages rose, housing and real estate boomed, the federal budget was nearly balanced, and consumers felt good and spent money. There were moments in 2012 that made people dream of a repeat performance—despite the havoc that the Eurozone debt crisis has been wreaking.
Whatever was happening, Germany would be able to make up for declining exports to the Eurozone with strong exports to Asia and the US. Internal demand would remain solid. And this illusion of durable economic strength and fiscal virtue has tainted the discussion about saving the euro, bailing out debt-sinner countries in return for austerity measures, and keeping the European Central Bank in check.
But now the crisis has moved from Germany’s front yard to its doorstep and is about to enter its living room. Beer sales, for example. That the German Federal Statistical Office tracks them shows just how crucial a staple beer is. Alas, beer sales to customers in Germany dropped 2.3% in the first half over the same period last year, and ominously, exports dropped 2.9% [for the worldwide beer phenomenon, beer consumption per capita, and where the growth really is, read.... Beer, A Reflection Of The World Economy?]
Auto sales got clobbered in July, dropping by 5% from July last year, and by 16.5% from June, knocking year-to-date sales, which had been holding up well, into the red (-0.1%). Auto sales have been a fiasco in the Eurozone for a while. In Greece, where they’d been plummeting for years, they plummeted again in the first half, by 41.3%! In Italy, by 19.7%, in France by 14.4%, in Belgium by 12.7%. But until July, Germany had been spared. No more. Of the big brands, only Audi (Volkswagen) was up (+14.3%). The others got hammered: Opel (GM) -18.6%, BMW, Mini -17.9 %, Mercedes -14.6 %, and Ford -4.4%. Even VW, market-share leader and on a phenomenal worldwide roll, was down 1.5%.
Retail sales, which had also been doing very well, stalled. And the closely watched Ifo index for July deteriorated so sharply that Hans-Werner Sinn, President of the Ifo Institute, admitted, “The euro crisis is having an increasingly negative impact on the German economy.”
Germany’s manufacturing industry is now in a rout. Output and new orders dove in July at a rate not seen since April 2009, the depth of the great recession. It was the 4th month in a row of lower production volumes, and the 13th months in a row (!) of declining new orders—a terror for future production. The overall PMI index crashed to the lowest level since June 2009. Exports were hardest hit, particularly to Western Europe, Asia, and the US, the three largest markets in the world! The decline in exports was steepest since May 2009. And there is talk of “job shedding.”
These trends harken back to the financial crisis, when export orders fell off a cliff, causing GDP to plunge 2.1% in the fourth quarter of 2008 and a horrid 3.8% in the first quarter of 2009. Annualized, those two quarters amounted to a double-digit decline in GDP—the worst two quarters in the history of the Federal Republic. The German economy lives and dies by its exports.
Yet my contacts in Germany remain “relaxed.” There’s no malaise or panic. “In the countryside, everything goes on regardless,” wrote one of them. Restaurants are doing well. People have jobs, wages are going up. Inflation has backed off. The recent feeling of optimism, after years of pessimism, is still hanging in the air. People are bidding up rental properties and plowing their savings into brick and mortar. Well-educated Greeks and Spaniards are heading Germany in search of work. For them, it’s nirvana. The German government, through various organizations, is trying to rope in its expats in Silicon Valley and lure them back with special incentives to fill the shortage of qualified talent at home. Clearly, the numbers I mentioned haven’t yet made their way into the perception of day-to-day reality.
The public debate about bailing out Spain or Greece, and about Draghi’s plan to go on a bond-buying binge, is taking place to the backdrop of a sweetly humming economy. But the ear-piercing screech of the German export machinery as it shifts gears will change the debate—and the political will. German exporters, a super-powerful lobby, will push for all-out “do-whatever-it-takes” flooding of the Eurozone with money. On the other hand, if prospects of layoffs or forced part-time work (Kurzarbeit) are hounding consumers, their appetite for bailing out southern countries will fade altogether—and so will Germany’s ability to do so.
Meanwhile, Eurozone heads of state, top politicians, unelected kingpins, and bureaucratic honchos threatened everyone in sight with the demise of the euro. And then Italian Prime Minister Mario Monti went on attack. An ‘attack on democracy.’ Read.... Escalation of the Extortion Racket: Now It’s ‘The Dissolution Of Europe’ Not Just the Eurozone.
Argentina, an alternative path for indebted Eurozone countries? Not so fast! Since late July, a new set of words has been showing up in articles about the economy. Shrinks. Slows. Stagflation. These chilling terms describe the consequences of what some nasty economic indicators have in store. Read.... Argentina: The Big Shrink, by Bianca Fernet.
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Quite.
I'm not an alcoholic, I'm a drunk. Alcoholics go to meetings.
Print money, stuff channels, kick can, rinse, wash repeat, move along nothing to see here...
and where does the fairy dust come into your plan?
Bullish
this time I don't think so...
Once beer sale goes down... the end is near...
No, Sudden! People will be turning up to work fresher, contributing greater productivity and inventiveness. It's bullish.
What am I saying... life without beer? Might as well be an hero.
Draghi's desires will not translate into the Volks of Deutscheland blithely cedeing their sovereignity and controls to the periphery now that their own economic success is in jeopardy.
Hopium of last few days will be dealt another blow in Europe and then the creep (avalanche ) to USA and Asia.
There's one word for what's going on in Europe right now: "Summer"
Everyone's gone on holiday, and nobody wants to deal with anything until September. We are now officially in the annual, month-long "can kicking" exercise which suspends reality until the Eurocrats (and bond traders, apparently) return from their holidays.
But while they're gone, a few things haven't stopped:
1) Orders are continuing to plunge, which means when the Eurocrats get back from their holidays things will be significantly worse, and official economic indicators will now begin with the letter "R" if not the letter "D". (as 3 months makes it official).
2) Syria is going to hell in a handbasket, and the stakes are rising with bigger players taking bigger positions.
3) We're going to officially be in "crash season" when they return. The market is bigger than all of them, and the market typically shits the bed in the waning months of the year.
4) We've got an election coming up and there are 2 massive opposing political armies in the USA who both have different ambitions for the stock market. To say that the Romney camp wants an all out stock-market collapse on Obama's watch is an understatement. The Republicans are still pissed that the 2008 shit-show happened on Bush's watch. An event that is largely credited with handing Obummer the election. They want payback, and they'll need it in September or October. The entrenched camp by contrast is lined up to prop up markets but two opposing forces with diametrically opposing goals means we're in for a very bumpy ride as the volatility and volume needles both get buried deep in the red-zone.
5) War is coming right after the election. Seriously, everyone knows about this right? And with war, oil prices will shoot the moon. This gives the returning Eurocrats just 3 months before the airborne turd-pie vaporizes on the fan blades.
Now ask yourself this: Of all the attributes one might use to describe Brussels, are "fast", "efficient" and "decisive" on the list? Because without those things... this is going to be one of those parties that goes all night.
"War is coming right after the election. Seriously, everyone knows about this right?"
If that means we get the chance to ship hundreds of thousands of endlessly stupid white Christian crackers overseas to die, then LET'S START THE SHOW!!! Of course, barring a draft, these endlessly stupid white Christian crackers could save themselves by simply NOT VOLUNTEERING to serve as thugs and hitmen for the bankers and corporations in yet another laughably pointless "war"--but the great part is, they won't! LOLOLOLOLOL!!! They'll get all tatted up, and console their weeping girlfriends, and have a thousand beers at the neighborhood bar, and then head overseas to DIE FOR NOTHING. God bless Amurka! Too funny...
Most of them just need a job.
As we learned at Nuremburg, "I was just following orders" is not an acceptable defense. I would submit that neither is "I just needed a job."
Yes, Euros are on vacation in August, like always. And more volatility means more opportunity. There's nothing worse than a market that just sits there.
War? Perhaps, another war is always waiting to happen. These are the cycles, doesn't anyone study history anymore? (Present company probably excepted).
The users are doing what they have always done, the difference is that more of what they do is visible now than in the past. But the game is the same one They and we have played for decades. The users are no better or worse than in years past, they just play with larger numbers now. They are more dangerous, but they are still the only game in town. It's tough because there are 3 alternatives, and two are bad. Don't play, you lose. Play and you may lose, or you may win. As to the total collapse scenario, one makes the preparations for that and then ignores it as further handwringing does nothing whether one is prepared or not.
The trap is sitting around feeling superior because one knows how the end game plays out. That is meaningless as everyone knows that. The question is the timing, and that's where most have failed. To flourish we must be right AT THE RIGHT TIME and take action based on the swirl of actions by the users.
Ranting that immoral people are immoral is a profound waste of time. This is an amoral game. We didn't make the rules, we didn't start the fire. This is the jungle, and there is no escape, only survival day to day until the end.
You overestimate the Germans, never forget that they are nothing but tarded Goyim when it boils down to the core. Sure there are some good working slaves in that country, but they are very low-intelligent and stupid. (talking about majority here).
Same as in any country, according to statistical data around 70-75% of all people in most societies are meat products without higher brain functions and souls.
In my own country this level is just the same as in most countries, so please stop the "THEY WILL NEVER" they will do what the fuck they are told and nothing more and nothing less. First when they starve they will ask "who can I follow out of this crisis".
Sad but true.
I'm guessing you've never left the backwoods county that spawned your ignorant ass.
And that shows your limited brain capacity. I have work visas to countries you have never even heard about.
I am a global citizen and have worked at projects in more than 12 different countries including your own.
You're right, everyone in Europe is on holiday now. The can has been put on autokick until September.