This page has been archived and commenting is disabled.
Germany the Vampire Squid of Europe
Herr VAMPIRE SQUID revisited and affirmed-
Germany is in it for Germany, not for united Europe. When you look at Europe and see that Germay is a success and no one else is, there is a reason for that.
Germany, after 'trapping' many countries in the e-Zone ignored their situation while Germany continues to post increasingly lower-than-required rates of inflation as many in EMU ahve run higher rates. As a result of this, there is a huge competitiveness conundrum in the Zone. It seems to have been engineered by Germany-and they are great engineers.
see http://robertbrusca.blogspot.com/ for a previous discussion of this toipic.
How are we to view Germany's actions?
Now I do not 'blame' Germany alone but as you know in our financial system the low inflation Balance-of-payments-surplus countries rule. The others are forced to adjust. Germany has persisted in growing slowly, running a high rate of unemployment while others wanted to grow faster. Germany helped them to do that by lending to them. Germany was not mindful of the consequences of their excesses but there were consequences as they all were/are in the Zone together. the Zone was not a Bento box divided into various walled-off compartments; it was like bowl of soup and poison one place circulates to another place.
As the 'adult,' or fiscal conservative, Germany did nothing constructive. It held back and watched until the others were in trouble then it dropped the hammer. Am I supposed to view Germany kindly for this sort of behavior? Did Germany really 'behave' any better or did it simply spring its trap?
Why did it neglect the growing imbalances in the Zone? Not just the fiscal ones that might have been hidden, but the inflation differences that were reported month after month after month. I have been haranguing about EMU inflation differences in the zone for years.
Did Germany smirk and know that it was gaining competitiveness? Did it not realize this disparity would benefit its exporters but come back to haunt it politically and financially?
Now that it has... does Germany disavow itself of any responsibility?
What allows the US to to maintain a union that has areas of vastly different real income, property values, etc, is its fiscal transfer system. Germany instead of dealing with today's issues, and assisting with development (instead of just bail-out bucks) wants to roll the clock back and set up what I have called a Bento-box view of Europe in which GERMANS will be made safe as each member of EMU will have its own mandated balanced budget and will be put in a Germanic-like straight jacket of fiscal responsibility. Hey that sounds like fun!
The Euro zone is NOT the German Zone. It was not formed and does not exist for the benefits of Germans. But as Germany is in a position of power it is now trying to bend every EMU nation to its way of doing things. This widespread use of austerity is foolishness. You may denigrate 'Keynesianism' a term that is such a cartoon and straw-man that it has no meaning, but austerity in the midst of recession is tomfoolery!
Germany waited until other EMU members got in trouble then, as I said, sprung THE TRAP. While the Germans think they have been virtuous they are among the TWO COUNTRIES that are the farthest out of equilibrium with respect to the Euro-average.
Look at the EU Commission indices and everyone else is weak and only Germany still has strong readings. I can understand wanting to glorify Germany for this success. But if we view Europe as a team, then Germany is not a team player. It is a high scorer on a team that is losing all its games! Germany has created a game of 'economy' and set the rules of EMU to benefit itself and to impoverish everyone else.
I know this is not a popular way to look at it. We should glorify the best performing economy but why is it best performing? Because it has the fiscal policy and national work ethic and social policy that works with the monetary policy that is being run.
Suppose the US were to play Germany in 'Football.' Suppose the US sent NFL guys in their pads and the Germans sent their 'soccer' team. Now if they played soccer instead of NFL football and the Germans wiped us out would that really make them 'the best?" Suppose we played NFL football instead?
What I am trying to do is to suggest that Germany wins at this game because it is a German game. Germany did not have to change anything to join EMU. Everyone else SHOULD HAVE been made to change a lot but they did not. Yet the game continued under 'German rules' NO WONDER THEY DO BEST... and there has been no one out there 'blowing the whistle' on those counties that have been building excesses; they have been left alone until WHAM! Crisis time.
The Germans have not swerved one iota to help their neighbors nor has this idea of what macro policy should be been broached. The 'Mass-Trick' was supposed to be a constraint on that policy that was never agreed to but the Germans and French broke the rule first and ruined it. Macro policy cannot be every man for himself with a fixed currency.
So here is a restatement of the Zone and a new accounting of who is most out of whack:
Currently Germany is the low inflation country in the Zone since it was formed. It has done this by averaging inflation of 1.7% per year while the GDP-weighted EMU average was 2.12% per year. Only FOUR EMU nations among the first 12-members average inflation at the EMU average or less (Germany, France, Finland, & Austria). They are the strong countries and they are the outliers -too. Of course Germany and friends are closer to the EMU average because Germany is such a large country and it carries a large weight in making up the EMU average. If we look at the simple unweighted average for inflation for the EMU first-12 members, average inflation among these countries goes up to 2.35%. Viewed that way the most normal country since EMU was formed is Italy in terms of inflation followed by Ireland. Next most normal is Belgium. Germany ranks 11th out of 12, and guess what? Greece ranks 12th! Germany and Greece rank right next to each other as outliers- on different ends of the spectrum, of course. .
Isn't that amazing?
If policy were geared for the average EMU country the Zone would be quite different. But it is not; it is geared for Germany making everyone else much worse off relative to Germany. Instead of having a zone with most members tightly clustered around the average with Germany and Greece as outliers we have a policy that is being run for one extreme of the Zone - Germany!
Typically the Germans think everyone else is wrong.
...and before you side with Germans let me note here that the US has had a good inflation performance over this period averaging a CPI of 2.5% (PCE even lower) . So before you go, "Ugh! Italy's the the average - are you crazy!!!" remember that US inflation has been relatively well contained during this period and Italy has done BETTER than us. But Italy is stuck in Zone with Germany and policy is being run for German inflation at 1.7% not for Italian inflation.
Yes, the Germans are extremely successful in EMU especially compared to everyone else. They know how to work, how to engineer - there is no doubt about that. But they do not know how to share; they know how to dominate militarily, economically etc. Now they want to dominate EMU by by setting macro policy and social policy as well as having a German monetary policy.
If Germany is going to be in a single economic zone with everyone else, it must fit as well as they must fit. Germany and France were the first to break the Mass-Trick rules and once that was gone they could not expect discipline from others.
Germany wants every other nation to sacrifice a generation's worth of growth to get their competitiveness back in line to and to defend Herr Euro. Why should any of those countries do that to perpetuate a game where the Germans win?
The two important questions to ask are (1) how did this happen so we (Europe) can stop it from continuing and (2) what do we (Europe) do about the huge competitiveness gaps that each EMU member -EACH MEMBER- took part in letting develop? NOT What does GERMANY want to do...
Can EMU be saved? Should everyone devalue and re-form a new currency unit? Should the new unit be renamed? What are the new rules? Who makes compromise in the next system? Say it UP FRONT.
Certainly you can't expect whole countries to sacrifice a generation of growth to protect a currency!
That puts economics backwards. Currencies are there to serve economic efficiency, to replace barter and to augment growth not to enslave a nation..
...unless you are German of course.
In that case it works for you and you can enslave everyone else.
ergo,
Germany, the VAMPIRE SQUID of Europe
»
- advertisements -
That is what I was alluding to, thanks.
Not very politically correct are you?
Everyone here is a rational adult. If one choses to say something silly, you are free to ignore. But please don't ask them to play by the rules that make you feel comfortable.
apropos
Pink Floyd - Goodbye Blue Sky
http://www.youtube.com/watch?v=_0v07InoFiU
of course you could kill them in the Return to Castle Wolfenstein
http://www.youtube.com/watch?v=CcLG4-fbSdA&feature=fvst
or be killed
there are certain tribes with DNA specific to world conquest. One is from German region who have decendents in Germany (but their world war attempts were squashed), Russia, and US (yes, US military is full of Germans).
Chinese/Mongol war DNA are also all over Asia. Indonesia, Japan, Korea, all have Mongolian roots in the upper crust of society.
Argentina, Brazil, Mexico, upper class are also European who have since conquered the natives.
Conquest is not a notion exclusively reserved to 'certain tribes'. It is a distinctly human trait, imbedded in the nature of all men, as we are in the end fallen creatures who must decide which paths to follow in our lives. How about that 'italian' conquest gene birthed with the creation of the Roman Empire? Or the Greek/Macedonian lust for conquest generated in the heady days of Alexander? How about those conquering Egyptians and their desire to place everyone under Pharaoh's iron fist?
When presented with the opportunity, MAN will often choose the path of conquest over the path of peace.....whether he be German, African, Pacific Islander, etc.
Another public school education.
Yep
industriousness is cheating
Germany should have ...done what? When they don't offer gobs of cash they are bad, when they work to get it they are bad....moral...zee Germans are bad?
No but when you engaged in a union you are part of it. Either you fit in or make life miserable for everyone else. Both Greece and Germany have made life miserable for everyone else.
yes, both of them.
Engaged in a union? Like society? Fit in or make life miserable for everyone else?
How many fingers am I holding up?
Kinda like the northeast and left coast in the US and their relentless drive for a bigger stronger nanny state.
The rules were very clear from the beginning. If you did not like it do not join.
One of the rules still is that no country is responsible for the debt of the others.
Dude,
As you describe it, the EU is and acts more like a co-op.
But, it is still up to the individual farmer(country) to sow the seed, nurture the land, harvest the mature crops and reap the reward.
"the EU is and acts more like a co-op" LOL, yes, including the endless squabble about policy, eh?
Many here prefer the visual of a GentlePeople(s) Club. One People, one Vote. This includes the grumpy Brit on the confy chair enlessly complaining about things like that the club serves Guinness by the half-litre instead by the pint and that he's really the only one fit to lead the club.
In the times when it was dreamt up (with armies endlessly marching up and down the place) the term was Concert of Europe.
this surely is a great way to describe it, especially the "marching armies"/"concert" thing....! I can hardly remember hearing that as a child in the early nineties, but this was exactly what I liked about the European Project!!!
Robert, you had made a comment the other day that bothered me. Being the old fart I am, I did spend time Land Surveying in my early years. This entailed measuring (and recording) the angle and distance between two or more fixed points and then carefully (mathematically) calculating closure. The methodology used entailed very careful use of the instruments and measuring devices. Steel tapes were adjusted for temperature and the theodolites were carefully set up (geodetic surveys) with umbrellas to shield the instrument from the sun as heating would cause temperature deviations that would throw the instruments accuracy off. I never fucked up.
For standard boundary surveys, I used the similar (improvised) methods for large scale work and never closed less than 1:20,000.
The rules for boundary surveys (in some states) allow what is called a 'compass survey' that will allow a closure of about 1:5000.
In the trade there are mathematical fixes (compass rule and others) for botched (busted closures) that can on paper fix the problem but the error remains on the ground.
Ok, so here we are. Let's say someone really fucked up (the survey or the books if you know what I mean) and now because the "grandfather deed" has erroneous "adjusted data", that is the gospel according to the courts, the next surveyor has to go in, survey it, and somehow replicate the error again because that is what is supposed to be. Even though it is incorrect.
Adjusting or smoothing out data can be very problematic.
Regards.
Yes.
When I worked at the Fed there was a very senior economist, Paul Meek, who used to say, 'seasonally adjusted the Great Lakes never freeze'. He always wondered if we were missing something using seasonally adjusted data.
There is a point there but not one that most people are making. It is not intrinsic crookedness.
Intelligent people know there is a sophisticated case for skepticism about seasonal adjustment... as do idiots and wonk-contrarians.
I see see your concerns one of the former, not of the latter.
regards
B
"Paul Meek, who used to say, 'seasonally adjusted the Great Lakes never freeze'."
That was priceless, Thanks.
I see it as a crisis of fixed capital formation , rational fixed capital formation - the Germans don't do fixed capital formation - they sell BMWs & burn coal
If the French ran the shop things might have worked out better but they don't - it time to end this sad mercantile game of chair swapping.
It does not create any wealth ......... it just is......... a terminus.
I understand your article fully, Robert. If the Morganthau Plan were put into effect in 1945 we wouldn't have this "Problem" today, right? Germany would be a pastorial paradise of farmers. Oh, and the Russians would be bathing on the French beaches because "The only thing the Russians needed to reach the English Channel in 1946 were shoes".
Now they have the Bosporus or the Baltic.
The euro was created for the French, not the Germans, as the price of re-unification. It is no surprise, though, to see that while the French were into fastasy role-playing and costumes, the Germans were into bondage. Who can blame Germany for wanting to assure that it can focus it's competitiveness and build its trade relationships with Russia and the rest of the world? Should they become oh-so-European at the expense of their survival in trade with natural-resource and massive-labor-force countries? That would be economic suicide. Imagine if Sweden and Nederlands followed that same course? In that light you start to see the peripherals' problems for what they are, cultural problems that must be solved internally.
...or externally by leaving a system in which they cannot survive.If the Germans remain this inflexible.
Meanwhile Germany is scraping plans for new nuke plants and becoming even more dependent on energy piped to it from Russia.
The US has great natural gas finds and sits on other energy reserves.
Sometimes in the midst of chaos and all the finger pointing it's hard to tell who is really winning. It may seem to be the Germans who are winning but they would be better off trying to get to some appeasement with the rest of Europe than in being the tough, unrelenting guys who will wind up tough, unloved, and a puppet on the end of the Rooskie fuel leash like the rest of Europe.
Yes, Germany is scrapping plans for new nuke plants and will become more energy dependent to France (the big reactors right at their mutual border) and Russia (NatGas from the pipelines).
Making France and Russia geopolitically stronger vs. Germany. Sounds like Vampire Squid strategy, eh? Very inflexible. Very dominating.
Your problem is you want to find some victor to bash, some puppet to leash...
I don't think "it may seem to be the Germans who are winning." I think the Germans have been terrified for years that after bearing the burden of rebuilding the east, they'll be bankrupted by the periphery. The Russian fuel "leash" will always have to compete with the middle-eastern fuel leash. That's natural. I have no reason to think the Germans are afraid of the Russians. At least there is good mutuality in that relationship. They each do different things well, have different resources. Germany has enough debt on its own. Even France realizes that without some other source, the IMF for example, there simply isn't enough money and production power in Europe to pay the bills when the world calls them on their "guarantees." North America has it's own problems, and certainly doesn't have either the money or the reason to prop up a failed currency union. Let France prop it up. They can sell Total, Renault, and many other interests...and use the proceeds to save their banks. Why should US, Brazilian, Chinese, or Indian taxpayer money go into it? Yes, the Germans do not want to simply walk, because they fear the world's opinion. But they will walk when they find a way out. The IMF is not that way out, nor is the G-20. The Euro Zone must pay its own bills for its own benefits. There were benefits, weren't there? Well, weren't there?
No, that won't happen.
They have state of the art wind power!
This makes my prostate itch.
scratch it, while you still have one.
"...while Germany continues to post increasingly lower-than-required rates of inflation as many in EMU ahve run higher rates. As a result of this, there is a huge competitiveness conundrum in the Zone. It seems to have been engineered by Germany-and they are great engineers."
I have read the above line and cannot fathom exactly what you are getting at, sir. Assumptions include inflation GOOD, living within your means BAD. Lending out money created out of the surplus value from a drop in production costs due to technology and/or value added products BAD, borrowing money to fill in the deficit of balance of payments gap GOOD.
Speaking of the balance of payments, a country (actually any and all countries) that trade goods, services and financial capital must have SOMETHING to trade in the first place. You correctly point out that there is a huge competitiveness conundrum in the EU, without realizing the basic reason why. I and much of the rest of the world don't actually trade goods, services and financial capital with Greece because they have nothing I want. Germany, on the other hand does produce goods, services and financial capital that the rest of the world seems and does want. In fact, we could easily make the case that Greece has benefited on the backs of Germany because they were able to access cheap funding precisely because Germany is part of the EU and is perceived as fiscally responsible.
Next, your use of inflation as a measuring stick can, to be put lightly, odd. Some dude once said, "Inflation is always and everywhere a monetary phenomenon." So using that logic, couldn't we come to a consensus that using inflation as yardstick, we are really measuring monetary phenomenon? Would the comparison between the economies of Greece and Germany prove this point of view?
Furthermore, I could come to an agreement with you that Germany has seemed to "engineer" a system that benefits its citizens first and foremost. But isn't that what "rational players" in a world economy are expected to do? I.E. when I, a US citizens vote for a president, I am voting for somebody that will put myself and my country first on their list of priorities. If I found out "my guy" were favoring China, why I would vote for someone else during the next election. I feel that this is a rational assumption, that citizens in every country on the planet make in regards to their politicians and/or central banker.
Lastly US "football" is the greatest sport on earth. Why? Because once you step in between the lines, all the bullshit ends. The object of the sport is to put your opponent on his ass every play. It is a fair game that way. Unlike economics, where today Keynesians get to hide behind the "money printers" and blow sunshine up the asses of the people, all the while their standardof living drops daily.
TDR:
You know that's not true! We are one! We are United!
For years, the people of Greece, Spain and Portugal woke up asking
"what would the Germans need?..." and "...The Germans will definately approve...."
(sarc)
Good Heavens.
Big fan of Spanish wine.
It is my hope that Greece, Italy, Spain and Portugal leave the EU and devalue their currencies before the dollar takes "THE BIG SHIT".
It will allow me to stock up on some of my favorite wines.
What about Ireland you ask? Jameson gives me whisky dick. Fuck the Irish.
Now hold on. Real Football is the greatest sport on earth, american .........ball is a distant second. Canadian Hockey is dead last.
By the way, american football should change the name. How many times during the game do the players touch the ball with their feet?
Who has counted?
Enter here proposals for the new name of American ..............ball.
Your "real football" in the US is only for kids whose mommy wont let them play football or baseball because they might get hurt. We call them "soccer weenies".
"Rollerball" would require too many rule changes. :>D
American Rules Rugby
I was looking for a way to say that. Imagine that - someone looking out for their own best interests first. Wish we could find a President like that.
Exactly...
not the point.
When you sign on to be part of a union or a tam you have a role to play. In a union, if the union does not work your role will not work out either. This is what Germany did not understand. It gamed a system it was part of and ruined it.
Get it now?
Like Carmelo Anthony and the Knicks: He scores 30 and they lose. Nice game Carmelo? I don't think so. But maybe you do...
From what you are saying Robert they were forced to join the Emu. If this is true, and I dont believe it is, surely they were right to game the system?
Apropos what many posters are saying: If the union were perfectly prudent (according to Austrian principles) it would have run a zero inflation rate target which, I presume, would have crushed Germanys economy along with all the others? The moment you entertain the slightest inflation rate to grease the system you become, ipso-facto Keynesian.
Since the Austrian approach was never advocated and since the union is a team (and Germany were NOT forced to join) then your idea of adopting a median interest rate policy does seem like the correct real world solution - notwithstanding your own arguments against yourself!
You still haven't addressed a couple of my main critiscms.
In fact, on day 1 of economics 101, we are tought that individuals, firms and yes, countries, make rational economic decisions to their own maximum benifit.
As I have pointed out earlier, it is not just Germany that has benefited from the EU through the mechanism of a lower currency value that has allowed it's exports to be be more competitive, comparably of course in the world market. But, Greece has also benefited from this economic union throught the access of low (comparatively) cost financing.
Now, as you have pointed out, monetary policy is just one point on the triangle. Other issues such as fiscal policy play an important and key role in the economy of any country. So, what did the Greeks due with the access to cheap financing? I wish I could tell you exactly when, where and who messed things up, but alas, I have been too busy focusing on the US's mistakes to offer a contemporary economic history of Greece's economic woes. But, what I can offer you is this, fiscally, with the backdrop of 10 years of (comparatively) cheap access to financing, the Greek government (People) fucked their opportunity up and not the German government (People).
You earlier mocked me about "comparative advantage" and I felt slighted. You make the orginal sin that Greece has something I and/or the Germans want in the first place. But, lets play the game.
Comparing the Greek's beaches to the German beaches. Comparatively, the sands on the Greek beaches are smoother, the weather on the Greek beaches is finer and the food on the Greek beaches, tastier. So, comparatively, Greek beaches beat German beaches hands down, economically speaking. Now, lets play this game with virtually everyother good, service and financial product that can be measured between the two economies. In almost all comparative instances, the Germans win when we compare them with their Greek counterparts. Now is it the German's fault that they build better cars? Or mix better chemicals? Or make more accurate measuring devices? Or offer finer architechural services? Ahh, short answer is, no!
In fact, you seem to think that the market, full of millions of rational players hoping to maximize their profit is wrong, and you, mister American econ. professional is right! You sir, are wrong. the market IS NEVER WRONG! Got it? Learn it, live it and love it!
PS Who says Carmelo Anthony's goal is winning? Have you seen how much that man gets paid for just showing up? That sir, is winning, even when you lose.
Sir:
Picking up on your metaphor:
A team is owned by a single person/entity, who hires general manager, who hires a coach.
Who "owns" the EU?
Who defines the roles?
Do the players have a say?
If Germany "ruined it" why didn't the (majority) other "players" in the EU kick them out/trade them?
(For Russia, perhaps?)
Clearly, Germany is a player in the EU who is looking to trade or option out of their current contract.
If the EU is such a worthwhile endeavor, certainly it can survive, perhaps thrive, without Germany.
Go with God.
Dear David discoverer of the concept of comparative advantage...
Inflation 'as always and everywhere etc...' does not help us here since all these nations are under the same monetary policy, the one conducted by the ECB. Yet each country has its own undeniable rate of inflation.
So the ECB determines the EMU-wide rate then what determines the local rates? What we have left is fiscal policy, culture, etc. The Germans have a strong cultural anti-inflation heritage to control inflation since their post WWI hyper inflation.
Rigidities in EMU prevent their competitiveness from disciplining prices across the Zone.
As for the EMU and assessing blame.... I think of like this:
What has happened it is the result of a poorly thought out contract. Suppose you marry someone its true love. You go on to have a child. But you and your spouse are of different religions. You did not agree prior to marriage what to to what religion your child would be raised under. There is no clear solution here; it's a conundrum.
Whose fault? Both of your fault for not thinking ahead.
Europe is in the same place. They had no fiscal pact. They knew it was loose end but had a poor patch in place. It did not work. Now they are in a mess. My point is you blame everybody. Germany is being a bad guy by imposing its will on everyone. A recession complete with unrelenting austerity?
That is stupid. And it's reality. Reality often is stupid and it is result of a series of mistakes. Now Europe must resolve them and Germany wants it done on its terms because it is not in trouble but it contributed mightily to the problems elsewhere.
in a word.
Why?
Germany is a guilty of these economic sins as anyone regardless of how innocent it looks to you.
Bottom line: Either form a United States of Europe OR get rid of the Zeuro, vacillating about only serves to enrich the Lawyers/Banksters.
Apparently the US is NOT the only country that does this: "They'll eventually do the right thing, after having exhausted all other possibilities." All these Euro heads of state want to have their cake (prosperity) and eat it too (rule their own little piece of Europe!)
Dear David discoverer of the concept of comparative advantage...
Sir, from my post, you shirley must have deducted that I may have run across comparative advantage in my life.
Moving on. In regards to monetary policy, I was merely trying to point out how silly it was to comparing the economies using the rate of inflation. I could write a book on how Keynesians have misinterpreted inflation. To make a long book fit into a sentence, "In the scheme of things, mild deflation is the natural course of economies." I understand that you disagree with this statement, but I could point to million different examples, from cars to cell phones that have seen prices "deflate". In fact, virtually all people wake-up and go work with the goal of efficiency. Which is in of its self, deflationary.
Moving on and wrapping things up. Reread my post regarding Germany. Germany is playing the game the way it should be played. To win. YOU PLAY THE GAME TO WIN. Blaming for Germany for #winning is like blaming the NY Giants for winning the Super Bowl, silly.
Shirley, you jest? and Lavern too?
Dont call me Shirley! ;-)
You boys are forgetting that in the early 1990s Germany was called "the sick man of Europe". The euro project was already well under way. The Germans enacted many painful reforms, labor market, austerity etc to put themselves on the track. Now that they've turned things around it's revisionist to blame them for #winning, as stated above
The green arrows is from me. Thanks for reading!
A science teacher of mine once said, 'it is a bad parasite that kills the host.'
Germany's dominance of the Zone is killing it.
Germany does not have any sense of enlightened self interest.
That is why, I think you are wrong.
For example the Japanese know that it is bad to crush your opponent. You need to give him/her a face-saving way out or he will be stubborn and things will get messy. The Germans have not figured this out.
Best,
RAB
A science teacher of mine once said...
OK man! I am obviously missing something. You are equating the fiscally conservative and value adding Germans as the parasites and the spendthrift and feta cheese eating Greeks as the hosts?
Or, do I have my wires crossed?
Beautifully said.