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Germany the Vampire Squid of Europe

RobertBrusca's picture




 

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

 

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Sat, 03/31/2012 - 19:49 | 2306970 Clowns on Acid
Clowns on Acid's picture

Bobby ! Your argument seems to be contained in this one paragraph -

"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."

Ok...so because Greece, Italy, Spain, Belgium do not have the fiscal policy, the work ethic, or social policy to perform well....Germany should accept the "responsibility" of these countries freely taken, socio-economic decisions?

It is certainly NOT a popular way of looking at it, except by those that also think it is the responsibility of all US taxpayers to bear the cost of bailing out Fannie andf Freddie because of the freely taken, bad decisions of some housing investors.   

Sat, 03/31/2012 - 20:27 | 2307026 RobertBrusca
RobertBrusca's picture

They have joined in a zone and they to AGREE to a common policy that is workable.

The Fannie Freddie problem is different. partly its a legal question. partly its a question of whether letting them collapse is economically viable for the economy.

The trouble with EMU was that it launched into a zone that was not well thought out and does not have any legal architecture. The Mass-Trick fiscal patch did not work. They let problems fester util there was a crisis now what?

So now we are in a situation where we have essentially debtor creditor games being played. We know that this is bargaining situation not a case of right vs wrong.

Running an inflation rate as low as Germany does take a lot of consensus. It is because Germany suffered an interwar hyper-inflation that its people have a will to keep inflation low that is unmatched. That fact will make it hard for ANYONE to tie up to the German economy in a currency zone.

Germany is not right about its inflation rate; it is obsessive.

Greece, Italy, Spain, Belgium do not have the fiscal policy, the work ethic, or social policy to perform...because they do not have the history of having made Germany's mistake.

Sun, 04/01/2012 - 05:18 | 2307350 Kiwi Pete
Kiwi Pete's picture

It's a good point you're making Robert. If you join a union you have to learn to be a team player. That means you can't just carry on as before. Even if you were the more fiscally responsible. You have to adjust to the others reality.

Just like a marriage! I could argue my wife shouldn't spend as much as she does. Which is true! To me. But if I tried to enforce that and it all ended in tears whose fault would that be?

Sun, 04/01/2012 - 02:30 | 2307305 alfman
alfman's picture

That fact will make it hard for ANYONE to tie up to the German economy in a currency zone.

wrong!

since the mid-70s and for about 20years the Dutch gulden, Austrian Shilling (and somer other currencies, I can't remember which) were tightly bound to the DeutschMark. needless to mention, that in these years growth (for above mentioned countries) was bigger than in the last 15years of EMU.

Sat, 03/31/2012 - 20:39 | 2307042 Ghordius
Ghordius's picture

"Germany is not right about its inflation rate; it is obsessive"

Not as "obsessive" as a gold standard, which by definition is mildly deflationary.

-----------------

Robert, after printing trillions of QEs and LTROs, eventually we will all have enough inflation everywhere...

Sun, 04/01/2012 - 06:45 | 2307386 simonsito
simonsito's picture

this is where I loose Mr Brusca, too... not that there isnt something to his points, but when you add contextual facts like these trillions already printed, it looks weird to blame german monetary policy on all that, especially when youre livin in germany, and have witnessed a huge decline in living standarts over the last decade...

Sat, 03/31/2012 - 23:59 | 2307223 StychoKiller
StychoKiller's picture

It's not gonna matter if the wheelbarrow is made in France or Germany, ALL WILL suffer this time!  (Got Gold?)

Sat, 03/31/2012 - 20:36 | 2307041 Clowns on Acid
Clowns on Acid's picture

"Greece, Italy, Spain, Belgium do not have the fiscal policy, the work ethic, or social policy to perform...because they do not have the history of having made Germany's mistake."

Well they have made the mistake now....and Germany does not want to be part of the payback.

"Germany is not right about its inflation rate; it is obsessive" Obsessive to whom? To you? To the other countries who are now in trouble?

Sat, 03/31/2012 - 19:46 | 2306965 Solarman
Solarman's picture

This is typical socialistic sop.  Let's keep giving money away and make the Germans pay for it.

 

I have a better idea, let those country's drop the whole idea about going through a bank middleman that extracts a toll, and allows governments to increasingly enslave their people with debt and austerity while thinking all along everything was OK.  Inflation long ago through currency debasement would have killed the Progressive illusion with minor pain.  Now we get to watch the apocalypse.

 

On another note, maybe this was Germany's plan all along to screw with to economic systems of countries they despise; the French and the English.  I would watch for an alliance of sorts with Russia and Germany.  From a geopolitical point of view, they need each other.  Resources for technology.

 

The Rothchilds game is coming to an end.

Sat, 03/31/2012 - 20:34 | 2307036 Ghordius
Ghordius's picture

Solarman, the Germans and the French aren't in the game of despising anymore. Look somewhere else. Though you are right, Russia and Germany are even now each other's biggest trade partners.

Sat, 03/31/2012 - 20:12 | 2307003 RobertBrusca
RobertBrusca's picture

German money is not the key. It is an ingredient.

What is important is an agreement on what the Zone is. And it has to be more than a pledge to have one currency for everybody. There must be some sort of plan everyone agrees to. When you form a union everyone has responsibilities

Think of it this way.

You tie a group of cars together side by side. If they don't all steer the same direction you crash. If they try to go different speeds they crash. You can blame the ones who go too fast or too slow. It is the same with countries when you tie economies together by fixing exchange rates. For stability you need consensus. The e-Zone only has consensus on the common currency. It's not enough. This is why I argue that Germany is as much at fault for the Euros problems as is Greece.

I am simply saying that Germany under the Bundesbank used to shoot to cap inflation at 2%. EMU shots for 2%. German achieves 1.7% it turns up the heat on everyone else to do even better on inflation which may mean slowing down economies that want/need to grow faster.

WHAT I AM DOING IS TRYING NOT TO CEDE TO GERMANY THE RIGHT TO HAVE ITS CHOICE BE THE ONE THAT THE WHOLE REST OF THE UNION MUST EMULATE.

Sun, 04/01/2012 - 06:40 | 2307383 simonsito
simonsito's picture

what about the fact that theres a completely seperated class of elites in EVERY €-country, hell-bent on forcing their population -not themselves- into the economic nightmare parts of which you have accurately described.

The EU is a political frankenstein, patched together from the delusions of the national elites. They have immunities and exemptions from national taxes..the EU-project as an political idea is dead, now its all about central-planning and extortion, but from every citizen of the nations to the new class of EU-cadres....its like communism, only that its even more hypocritical.

you shouldnt blame it solely on germans, or what about all those corrupts that have been ordering those german good for huge bribes...?

 

It all comes down to this:

pay low wages to produce things that only corrupt bureaucrats would be buying - bribe them, make the taxpayer pay the bill, or make it a KfW-guaranteed private deal, and then blow it up later so you can get it from he same people that already produced alll this shit for no wage increase in 20 years. Then repeat over and over......

Sat, 03/31/2012 - 23:56 | 2307219 StychoKiller
StychoKiller's picture

There are exit doors, all the 16 countries have to do is walk thru them -- pretty sure that Germany isn't gonna roll out the Panzers in this age of political correctness and Socialist/Progressive hand-wringing.  So sorry, but the biscuit wheels are coming off all the Socialist Gravy trains, unfortunately, very few want to get off and help push the train -- look at the millions of Spanish rioters, for example.

France, and all the other Zeuro members are gonna stay in the union until they see a better deal on the other side of the exit -- good luck arguing against that point.

Sat, 03/31/2012 - 20:12 | 2307002 RobertBrusca
RobertBrusca's picture

German money is not the key. It is an ingredient.

What is important is an agreement on what the Zone is. And it has to be more than a pledge to have one currency for everybody. There must be some sort of plan everyone agrees to. When you form a union everyone has responsibilities

Think of it this way.

You tie a group of cars together side by side. If they don't all steer the same direction you crash. If they try to go different speeds they crash. You can blame the ones who go too fast or too slow. It is the same with countries when you tie economies together by fixing exchange rates. For stability you need consensus. The e-Zone only has consensus on the common currency. It's not enough. This is why I argue that Germany is as much at fault for the Euros problems as is Greece.

I am simply saying that Germany under the Bundesbank used to shoot to cap inflation at 2%. EMU shots for 2%. German achieves 1.7% it turns up the heat on everyone else to do even better on inflation which may mean slowing down economies that want/need to grow faster.

WHAT I AM DOING IS TRYING NOT TO CEDE TO GERMANY THE RIGHT TO HAVE ITS CHOICE BE THE ONE THAT THE WHOLE REST OF THE UNION MUST EMULATE.

Sun, 04/01/2012 - 06:27 | 2307377 Ghordius
Ghordius's picture

Germany has every right to lead in monetary policy in the eurozone and the others have every right to follow or not.

Currently, the leading is done by that "Kraut" Mr. Draghi and the "following" is done by the 17 highly political central bank presidents.

And you know that our central bank presidents are political - they are set up there by the governments and the parliaments.

This is your problem - it's not like you are used to. Where you come from the banks dictate central bank policy.

You can twist it as you want - we are fond of the BundesBank model and we hope to keep inflation low - you are not.

Sun, 04/01/2012 - 06:14 | 2307372 Ghordius
Ghordius's picture

According to this logic, the dollarzone would either need two currencies, one for NYC and Washington and one for everybody else, or "someone" in NY or Washington should show some responsible behaviour... what is the current deficit? 10%? 12%? Projections?

You are bitching about an inflationary difference of 0.3% (2% minus 1.7%). You seriously believe that a Central Bank can achieve this kind of precision, eh? And that this 0.3% diff matters... Man, they really teach you something about the BundesBank and other CBs at the NY-FED.

Sun, 04/01/2012 - 14:56 | 2307935 Lednbrass
Lednbrass's picture

Great idea, there is certainly a fair part of the country that would happily vote out of a dollar zone and leave the NY-DC axis of evil and everything in between to rot. 

One big difference though- Germany actually produces real things that have value, NY and DC produce nothing of value whatsoever unless one considers monetary, social, and cultural cancer to be valuable.

Sun, 04/01/2012 - 00:49 | 2307263 brettd
brettd's picture

Time to untie them, before the wreck turns fatal.

Sat, 03/31/2012 - 19:38 | 2306951 JamesBond
JamesBond's picture

got to love the sarcasim of RobertBrusca

he's the master.

Sat, 03/31/2012 - 19:32 | 2306944 ekm
ekm's picture

There is NOTHING INCORRECT in this article. I can even dare to hope (or dream) that Mr. Brusca has read a few of my entries.

These countries have IDENTICAL ECONOMIC MODELS:

- China = export economy of CHEAP goods = very low consumption = relies on the world to consume

- Japan = export economy of STRONG AND ELECTRONIC goods = very low consumption = relies on the world to consume

- Germany = export economy of VERY STRONG AND ALL KINDS OF GOODS = very low consumption = relies on the world to consume.

Americans were buying everything so far exchanging electronic dollars = military protection for Real Goods from these countries.

Question: In this age of debt, who is going to buy all that over-production and for how long?

Sat, 03/31/2012 - 19:45 | 2306964 RobertBrusca
RobertBrusca's picture

exactly the problem.

Export-led growth is an issue The US/IMF/WTO have not taken up.

Until they do we are condemned to continued current account imbalances and threats of instability from the capital flows they engender.

Germany is essential pushing the same model with the e-Zone using lower inflation to gain its advantage.

Sat, 03/31/2012 - 19:57 | 2306982 Clowns on Acid
Clowns on Acid's picture

Bobby - "Until they do we are condemned to continued current account imbalances and threats of instability from the capital flows they engender."

Are you arguing for a return to a gold standard? Because that would answer your complaints.

Otherwise you are simply arguing for argument sake...that Germany Gov should control their individual business people and worker unions to accept some EU 1000 page loosely written "trade agreement" with all the other countries of Euro Zone.

Which is it?

Sat, 03/31/2012 - 19:56 | 2306981 ekm
ekm's picture

Thank you sir.

Sat, 03/31/2012 - 19:03 | 2306920 Gordon Freeman
Gordon Freeman's picture

I have no special love for Germany, but this article is so off-base, it defies description...

 

Sat, 03/31/2012 - 19:29 | 2306940 RobertBrusca
RobertBrusca's picture

The idea which you reject is that policy SHOULD be run for the Zone instead of for Germany. It is odd that Italy has a bad rap in the Zone even though since the start of the Zone its inflation performance has been better than for the US.

Try to see the points I have made, instead rushing to the defense of the status quo.

The Zone has been tailor made for Germany and Germany is trying to turn every country into a new Germany.

I think that is a defensible argument and not a comfortable fact for current EMU members and it's a reason to expect continuing tensions.

Sat, 03/31/2012 - 20:09 | 2306998 disabledvet
disabledvet's picture

"facts are a stubborn thing" however. Without the French there is no EU. It is the French who made a conscious choice to link themselves to Germany and thus create "the modern EU." The complexity of this relationship simply isn't even acknowledged in this impossibly simplistic article presented here. the "one to watch" will be Italy. they aim to maintain their status as a "core member." and the labor unions in all of these nations of course. at present they seem to represent one of the view "pan European institutions."

Sat, 03/31/2012 - 20:28 | 2307027 Ghordius
Ghordius's picture

yup. correct, France is the linchpin of the eurozone and arguably also of the EU

and it keeps the Germans and the Russians from getting too cozy, again

and it bridges between the northern and the southern cultures, between the germanic and the romanic

so what? lots of quite fetching ladies from there, including the very tall one holding the torch in NY

Sat, 03/31/2012 - 23:09 | 2307169 palmereldritch
palmereldritch's picture

Great points Ghordius.  You owned the thread.

You should be posting an article here instead.

Sat, 03/31/2012 - 20:36 | 2307043 ekm
ekm's picture

I am impressed.

French are latinized germans and they do actually play exactly the game you're depicting.

Sat, 03/31/2012 - 19:36 | 2306950 ekm
ekm's picture

Correct.

Germany produces

Germany lends money to Greece by buying greek bonds via german banks and german pension funds.

Money is lent at the condition of buying german goods.

Greece buys german tanks with that money and is stuck with the interest.

It's called VENDOR FINANCING.

Sat, 03/31/2012 - 20:04 | 2306991 Clowns on Acid
Clowns on Acid's picture

ekm - So you are arguing that Greece should build their own tanks then?

 

Sat, 03/31/2012 - 20:10 | 2306997 ekm
ekm's picture

Absolutely not.

What I stand for is that Greece, Italy, Portugal, Ireland etc get together and tell Germany to stick it up the ass. If they want to over-produce, there will be two options:

- Give the over-produced stuff for free.

- Stop producing - here lies the problem. Unemployement in Germany would have soared.

So, same as Chinese and Japanese they just want to over-produce and sell. Check below - the proof. Since Italians can't buy, they want to stick the stuff to the asians who themselves want only to export.

http://www.dw.de/dw/article/0,,15742650,00.html

 

Sat, 03/31/2012 - 20:17 | 2307015 Clowns on Acid
Clowns on Acid's picture

ekm - Over producing ? Who is forcing the PIGS to buy?

Asians are buying...French wines, Italian leather goods, Greek olive oil....not to mention the EUR based sovereign debt (although I would advise them to SELL!)

The PIGS may tell Germany to stick it up the bulbous asses....by defaulting. Thats why Germany is taking precautions and preparing for a hybrid D-Mark.

Hopefully this is all becoming clearer to you. Cheers.

 

 

Sat, 03/31/2012 - 20:23 | 2307021 ekm
ekm's picture

I didn't say they are forcing the PIGS to buy. I said that Germany offered funds to them to buy german stuff, which they did willingly. Right or wrong, it's irrelevant.

Selling Wine and Gucci is not enough for europe to come back to normal.

I don't think anybody is so stupid to buy EUR based debt except for China in order to make RMB cheaper so they can............... (wait)..............export to Europe.

Thx for the debate. I enjoyed it.

Sun, 04/01/2012 - 11:01 | 2307553 LowProfile
LowProfile's picture

Nicely done, boys.

clapclapclapclap

Sat, 03/31/2012 - 19:34 | 2306948 Ghordius
Ghordius's picture

Italy's promise was to decrease the debt/GDP about 1% per year, so to get from 105% to 85%. That was the source of the bad rap.

And some countries want the German model of governance. Don't ask the French because they would lie to you, but ask for example the Italians.

Sat, 03/31/2012 - 19:49 | 2306968 RobertBrusca
RobertBrusca's picture

some do
some don't

All are trapped in the Zone now.

Only Germany and few other countries have a system set up to control inflation to a very low pace. The others do not and are trapped in a rat race (to lower inflation) that they do not even begin to understand.

Sat, 03/31/2012 - 23:46 | 2307208 dogbreath
dogbreath's picture

how can the germans control inflation when they are the backstop for everyone elses debt. 

Sat, 03/31/2012 - 19:59 | 2306986 Ghordius
Ghordius's picture

"trapped in the Zone" LOL

we are still at the very beginning of a possibly very nasty currency war. that's the moment when we "trapped in the eurozone" don't want to be ambushed by FX waves screwing our internal supply lines - or we have to ship our industry elsewhere, too

ask the Texans if the "felt trapped in the dollarzone"

ask the Swiss if they really can stomach a (in comparison) stronger CHF

ask the Icelanders if they don't feel an own currency would be a good thing to keep

lol - are you sure you are not "trapped in your thinking"?

Sat, 03/31/2012 - 19:14 | 2306929 John Wilmot
John Wilmot's picture

Indeed. Blaming Germany for the EU's problems is like blaming "speculators" for high oil prices, or "greed" for the housing bubble. Wrong, simple-minded, and MOST IMPORTANTLY, designed to distract the people from reality.

Sat, 03/31/2012 - 19:40 | 2306958 LowProfile
LowProfile's picture

Well, when a bunch of somebodies who aren't oil producers get in the futures market with $100B or more each and start pushing the price around, yeah:  They're fucking speculators, and they are responsible for high oil prices...  At first.  Eventually the price will go up in USD because we created too damn many USD (and of course, the speculators wouldn't have the $ to speculate with if we hadn't given it to them at near 0%).

But you have a point, laying the blame for all the EU's ills on Germany is clearly horseshit.  However it's remarkably similar to the speculator issue, because if German banks hadn't foolishly loaned the money to those who couldn't repay, neither would be in this mess.

Sat, 03/31/2012 - 20:21 | 2307018 steve from virginia
steve from virginia's picture

When a bunch of somebodies who aren't oil producers get in the futures market with €100B or more each and start pushing the price around, yeah: They're fucking speculators, and they are responsible for high oil prices...

 €100B, Greece, €100B, Ireland, €2Tn Spain ... this is why there is a problem in the Eurozone. Germany provided a ceiling on the cost of borrowing ... for a little while.

The trillions of euros worth of borrowing was to Germany's (short-term) benefit and to that of the oil producers. Now, the Europeans cannot meet their obligations, not even the Germans. They have nothing of worth to offer, only more debts (that the Germans refuse/are unable to guarantee).

Waste-based economy = bankruptcy.

Sat, 03/31/2012 - 20:50 | 2307052 LowProfile
LowProfile's picture

TY, good summation.

Waste-Based Economy + 10^10

Sat, 03/31/2012 - 19:32 | 2306945 RobertBrusca
RobertBrusca's picture

No not really. There is a bit more at work here. Since fiscal and monetary policy must coordinate there is a question of who monetary policy is being run for. It clearly is for Germany whose inflation rate is the lowest in the Zone.

Sat, 03/31/2012 - 19:41 | 2306954 Ghordius
Ghordius's picture

Robert, this is Ivory Tower thinking. Germany has an unique tightly controlled distribution/retail system and the Germans are the most price sensitive people of the world. They still think that there should be a coin smaller than One Cent. Of course inflation is lower in Germany - the economy has a human psychology and behavioural component, you know?

The Agenda 2010 of the Social Democrats brought an immense pressure on wages - this alone would be an incredibly strong factor on any price increase.

Sat, 03/31/2012 - 19:07 | 2306918 Ghordius
Ghordius's picture

you shall not take the name of the Holy Vampire Squid in vain...

btw... an incredible hogwash, this article

"If policy were geared for the average EMU country", there are 17 countries in the eurozone - 17 votes on nearly everything that has to do with policy.

btw, is policy in the US geared for the "average" state? if yes, how?

Sat, 03/31/2012 - 19:22 | 2306935 RobertBrusca
RobertBrusca's picture

I look at the original 12 so I can calculate inflation from the start of the zone. It's a benchmark that does not exit for the new members who were not there at the start. The point still holds for them but from a different reference date.

Sat, 03/31/2012 - 19:40 | 2306957 RobertBrusca
RobertBrusca's picture

sorry
"benchmark that does not EXIST"

Sat, 03/31/2012 - 19:30 | 2306941 Ghordius
Ghordius's picture

Robert, we are still talking about 12 country votes. What you don't seem to understand is that even countries like Italy with a long history of inflation would have adopted gladly the DM if possilble.

What the majority of the countries and the electorate wanted was the BundesBank model. You make too much a national thing out of it, ergo IMHO you don't understand how "the original 6" think (Germany, France, Italy and the BeNeLux). We are confortable with the same policies. If they work.

Sat, 03/31/2012 - 19:40 | 2306956 ekm
ekm's picture

Sir,

Obvisously you do not know mediterranean mentality, otherwise you wouldn't be saying:

"What you don't seem to understand is that even countries like Italy with a long history of inflation would have adopted gladly the DM if possilble.". I am from the mediterranean and I can tell you, no, no and no. We do not like german lifestyle, if not consuming, eating sausage and dying in boredom can be called as such.

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