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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
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Pls read again - I'm talking about BundesBank-style currency and German-style governance and policies.
Not lifestyle, there the Germans have still some three hundreds years to catch up, at least
I read it again and I retract most of my post.
However, National Mentality influences a lot the National Policy regardless of the politicians agreeing in principle with Bundesbank.
It is quite clear (at least to me) that Italians could not keep up with German's efficiency regardless of how much their leaders wanted to.
Dude. Northern Italy is more akin to Austria and Germany than anything else. Very industrious and fiscally aware. Generalizations are well, general in nature.
Agree. Lombards are are mixture of romans and germans, fully latinized.
But they have to subsidize the south, which is basically a larger greece, no exageration whatsoever.
If they split as Umberto Bossi of Lega Nord wanted, it is quite possible they would have been very close with Germany.
I know italian quite well and I still read Corriere Della Sera 2-3 times a week. Moreover, I am a die hard Juventus fan. Milan equalized today, so if we beat Napoli tomorrow, we'll be just two point behind Cavaliere's team, who by the way as Ghordius told me, called Finnish food "disgusting" (see a little bit further down).
http://milano.corriere.it/milano/notizie/cronaca/12_marzo_31/manifestazione-piazza-affari-corteo-migliaia-persone-2003905342081.shtml
Italian verstion of Occupy Wall Steet, today.
My father-in-law is Friuli so I may get an update on that game tomorrow :)
At 2.45 pm eastern time. Watch it. It's going to be entertaining.
Juventus 3
Napoli 0
Life is good.
I fully agree with you and I have the perfect example: when the EUR was launched, the Germans wanted smaller coins and even the Dutch thought they were crazy.
Prices for small things all over the eurozone went up from let's say 0.65 to one full EUR - except in Germany. Why? Because the habits were different.
For a while, charities in Holland made a fortune by asking people to "get rid of the unnecessary coins".
Nevertheless: europe did work under a gold standard, arguably the harshest master of efficiency and balance. It's a question of time.
- btw, Finland wanted the "Food Ministry of the EU"! Remember?
Never heard of the food ministry of EU, but living for the first 20 years of my life in communism, nothing surprises me as far as economics is concerned.
oh, you have to read up on the 2006 Finnish-Italian Food Fight, aka "Southern European food-chauvinism"
it was about who would house the european Food Agency
even a quasi-neutral article like this http://euobserver.com/843/21624 is hilarious
LOL. This is so freaking hilarious.
I came to Canada in 1999 and have not kept up fully will all the european idiotsies.
as Trayvon7777 would say..."thas rayciss"
I miss him. Just so you could have laid that handle on him in person...LOL
What a pile of horseshit....bitchez.
The EU is not a German scheme to conquer Europe, you fucking muppet. The EU is a banker scheme to integrate Europe (and ultimately the world) which has been on the go since useful idiot dipshits like yourself were screaming anti-Hun propaganda in 1914.
The nation v. nation deathmatch that the TV drones on about is propaganda. There are no nations. Look around you.
Wow! I'm Speechless..what a tour-de-farce from you.
Well you sure walked right into it. However, re Germany, I believe that you are onto something.
I am surprised at you Robert - pleasantly surprised.
Re your 'pleasantly surprised' ...
It is funny here ... Robert Brusca is being savagely attacked, when in this article he is arguing a theme often presented by Tyler Durden himself (or themselves) ...
That Germany is a mercantilist country which, once having arrived (even if pushed) into the EU, wound up finding it could 'game' the whole system by getting the Mediterranean block into debt slavery buying German products, using its clout to overwhelm local companies in other EU countries, and yet manipulating EU and ECB structures for the benefit of its own economy, so long as France was taken care of as well.
Tyler doesn't get this kind of attack for saying the same thing ... so it seems that a lot of the hostility to Brusca must be leftover from reaction to his earlier posts, his rah-rah posts on American real estate (somewhat 'Bottom may be in!'), which appeared pretty ludicrous to the typical ZH reader.
As Tyler suggests, German's mercantilism is actually a great, neglected, important story, which Brusca is discussing here as well ... the way that Germany, and to some extent France, have been gaming the EU system for themselves ... and also buying up, squeezing out, or destroying other business in favour of multi-nationals tied to the 'big' EU players.
Funny how ZH readers can also be seen to stampede in a herd.
Da. It appears that we have developed a new orthodoxy here on ZH. Or the one that used to just be loud is now dominant. All the more reason to speak truth, no matter who fancies themselves in power.
i.
I "savagely" attack Tyler too when he comes with this "they are playing a mercantilist game". It's pure propaganda.
Let's put it like math, ok? the ingredients for complete imperialism:
1. Navy to rule the waves
2. Army to occupy resources
3. Mercantilist policies to acquire market shares (by dumping and other manouvers if necessary)
4. Financial cracking methods to fund the whole shebang and finesse some points above
------
No, Germany has a defensive policy mix. Implying that it's mercantilistic is a way to make them look like aggressors.
Agreed, Ghordie. It's exactly the same tactic as calling them 'rayciss' ... designed to inflame the emotions and thereby attempt to 'shame' them into bowing down to the Golem Sachs technocrats who want their gold and workers' savings.
It's despicable.
On the plus side though, it is a good thing to see dissenting points of view here because echo chambers suck. He also has the stones to show up in person and defend his thesis.
Good or bad, right or wrong, that is a positive thing. How many former Fed types with a PhD in Fiscal Phrenology would be willing to walk into this snake pit and do the same?
I hope he continues to post, though I may not agree with his views. There is a valid pont here though, Germany has benefitted greatly from using the Euro in terms of keeping their goods cheap and allowing them to dominate markets.
He's not onto something ... he's on something (found in the woods wihile snuffling for truffles, I suspect).
Germany is not the perpetrator ... Germany is the target!
Go back to your seminary, Brusca ... your propaganda is not wanted here.
The fact of the matter is that the creators of the EMU/EU wanted full political union from the beginning, being the international socialists that they were/are, but they couldn't sell that to the people, so they created this bastard system of monetary without fiscal union, which they knew perfectly well would fail just as it has, and out of that failure would emerge the full political union they wanted to begin with. This is what they call the Hegelian dialectic: (contrived) problem, (expected) reaction, (planned) solution. That continent is infested with Hegelians, otherwise known as Dialectical Materialists, otherwise known as Marxists, otherwise known as the ruling establishment of all of your precious "nations." Any rivalries between the nations of the EU are petty fights for position within the new order that is emerging in Europe - but when it comes to the great and glorious European Project (i.e. imposition through fraud of a non-democratic and authoritarian international government), they circle the fuckin wagons ricky tick.
Kind of like how the two American political parties engage in a partisan deathmatch in front of a live Television audience, but they seem to unite in opposition to anyone who actually challenges the main pillars of the status quo....hmmm, strange....anyway.
Let me guess, you're one of those folks constantly yelling about the impending collapse of EMU/EU? Will [insert latest debtor nation] default or get bailed out? Will the Germans go along with more bailouts or not? And you also think it's vitally important that Romney beats Obama (or vice versa)? LOL. You're watching a soap opera.
http://lh5.ggpht.com/_e109kKH12do/TEXvnctiYhI/AAAAAAAABiQ/YLyGgqGjp94/co...
...careful you don't step more than 1 foot to the left or the right, as you might step outside the range of approved discourse.
Awesome post. Maybe this Brusca guy is muppet practice.
Who is this bruscha fuck anyhow?
no, it's correct.
it's not like the first time the germans have tried this game.
third strike you're out.
It misdiagnosed the most basic premise that there will never be consolidation of the debt or common budgetary controls, ergo a unified currency is the ultimate invite to a free lunch, which we all know is impossible, and against human nature. There is no dinner with Mr. Jefferson. It's a farce to believe that there is a solution to an unsolvable game. The only solution is unwind. The only question is when?
unwind? Best suggestion I have heard.
That will happen when all the European aristocricy that run this shit show (they fancy themselves as the Rothschildes!!!) have their hands and feet cut off with a chainsaw.
"third strike you're out" - a concept that is applied only in one country of this world...
and how many times has the UK tried this "game"? or the US of A? Once each.
Ahead on points? Really?
your thinking is adversarial - what if we continental europeans are not using your paradigm?
Gee, Italy, Greece and Spain are part of the european continent and one imagines that they view Germany's position more similarly to the author than to you.
I still remember one of the Monty Python guys commenting in the early 90's about the incipient EU that it was hardly an original idea. Germans had desired a european union for a long time. They planned to call it . . Germany.
??? One country
softball was an Olympic sport for women.
Japan, Caribbean countries and Venezuela as well as the US play baseball.
"Beisball been berry berry good to me," said Chico Escuela on SNL
Mas que uno
Lo siento mucho
Bat and ball sports outside the Americas have even less interest and impact as soccer does in the US. The Olympics has curling too, so making it there doesnt mean alot.
[quote] Germany has created a game of 'economy' and set the rules of EMU to benefit itself and to impoverish everyone else.[/quote]
As far as I know, NO ONE twisted Greek arms to join the Zeuro (or any other countries either!). Show me the requirement(s) for spending MORE than you produce! Bad choices were made all the way around, but choices they were.
"As far as I know, NO ONE twisted Greek arms to join the Zeuro"
Well if the boys at Goldman didn't twist their arms they sure buttered the floor.
you don't know him from his posts, otherwise you would have catched it: he is referring to the game of dominating the world.
he's big on domination and rebellion from domination
No, it has been applied before. Remember Carthage?
LOL, yes. And if you listen to this propaganda, then it does remind us to Cato the Elder debating the final distruction of Germany
http://en.wikipedia.org/wiki/Carthago_delenda_est
This article was GARBAGE! I couldn't even finish it. Tyler, dude, maybe you should go back to reading these before you post them.
Germany is in the position it's in because it did not toss all of it's manufacturing over the Great Wall of China like the US did.. It's not that hard..
Maybe they did close their eyes and ignore what they knew was happening to many of their EU neighbor countries.. But to demize them as parasites? What a crock of shit.. Moronic..
The last time they were de-industrialized was 1945. A hard lesson but they're not going to let it happen again.
Time North America woke up.
Robert, it's Paul. I agree, Germany needs to do more. They, as all of Europe, have a role to play; they need to support the other parts of Europe. The fiscal union made a pact to grow together, and now, they either will or the Zone will flounder.
Also, your point that austerity at this time is moronic is wise. What is needed is support; Germany should support their EU partners, not belittle them, nor move policy against them - there is no long term advantage to that action.
Wow! Krugman on Zero Hedge!
How is this article news? Everyone knows.