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Germanys Battle with Morality

Tick By Tick's picture




 

 

During the spring of 1724 in the small city of Königsberg, a boy by the name of Immanuel Kant was born.  Kant, an academic prodigy, endured a ‘strict, punitive and disciplinary’ (Wikipedia) education that would form the basis for his Critique of Pure Reason.  Kant’s most famous work focussed upon the idea of the Categorical Imperative; the duty that a human must fulfil a certain number of obligatory actions or mannerisms that should become universal laws of society.  Or as Kant put it, “Act only according to the maxim whereby you can, at the same time, will that it should become universal law”.

This ideology is clearly identified in a scenario dubbed  “The Inquiring Murderer”.  In summary, the scenario is the following:

If one is hiding an innocent person in his or her house, and a known murderer knocks on the door asking if the innocent person is hiding inside, would it be morally correct to tell the truth at the risk of the innocent person's death, or to lie to the murderer in an attempt to save the innocent person's life?

Kant would argue that telling the truth is a Categorical Imperative and as a result should trump all other moral or ideological reasoning.  Stay with me here, there is a key point to come.

Kant’s work, although academically disputed, has had a profound impact on the way that Government’s construct ongoing legislation to encourage the “correct” civil virtues in their populations.  There is no greater proponent of these beliefs than Germany whose relentless pursuit of human dignity has resulted in enacted constitutional legislation to drive its inhabitants towards a higher regard for human dignity.  So much so, that in the wake of the 9/11 it was ruled that a strategic destruction of a hijacked aircraft would be unconstitutional with regards to the human dignity of both the captives and the hijackers in there own right.  Economically, this entrenched belief of human dignity has developed into somewhat of a Categorical Imperative towards rescuing the financially bankrupt countries or soon to be bankrupt countries of the Eurozone.  

Fast-forward to 2011 and lets evaluate economic fundamentals that exist today within Europe.  Of the 17 member states that adopted the Euro, we know that roughly 6 of them are broke (Portugal, Ireland, Italy, Spain, Greece and Cyprus); a list that seems to grow by the day as the Euro politicians shake off last nights hang over and finally get a grip with reality.  Now some of you may be wondering, hasn’t Germany single handedly rescued these countries and made Angela Merkel somewhat of a god like figure in these states…Not exactly.  Germany’s resilience to letting it’s Euro brothers and sisters fall by the wayside seems to have formed somewhat of a Categorical Imperative in itself.

If we are to look at the 2008 crisis in detail, the fundamental issues lie between issues of policy, greed and pursuit of profit by individuals and firms alike.  This "private sector" contraction, although difficult to swallow, resulted in economic calamity that was in many ways a far better situation than we are in now.  For now, it is the governments that are broke and have fallen victim to the endless pursuit of political success and the idea of a relative improvement in quality of life.  This rose tinted ideology is the overarching umbrella that sits above the private sector in both an authoritarian and protectionist manner.  The reality is that this umbrella has shrunk to such an extent that the private sector sitting beneath it is going to get wet.  In some cases, for instance Greece, their umbrella is now so small that countries with a larger protection from the impending storm are lending a place of refuge.  The justification for such practices to prevent contagion will eventually lead to the polar opposite outcome.  

 

Without Germany, the Eurozone would already be a failed experiment and now it seems determined to drag itself down with the pack.  In an interview on Bloomberg (9th August), one European politician was quoted in saying "we must chose between more Europe or less Europe.  We will choose more Europe".  Now this opinion is somewhat sensible for the likes of Greece who seem to have found themselves with an endless piggy bank called Germany but for the rest of the states one must question what exactly are these people smoking.  The austerity measures entered into by a vast quantity of these nations are dependant on fixed price imports, improved exports and tourism.  If you were to break down what would happen in an economic contraction, one must only conclude that the situation is going to be made an exponential amount worse with the inverse predictions happening.  

 

Last week’s plan by the ECB to purchase members states bonds on both the primary and secondary markets should send alarm bells ringing.  The reality is that Germany is using it’s own economy and low lending rates to fund the whole Eurozone area whilst increasing it’s exposure to 133% of GDP (Zerohedge).  This is only going to end badly. 

 

If we take a step back for a minute and consider a similar situation that occurs with aid in African nations we know this is the wrong thing to do.  The effectiveness of financial relief is solely dependant on the social response of the people that are affected.  Don’t get me wrong; aid in Africa is the right thing to do, however far more progress has been made through teaching the society better agricultural techniques and encouraging the practice of safe sex than has ever been made financially.  Germany is making exactly the same mistake, the relaxed liberal European way of life needs a fundamental slap in the face to awake these societies that believe tax evasion is a birthright and that retirement at 50 is just how it is.  

 

No no no Mr Berlusconi, life isn’t quite so much of a party as you make it seem.

 

What the Euro MP’s seem to have missed is that these societal and policy values that will prevent any credulous rescue package from success. A point that George Soros has been clear to advocate in his recent article entitled Three Steps to Resolving the Eurozone Crisis


“Sadly, Germany has unsound ideas about macroeconomic policy, and it wants Europe to follow its example. But what works for Germany cannot work for the rest of Europe: no country can run a chronic trade surplus without others running deficits. Germany must agree to rules by which others can also abide.”

 

Instead, Mrs Merkel and Mr Sarkozy seem intent on wasting both time and valuable resources drafting new measures in an attempt to save the Euro from certain collapse.  The one area of Soros’ article that this writer agrees to surrounds formulating a comprehensive exit mechanism from the Euro.


“In the absence of an orderly exit, the regime would have to carry sanctions from which there is no escape – something like a European finance ministry that has political as well as financial legitimacy. That could emerge only from a profound rethinking of the euro that is so badly needed (particularly in Germany).”

 

Although a departure from the Euro may cause economic redress for other Euro denominated countries, the long-term effect would be to reduce the toxicity of the Euro and facilitate the payment of outstanding debts (at a significantly depreciated level).  Although difficult to swallow, this is singularly the best option for the likes of Greece who needs to regain control of their monetary policy in order to get their house in order.  The process wouldn’t be pretty or please the financial community but in many ways this self-sacrifice would provide the all-important Human Dignity to the Greek population that they deserve.

Instead, the latest meeting between Merkel and Sarkozy pledged to harmonise corporate tax and potentially introduce further taxes to aid deficit reduction.  However, stupid the idea of taxing a faltering economy may sound (especially penalizing your own banks) some common sense did prevail out of Tuesdays meeting.  Firstly, Germany seems to have finally checked its bank statements and realized that it is losing money faster than a junkie in Tijuana; this realization led Mrs Merkel to announce that the ECB piggy bank would not be increased to the magnitude previously expected. 

Secondly, they dismissed the idea of Eurobonds; in this writer’s opinion, the best decision ever made by Europe’s Punch and Judy.  Eurobonds would have effectively bred contagion despite what Mr Soros may believe.  A Eurobond is effectively a Collateralised Debt Obligation where Germany is the A game and Greece is the Z, but unlike 2008, the investor friendly A game will risk life a limb to protect Z….You can see where this is going.

At this point, one must ask why Germany would even be interested in a Eurobond?

Lets suppose, I am Warren Buffett and I go into the market to raise $1bn.  The market says, Warren you’re a smart guy, we trust you so we will lend to you at 3%.

Now lets suppose, I am Warren Buffett’s family and I go into the market to raise $1bn.  The market says, Warren is a smart guy but the rest of you…not so much; especially Uncle Charles who seems to be very overdrawn and the workers from his business are always striking.  The best I can offer we can offer is 5%

With or without the intended puns, were we seriously expecting Germany to agree to this?  They may have made some pretty stupid decisions but this really would have rocked the boat.  So why did we expect it?

This deep-rooted answer comes back to the original point of the Categorical Imperative that Germany seems to have developed towards the rest of the Eurozone.  The market is pricing in the idea that Germany will be there to stabalise the Eurozone area at least in the short term.  But from what we have discussed, there are underlying concerns about the viability of this continuing.  One must consider that Germany has already committed tens of billions of Euro’s towards helping it’s sick brothers with only a handful of overpriced to market rate bonds to show for it.  So what happens next?

In the coming months, Germany is going to be forced into the situation where they must chose between the blue pill and the red pill knowing that whichever one they take, it is going to cost them an astonishing amount of money.  Before we conclude, let’s talk through the two competing options.

 

Option 1 – Germany Continues to Bank Roll the Eurozone – Probability 70%

§  The market reacts positively in the short term but corrects once the fundamentals are evaluated

§  Germany increases it’s long term debt obligations during a contracting economy and finds itself with the mother of all overdrafts

§  Dream scenario (probability 1%) – Austerity measures prove effective within the PIIGS and Germany becomes the overwhelming power regarding all European matters

 

Option 2 – Germany Separates Itself from the Eurozone Debt Burden – Probability 30%

§  Markets contract but are reassured by long term viability of Germany’s economy.

§  Eurozone exit mechanism allows the contagious nations to leave the Euro in order to balance their books over the long term and reduce the toxicity of the Euro

§  Germany retains free trade environment but looses the long term viability of a singular monetary union

 

It is clear that whichever choice is made, Germany will experience a significant opportunity cost.  Should Germany promote an Exit Mechanism, the fundamental framework surrounding the EU in it’s entirety would be on the line.  Conversely, should Germany support the Euro, its deficits would slowly constrict its economy and eventually cause a Eurozone Meltdown.  This option is further complicated by the lean and organized nature of the German economy that would significantly weaken the effects of austerity and restructuring when compared to the likes of Greece.

The conclusion is clear, whichever route Germany takes in this shabacle there are going to be a lot of losers.  However, the magnitude of loss will be in many ways dependent on Germany’s ability to act whilst time and the economy are on its side. 

 

 

First published on 9th August 2011

 

 

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Mon, 12/12/2011 - 19:00 | 1971896 JeffB
JeffB's picture

"If we are to look at the 2008 crisis in detail, the fundamental issues lie between issues of policy, greed and pursuit of profit by individuals and firms alike."

Although those issues undoubtedly at least played a role in the timing & severity of the crisis, I think the underlying fundamental issue was the Fed's tinkering with it's play toy fiat money system.

I just started reading Thomas E. Woods, Jr.'s book,"Meltdown", & he makes the analogy that blaming the crisis on greed, and screwups etc. is like blaming a plane crash on gravity. The analogy isn't a perfect one, of course, as all analogies fall short at some point, but I think his point is a very good one.

It's a side issue to your main point, but just thought I'd get my two cents in anyway.

 

 

 

Mon, 12/12/2011 - 13:39 | 1970692 The Reich
The Reich's picture

amongst other things you missed a thousand years of confused public morality.

Mon, 12/12/2011 - 11:19 | 1970022 Stuck on Zero
Stuck on Zero's picture

This is a political crisis.  Not an economic crisis.  All the heads of state should be stripped of their posts and all the failing banks should be rerganized.  Bondholders should take their losses.  Isn't it interesting how banks turn their problems into national crises?

Mon, 12/12/2011 - 11:27 | 1970011 G-R-U-N-T
G-R-U-N-T's picture

"Kant would argue that telling the truth is a Categorical Imperative and as a result should trump all other moral or ideological reasoning."

"The man....who closed the door of philosophy to reason, was Immanuel Kant."

"Kant's expressly stated purpose was to save the morality of self-abnegation and self sacrifice. He knew it could not survive without a mystic base--and what it had to be saved from was reason."

-Ayn Rand

At what point do responsible and caring parents cut off dependent children whom haven't learned how to be self sufficient, productive and whom have become fat and spoiled off others ingenuity, productivity, creativity and of course hard work?

I believe Germany will be forced to be reasonable but the jury is still out on the PIIGS.

 

 

 

 

Mon, 12/12/2011 - 10:27 | 1969828 Wakanda
Wakanda's picture

Until the West gets over the fact that life is measured in sunrises and sunsets, not euros or frns, we will be free to enjoy this beautiful planet and occasionally each other's company.  Until then, more of the same - financial and cultural shitstorm. 

If one puts down the mouse and steps outside, the sunsets are still beautiful and free.

Mon, 12/12/2011 - 10:19 | 1969792 GeneMarchbanks
GeneMarchbanks's picture

'Instead, Mrs Merkel and Mr Sarkozy seem intent on wasting both time and valuable resources drafting new measures in an attempt to save the Euro from certain collapse.  The one area of Soros’ article that this writer agrees to surrounds formulating a comprehensive exit mechanism from the Euro.'

Wow. Another myopic Anglo-American take on the situation in Europe decorated with Kantian ethics, Soros, and a lesson on morality. This article manages to encapsulate everything in leaps of logic that resemble new age religionists.

 

Mon, 12/12/2011 - 09:59 | 1969712 YHC-FTSE
YHC-FTSE's picture

Interesting post. There's a parallel here between critics of moral behaviour that is regarded as naive and inflexible, and critics of Germany's high regard for human dignity. One man's moral behaviour, for example coscientious objection to war, is another man's immoral cowardice and naivety. To me, it is all a matter of local ethos and context for the monkeys to justify whatever they do to each other. In the modern world, assaulting, thieving, and murdering are done as casually by the "Moral" heroes, as they are done by their enemies. Once you introduce morality or lack thereof in to an argument, it gets boring and full of irony very quickly.

 

Anyway, this scenario might be best described as a decision tree rather than a couple of options. I may come back to this and post some likely scenarios, but don't hold your breath.

Mon, 12/12/2011 - 10:24 | 1969812 Azannoth
Azannoth's picture

+100 Morality is as arbitrary and ambiguous as it gets and is highly coupled with local religion and tradition and has nothing to do with Right&Wrong(another highly vague concept), still people tend to think and judge their own actions and actions of others in therms of moral values, I wish the humans would grow up already

Mon, 12/12/2011 - 11:23 | 1970041 StychoKiller
StychoKiller's picture

Moral concepts must be determined by the goals that are trying to be achieved.  For example, if the goal is conformity, then freedom-loving people will fight against such moral teachings.

Mon, 12/12/2011 - 09:55 | 1969702 Fuh Querada
Fuh Querada's picture

Abhorring Kant, adoring c**t.

Seriously, if you want a better analysis check out Felix Zulauf's latest interview on www.KingWorldNews.com. Especially the 1st 5 minutes wheree he explains why Germany is not going for the printing/bailout option (Murkle is being advised by the chairman of the Bundesbank).

Mon, 12/12/2011 - 10:08 | 1969619 falak pema
falak pema's picture

This article begins with a sleight of hand, putting the blame of German mindset on Kant. From there we go on to prove that given the mindset the Germans have inbred constraints encouraging bad decision making; something the great UK never had, as the historical opium trade and gunboat diplomacy practiced by Rule Britannia contradicts to the point of making all phiosophical analogy totally meaningless. Deriding National traits is like living in glass houses...

More to the point, The writer MINIMISES the OLigarchical scam practised by that great nation : USA, when they socialised the debt of Corporate USA, in 2008. A Corporate machine that had been programmed to concoct the financialised ponzi since Thatcher-Reagan days; deregulatory mantra, asset risk bubble economy, supply side incentives and junk bonds, were their religion. Free markets are like the opium trade, totally one sided. Oligarchy does not believe in fair markets. Ask the City, Ticky tocky.

We are in financial karma now in western civilization. SO Merkel may be wrong to not have allowed ECB to print to infinity at fixed rates, having taken the risk of leaving the sovereigns and euro banks to the mercy of anglosaxon-led speculative frenzy. With the ECB printing, the bond interest would be much lower. ANd banking regulation much easier. But then the Euro zone is like a half pregnant woman today; and we all know that half pregnancy is a virtual state that leads to a hard landing. Euro bonds amongst nation states of Euro zone is no more potentially dysfunctional and toxic CDO  inclined than FED printing for New Jersey and Alabama in the US context. They are not exactly states with similar socio cultural and economic profiles. Doesn't stop USA from being powerful nation.

Mon, 12/12/2011 - 08:55 | 1969520 proLiberty
proLiberty's picture

Kant follows in a line through Hegel to Marx.  The Germans are conquering the world by other means- by socialism.

Mon, 12/12/2011 - 11:34 | 1969910 TSA gropee
TSA gropee's picture

Not conquering the world, just doing economically now what they couldn't do militarily 65+ years ago. We (imho) are seeing the rebirth of the Holy Roman empire.

Interesting that on the day of the Vatican’s Feast of the Immaculate Conception, Jesuit trained Mario Draghi, submits the fiscal compact with the demand that all EU nations sign up to it—a demand that was acceded to by all except Britain the following day. Oct 24th, Vatican information service posts: http://visnews-en.blogspot.com/2011/10/holy-see-calls-for-reform-of-global.html

Mon, 12/12/2011 - 09:09 | 1969541 Ghordius
Ghordius's picture

Hogwash. Marx himself wrote: "I have turned Hegel on his head".

Go and visit some foreign lands...

Mon, 12/12/2011 - 07:06 | 1969410 Optimusprime
Optimusprime's picture

Very odd post, to be sure.  In the time since August, one would think, there might have been more of an effort to clean up the innumerable and irritating grammatical lapses.  And before someone starts shrieking about "grammar nazi's", consider this: if one wishes to introduce Kant into the discussion, then one assumes a certain burden of clarity and competence in presentation.  It goes with the territory.

As to substance, the Kant material is interesting, but IMO mishandled.  What the authors seem to want to say would be better served, not by focusing on the Categorical Imperative per se, but rather by Kant's insistence that the obligatory nature of the imperative is determined independent of any interest in probable outcomes.  Such is morality, according to Kant.  Then the way could be clear to point out a contradiction between such a morality and the role of public policy makers, who must always consider probable outcomes.

 

Instead the authors go on to (once again, this is not new) draw up a list of probable outcomes given the alternative options of continuing or not continuing to fund the toxic debt of the Eurozone.  Fine as far as it goes, but nothing new, and no attempt to consider further options or ramifications. 

 

So--not bad, but not all that useful.

 

 

Mon, 12/12/2011 - 08:57 | 1969523 achmachat
achmachat's picture

trivia of the day:

The Chinese Name for Germany is De Guo, which means Morals and Virtue Country.

 

Mon, 12/12/2011 - 10:13 | 1969761 falak pema
falak pema's picture

the Greeks would call Germania : Minerva! (To the Romans : Pallas Athena).

Neither the Greeks nor the Italians today feel Merkel is Minerva!

Mon, 12/12/2011 - 09:36 | 1969637 devlin1984
devlin1984's picture

Yeah and the Chinese name for America is Beautiful Country.

Mon, 12/12/2011 - 09:17 | 1969586 GeneMarchbanks
GeneMarchbanks's picture

There's a French historian and geo-politician(blanking on the name) who has noted that China's ruling class has a certain obsession with the Germans. It seems they study German history and policy with immense interest.

Mon, 12/12/2011 - 10:37 | 1969851 falak pema
falak pema's picture

That's 'cos the french guy is jealous. The french ENA bureaucracy is a Mandarin class. The french cut and pasted Chinese manadarin culture during the Revolution to build their Jacobin cult. Under MAo, the french revolution and the Enlightenment became very fashionalbe in Marxist communist circles. Apparently Chou en LAi could "out Danton" MAlraux in their historical discussions. Chou was the epitomy of Mandarin China in Mao's party. I think that further study of Enlightenment made the Chinese realize that German philosophers like German musicians were uber-alles. La creme de la creme of Enlightenment. Of course, the pragmatic US intellectual only believes in the mantra of the Coca Cola formula; that's the only philosophy that US people adore; as it has $$$ written all over it. Its nice to have a SIMPLE mindset. Hamburgers and Coca Cola make the world go round. I'm forgetting blue jeans and "Good golly Miss Molly!".

Mon, 12/12/2011 - 10:48 | 1969908 GeneMarchbanks
GeneMarchbanks's picture

+1.

"Corporations are getting better and better at seducing us into thinking the way they think—of profits as the telos and responsibility as something to be enshrined in symbol and evaded in reality. Cleverness as opposed to wisdom. Wanting and having instead of thinking and making. We cannot stop it. I suspect what’ll happen is that there will be some sort of disaster—depression, hyperinflation—and then it’ll be showtime: We’ll either wake up and retake our freedom or we’ll fall apart utterly. Like Rome—conqueror of its own people." -David Foster Wallace

Cleverness as opposed to wisdom. That, my friend, has been the latest turn in the psyche of our American friends. Not sure you're European but I suppose it doesn't matter. The only trouble is, they're not content with destroying only themselves, everyone must be included.

 

Mon, 12/12/2011 - 08:39 | 1969501 eddiebe
eddiebe's picture

Tick also didn't note the option of Germany itself exiting the Euro. Wouldnt that blow everybodys mind.

Mon, 12/12/2011 - 11:50 | 1970158 TSA gropee
TSA gropee's picture

Tick, as you well know ,we (the Americans) have a constitution as well, but as you also probably know can be rendered "a living document" in need of revision or an archaic document in need of relegation to the annals of history. Nothing, when it comes to power and money is set in stone for those whose obsession it is...

Mon, 12/12/2011 - 07:40 | 1969440 Tick By Tick
Tick By Tick's picture

Optimusprime

 

We appreciate your comments and criticism.

 

We would make the following point:

Human Dignity is the forefront right as provided by the German Constitution.  If one is to read about the legal battle that occurred regarding laws to shoot down hijacked aircraft following 9/11, it would be clear to see that in the German mindset, human dignity is a catergorical imperative.  Michael Sandel, the writer of Justice, has actually explored this to quite extensive levels.

In the initial draft of this piece back in October, I did include the following paragraphs that has since being ommitted:

"In
the wake of the tragic events of 9/11, governments around the world were forced
to reassess their attitude to towards the actions of a possible hijacked
aircraft.  The worldwide consensus
was that should an aircraft be hijacked, the Government should have the right
to have it shot down to minimise the risk of a potential catastrophe and
overall cost to human life. 
Governments quickly passed this utilitarian legislation in to power to
minimise what has been perceived as a real terrorist threat.  It all sounds very logical and then we
meet the Germans. 

In
collusion with other nations around the world, the Germans were keen to pass
legislation that would provide the greatest safety net to its inhabitants.  However, the Germans are slightly
special.  In the wake of the
Holocaust, Germany has provided its habitants with the right to human dignity
and the fundamental right to life over all other rights via its
constitution.    This conflict of interest resulted in a
monumental constitutional debate where, at conclusion, it was decided that
these fundamental rights (or Categorical Imperative) deny the army the right to
treat humans are pure objects and that it would be unconstitutional to allow a
hijacked aircraft to be shot down."

 

With regards to providing options of how the situation unfold, I have provided plenty but not in this specific piece.  Please note that the date at which this piece was written, no stability fund or significant focus was being placed on Germany.  The market was very much all about H1 GDP results in the US and the debt ceiling debacle.  Saying that, I fully appreciate your point.

 

I am more than prepared to discuss the topic at length with you if you so desire.  Feel free to email the team at team@tickbytick.co.uk  

Mon, 12/12/2011 - 10:26 | 1969774 Azannoth
Azannoth's picture

So basically the Philosophy of the German government(and the majority of population as I see it) is that a National Suicide is preferable to hurting some individuals, 'all or nothing approach'.

That is probably why you have a 'right to live' in Germany - the government pays for your home and gives you a basic allowance the so called Hartz 4

But you don't have the right to Personal Freedom and Determination over your self, starting from the pervasive bureaucracy and needing a government stamp of approval on every action to 'holocaust denial' and no free speech, punishable by jail

In Germany ther is a law for every possible Lebenslage or Life situation, the goverment can have a say in every aspect of your life if it wishes to

Hence all Rights always come at a cost of Freedoms

My personal view point is that Germans(as a nation) come closest to the 'Borg collective' from StarTrek movies, they always seem favor the 'greater good' and social tranquility over small things like personal freedoms and liberty, probably some Asian cultures would look similar in this regard

Mon, 12/12/2011 - 16:51 | 1971548 G-R-U-N-T
G-R-U-N-T's picture

Thanks Azannoth...Excellent comment!

Mon, 12/12/2011 - 09:09 | 1969559 Ghordius
Ghordius's picture

"Conversely, should Germany support the Euro, its deficits would slowly constrict its economy and eventually cause a Eurozone Meltdown." This is in the line of "anything vaguely resembling balanced budgets and deflationary effects will kill the world" - a bit odd such a pregnant lone phrase after such a long discussion about Hegel and Kant refraining from shooting planes down...

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