Just How Bad Is It In Europe?

Tyler Durden's picture


EURUSD is 'weak' (under 1.2900) this morning, having given a week's worth of gains back in just 2 days as it appears (quite unsurprisingly) that even the core or Europe is now becoming embroiled in a total economic depression. While it seems unlikely that the much-discussed optimal-strategy of Germany leaving the EUR will occur before Merkel's re-election, we suspect there will be growing angst that their economic woes are due to their other European cousins. To wit, Germany's Industrial Production Capital Goods (just as we have also seen in the US) have fallen off a cliff in the last two months (almost -3 sigma); it has only been this bad twice in the last twenty years. Perhaps, we need to replace the youth unemployment records with German Capital Goods production as the 'new' scariest chart in Europe, since it seems the Money McBags of the disunion has mounting troubles of its own.



(h/t Sean Corrigan of Diapason Commodities)

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Fri, 12/07/2012 - 11:31 | 3042736 fightthepower
fightthepower's picture

Fuck you Bernanke!

Fri, 12/07/2012 - 11:33 | 3042748 Silver Bug
Silver Bug's picture

It is going from bad to worse and the U.S is not far behind.



Fri, 12/07/2012 - 11:37 | 3042766 old naughty
old naughty's picture

WTF, is this a race?

Fri, 12/07/2012 - 11:41 | 3042786 fightthepower
fightthepower's picture

Yes, its a race to the bottom. 

Fri, 12/07/2012 - 11:43 | 3042798 old naughty
old naughty's picture

SIGH !!!

Loud enough?

Fri, 12/07/2012 - 18:19 | 3044114 AldousHuxley
AldousHuxley's picture

Europe is what America will be after getting defeated by Chinese military.


As Old World order disappears,

New World Order shines, but not lasting too long,

as New World is replaced by Old Old World....Asia.


And then world war will take care of the excess greed and some hut village in Africa will be the winners.






Fri, 12/07/2012 - 11:35 | 3042753 q99x2
q99x2's picture

What is important is that they give their money to foreign banksters to save the EU.

Fri, 12/07/2012 - 11:39 | 3042775 Jason T
Jason T's picture

reminds me of that Raoul Pal presentation... 

Fri, 12/07/2012 - 11:51 | 3042777 Dr. Engali
Dr. Engali's picture

Better start building some more subs to sell to the Greeks. Then some panzers to collect when they don't pay for them.

Fri, 12/07/2012 - 11:41 | 3042787 francis_sawyer
francis_sawyer's picture

Surely if they just hire a few Goldman analysts to pseudo administrative positions & pay them fat salaries they can turn things around...

Fri, 12/07/2012 - 11:40 | 3042789 pods
pods's picture

Well none of the PIIGS are buying any capital goods.  

Maybe Germany will get lucky and all the saved banks will start needing some capital machinery?

Like a big sausage maker?

We don't need no education............We don't need no thought control...............


Fri, 12/07/2012 - 11:49 | 3042816 Inthemix96
Inthemix96's picture

Live Update For My American Friends.

Reporting from the front lines of battle in Europe is inthemix, "can you tell us how its going over in the EUSSR inthemix?".  "Certainly can Roy, its the same as it was last week, but this week the Camoron and the Ed-Miller-Band are harping on about gay marriage.  So to some up Roy, its still fucking shite, and no-one here knows what to do, or how to do it".

Updated weekly folks.

Fri, 12/07/2012 - 11:55 | 3042840 jubber
jubber's picture

Meanwhile French bonds hit another all time low 1.948%  !!!  France is now the flight to safety..insane

Fri, 12/07/2012 - 12:09 | 3042887 Seer
Seer's picture

Are folks still thinking that Germany could magically be a powerhouse if they left the EU?

I'd argued way back when that Germany was screwed because it was a big exporter and that without EXPORTEES they were dead in the water, no matter how great their industrial capacity.  Even if you removed all traces of their bailout support.

Pretty well spelled out in Jared Diamond's Collapse: the loss of a key trading partner is one reason why a civilization fails/collapses.

Economies of scale in reverse.  Margins get hammered, production capacities get cut.  Rack up another round- rinse and repeat.  The is NO bottom.

Fri, 12/07/2012 - 12:40 | 3042986 Haus-Targaryen
Haus-Targaryen's picture

I love it when people think Germany is going to get fiscally crucified upsideown if they were to leave the EZ, or it were to collapse.  The Swiss, the Chinease, the Americans, the British, even the Aussies are manipulating the shit out of their currencies.  What makes you think that Germany back on the mark wouldn't do the exact same thing? 

Fri, 12/07/2012 - 16:45 | 3043826 Seer
Seer's picture

Three things whose measure trumps all:

1) Demographics;

2) Energy imports;

3) Exports (especially if #2 is high).

Germany, as is most all "developed" nations, is getting older.

Germany doesn't have shit for natural resources, most importantly those of the energy type.

Germany is WAY dependent upon exports (to offset their expenditures on energy imports).  Who is it going to trade with, the broke EU nations? the US (in terminal decline- consumers are all massively in debt)? India or Brazil?- ha ha!  Pretty much leaves Russia and China, and I'm not thinking that they can make up the difference in the declines elsewhere, let alone provide the all-too-important growth element.

Staying OR leaving, it ultimately makes LITTLE difference.  My comments have nothing to do with advocating one way or another Germany's EU connection: those who aren't chomping on the bit to knee-jerk would have noted that; nationalism has a way of causing this reaction.

Thanks for playing!

Fri, 12/07/2012 - 16:48 | 3043843 Dan Conway
Dan Conway's picture

And don't forget Germany's decision to go green and scrap nuclear.  That will increase your #2.  I would say the great german export machine is now taking a #2.

Fri, 12/07/2012 - 17:03 | 3043897 Seer
Seer's picture

Nuclear wouldn't have saved them.  Though it might have decreased their energy imports some, they'd still be needing to import to feed the nukes.

I'm NOT picking on Germany specifically.  The same metrics/observations can be made of all other countries.  I see only these countries as having some sense of sustainability (which would require corralling the growth monster, otherwise all bets are off): Russia; US; Canada.  All three of these countries have sizable reserves of a fairly wide array of natural resources (not one-trick ponies): as noted, however, unless growth can be kept at bay the resources WILL be consumed  (the drill-baby-drill crowd just wants to exhaust things up-front- not too bright if you're really thinking about a future, not very conservative I'd say).

Sat, 12/08/2012 - 09:08 | 3045277 Haus-Targaryen
Haus-Targaryen's picture

I'm going to have to respectfully disagree with you.  

When it comes to energy, Germany is probably the most secure country in Europe.  First they have a direct connection to Russian for their natural gas.  Right now, due to EU law and treaties the gas that comes into Germany from the Russians is already "sold" to other Euro nations before it ever goes under water, ergo the profits are booked on the Russian side of things (non-EU) and not German.  If this whole thing comes apart at the seams, all of Europe (especially France, Netherlands, Denmark, Belgium, Luxembourg, Switzerland, Austria, and Poland) will be completely dependent on this pipeline to keep the heat on during the Winter months.  It would be quite easy for the Germans to add a markup to this on top of what they would be paying to receive it from the Russians.  

As far as electricity goes, yes they gave up nuclear ... really stupid idea, but all their nuclear power plants are still kept in operational condition, they are not being dissambeled or dismanteled, and are now just inactive.  They can be turned back on with relative ease.  I guarantee you given the choice between brownouts and turning back on the nuke plants, the Germans would throw this "green" idea under the bus, and quickly.  

Lastly, if the Euro comes apart at the seams there will be a rush to a "Safe heavan currency" as the risk priced into German 10 year paper would disappear and people would be paying negative yields on German paper I think all the way up to the 10 year mark.  This would allow VW Bank/ Mercedes Bank/ BMW Bank to borrow money at 10 years, whereas their Japanese and other Euro counterparts would be paying substantially more to borrow money.  It doesn't take difficult math or common sense buy a VW Golf for 35,000 Franks @ 0% for 5 years or buy a Renault Twingo for 30,000 Franks at 5% for 5 years.  

So if you mean to tell me that Germany would be hurt badly by the collapse of the Euro, then I completely agree with you.  I also believe it will be the least adversly affected EZ member if such a thing happens.  

Fri, 12/07/2012 - 12:11 | 3042896 youngman
youngman's picture

France is a safe haven....lol....

But Germany makes the best money printing presses in the world...so they will be OK

Fri, 12/07/2012 - 12:12 | 3042899 THE DORK OF CORK
THE DORK OF CORK's picture

The Brits are eating what remains of the surplus...........now overtaking French car consumption.



UK trade balance with Germany (£million)

Y2011 Q2 : - 4,350
Y2011 Q3 : - 4,351
Y2011 Q4 : - 4,580

Y2012 Q1 : - 4,712
Y2012 Q2 : - 5,045
Y2012 Q3 : - 5,846





The Brits Vant German stuff

Jan - Nov
BMW 3 : 41,340
Volks Golf : 59,465
Volks Polo :39,401
Merc C class : 35,328
BMW 1 : 31,292………..

Depression ? what depression ?

Fri, 12/07/2012 - 16:51 | 3043855 Dan Conway
Dan Conway's picture

Who is more foolish?  The brits receiving german stuff (equipment, bmw's, sausage, etc.) in exchange for worthless paper or the germans shipping the brits good german stuff in exhange for worthless paper? 

Fri, 12/07/2012 - 12:19 | 3042907 THE DORK OF CORK
THE DORK OF CORK's picture

Break it up

It is not working............


It has never worked.......


Also labour costs should not be factor in balanced trade………….but to reduce each countries labour force to similar pay levels (paid in a reserve currency) is a recipe for domestic entropy…..and explains the lack of local wage / rational demand rather then credit / investment demand which is a general characteristic of Europe since the single european act and the mini me disaster of the late 1970s boom early 80s bust  (in Ireland especially)

As each country (especially Ireland which in the immortal words of Brian is a island far from the core) should be looked at as a semi - closed unit with its own commerce / energy hinterland.


So we have seen a breakdown in local trade at the city & nation state level within the eurozone helped by strict EU regulations.

The closure of traditional bread factories in Cork city comes to mind.

Its the euro dummies.
It is the anti state , anti local trade currency.

This has built up massive non wage externalities over time hidden by increased credit until blow out.


Fri, 12/07/2012 - 12:22 | 3042936 proLiberty
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The major central banks are colluding in "co-inflation".  If they inflate at roughly the same rate and have roughly the same ZIRP, the FX cross won't change much and that alarm will remain silent.  

Fri, 12/07/2012 - 12:23 | 3042939 THE DORK OF CORK
THE DORK OF CORK's picture

However the UKs domestic economy is showing increased signs of weakness.


Commerical vans..........




Europe is in bloody chaos.

Fri, 12/07/2012 - 12:27 | 3042953 eckart
eckart's picture

it's not that bad really

Fri, 12/07/2012 - 12:33 | 3042968 StoleYourMoney
StoleYourMoney's picture

Germany essentially in recession so DAX makes 52 week highs. #howmarketswork2012

Fri, 12/07/2012 - 12:36 | 3042976 Tombstone
Tombstone's picture

Apparently, it is booming over there since several of their stock markets are making new yearly highs. 

Fri, 12/07/2012 - 12:40 | 3042985 e-recep
e-recep's picture

the dead cat is not bouncing anymore, it is coming to a standstill.

Fri, 12/07/2012 - 13:48 | 3043218 Yen Cross
Yen Cross's picture

 Now the assclowns on CNBS are trying to talk up China... They are trying to say it has already bottomed, so everyone will BTFD in Mc Donalds. They know Europe is officially in the toilet after Draghi confirmed at the ECB meeting earlier this week.

Guess those morons have never heard of reverse repos to keep your economy on life support , as pumping more yuan into the Chinese economy for any extended period of time would cause an inflation driven civil war...

Fri, 12/07/2012 - 14:07 | 3043305 Winston Churchill
Winston Churchill's picture

Everything is coming along in accordance with a 2014 end of the beginning , date.

If they can keep the wheels on that long.

Absolutely amazing they've ket it going this long.

Hyperinflation ,with or without a Deflationary collapse  first.


Fri, 12/07/2012 - 16:54 | 3043868 Seer
Seer's picture

"Absolutely amazing they've ket it going this long."

To be fair, all the "leaders" inherited a flawed system.  The flaws are hopelessly structural.  When one views it as such it does give give one pause to consider that it really has been amazing that they've been able to glide this crashing beast as far as they have.

Anyone who understands the fundamental flaws knows/knew to prepare for the collapse of the system rather than try to "reform" it.

Fri, 12/07/2012 - 14:21 | 3043369 XtraBullish
XtraBullish's picture

Just BTFD and quit whining. Never underestimate the replacement power of equities within a Wiemar Republic style reflationary spiral across the globe. Buy buy buy!

Fri, 12/07/2012 - 18:48 | 3044174 Lord Of Finance
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I just turned on my t.v. for the first time in 5 months, and when I turned it on from the last time, it was on 'Bloomberg finance.' I just sat and watched dumbfounded and speechless for 6 straight hours! I watched guest fund manager after guest fund managers come on in an endless parade throughout the day talking about how there are "green shoots in Europe." How American manufacturing is about to break out to new records, and that the policies in Europe will turn out to be "seen through the eyes of of history as brilliant and economically revolutionary."

    After six hours, and especially after the last statement mentioned above I finally snapped out of my trance and remember why I had not turned that idiot box on for all these months.


I promise God, I really do promise this time! I will never turn the t.v. on again if you give me another chance to recover the brain cells I lost in these past 6 hours! I promise!

Do NOT follow this link or you will be banned from the site!