The Eurozone As An East-German Motorcycle

Tyler Durden's picture

Eager for yet another explanation why despite all the bluster and rhetoric, it is Germany that has been the biggest beneficiary from the "Eurozone Experiment" (at least so far), as the following chart (and yes, there are other nuances, but in a continent in which youth unemployment is approaching 60% in increasingly more countries, it really is all about jobs) so clearly shows...

... then here is one from the inimitable Albert Edwards of Socgen who compares the destruction of the peripheral economies to...  the iconic East German motorcycle the MZ, the two wheel equivalent of the just as iconic Trabant.

My final observation about the current eurozone conjuncture is to remind readers about the fate of the East German MZ motorcycle company (see picture below). Prior to the 1990 reunification of Germany these motorcycles were an extremely common sight (eyesore?) on the streets of London. But in what many saw as a cynical vote catching measure, Chancellor Kohl allowed the East German savings in Ostmark deposits to be converted into the Deutschmark at a one-for-one exchange rate (the black market rate was nearer to 10-1). The immediate euphoria of East Germans being able to spend their savings at a favourable exchange rate was replaced by gloom as East German industry was bankrupted at this wholly incorrect exchange rate. The quaint, oily MZ had a market at the right exchange rate. At the wrong one East German industry was bankrupted and West German citizens were forced to ultimately pay a heavy financial price for the resultant mass unemployment. And now all these years on one could say we are dealing with almost exactly the same issues: i.e. countries locked together at wholly inappropriate bilateral real exchange rates? Plus ça change

 

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dirtyfiles's picture

Of the whole communist era those past days that motorcycle actually was the best product you can buy if you where lucky to get one.It was expensive to at about average yearly income those days.I know I had one same color do.

Ghordius's picture

no article about unemployment in Germany is complete without two key elements: the German Agenda 2010 and the fact that Germany, together with Austria and Italy, has no minimum wage

bvrulez's picture

we have strong unions, though!

Ghordius's picture

who are unique in the world, together with the fact that workers' reps get one third of the seats of the board of directors of every company, by law

which leads me to state that there should be a different name for German Unions, just so that people are not confused, then their US counterparts belong to a completely different tradition - including the "closed shop" one

Nussi34's picture

This is why the EUR does not work. A currency reflects everything that a people is and wants to be. No EU demos --> no EU currency

Sandmann's picture

Only on the Supervisory Board not the Management Board. then again that imposed by the Allies to hinder German industry and handicap it so men like Stinnes and Krupp and Flick would never be so powerful again.....today it is US CEOs who think they are gods with untrammelled power

Non Passaran's picture

Didn't Merkel recently talk about introducing the minimum wage?

Nussi34's picture

Of course there is a minimum wage. As long as you have social benefits and pay people for not working the effect is the same as having a minimum wage.

ParkAveFlasher's picture

Someone tell Krugman that "price" and "cost" are social phenomena and can not be altered on purely nominal terms without distorting the social fabric.  

Master Chef's picture

Hey, thats my MZ... well actually i got one of the last ones they made before lowering quality and shifting production to Turkey. It's a fucking ace bike and a miser on spares and fuel. (around 500 km / bitcoin). I intend to be one of the mobile few after the crash!

machineh's picture

It looks even better with a leather shotgun holster mounted on the front fork.

bank guy in Brussels's picture

And the sidecar, too, for the friend 'riding shotgun'

Now that is a great European tradition, the motorcycle with sidecar ...

We even have sidecar racing, where the guy in the sidecar pod has to hang out along the edge of the road for optimum cornering

---

Interesting and significant, that most of the older folks in Eastern Europe, who lived under Communism and knew it personally, would actually still VOTE TO HAVE THE COMMUNISTS BACK

 

Master Chef's picture

A few years ago in Nice (SoF) I left the MZ parked out in the street overnight. I woke up in a panic realising the universal key  was still in the ignition switch, not in itself a big problem because every MZ key fits every other MZ ever made (seriously). Running down to the street I saw the bike sitting there as i left it, except the fuel pipe was hanging off... someone had stolen the fuel and left the bike. You don't need a lock when you have an MZ.

Master Chef's picture

...and come to think of it, the european economy is exctly like an MZ... it should have died a long time ago but just keeps going.

Master Chef's picture

and just for reference, here's my beautiful MZ.

 

http://3-v.com/zoom/mz-etz250-3.JPG

insanelysane's picture

Nice bike and does the job.

johnQpublic's picture

never seen one that looked that good before

certainly not when i was in germany, before and after the wall came down

 

makes me miss my 1978 honda

Againstthelie's picture

It should be noted, that the exchange rate not only detroyed the parts of the GDR that would have been competitive and producing really good products - it allowed western companies to buy them cheaply after their labor costs had exploded thanks to the artificial high exchange rate.

The Globalists always win.

NoDebt's picture

The Germans always did want to run the whole joint.  I think they just conquered Europe without firing a shot.  "Only German banks are safe" is the message that the Cyprus situation (along with confirmations, denials and reconfirmations of the tactics used there) sends.

Sandmann's picture

If only German banks are safe I suggest you look at the reports on Deutsche Bank and the disaster at HSH Nordbank

NoDebt's picture

Where depositors lost how much?

Ghordius's picture

yeah, sure. and they are infiltrating their agents everywhere - one even married staunch Fellow of the City of London Corporation and stout Englishman Nigel Farage, so that his two youngest children are... German

that the Germans have better models of governance in many areas is completely forgotten, eh?

a small hint: we continental europeans have a different view about what Germans are and represent

kridkrid's picture

What are they? What do they represent? I am sincerely interested in your response.

Ghordius's picture

ouch, you know how difficult it is to squeeze this in a short comment?

ok, let's start with their strong federalism at home, which is a template for the EU. basically the model is that power in the center is co-shared by a directly elected parliament and a "council" of the federated units, represented by their local executives responding to the local parliaments - see Bundesrat of Germany and the EU Council. since the members of the EU have the armies and can leave in the EU case it should be called confederative, though

then perhaps it's best if I point you to the original political-economic basis of the Wirtschaftswunder: Ordoliberalism - with it's balance between liberalism, conservativism and social equity

and just to keep it small: they have embraced at popular level the dual identity of being German and European, and so still lead in defining "European" - in the same brotherly way they embraced East Germany (yeah, I know, lots of family squabbles there, too)

it's not the first time that German thought shapes this continent - this would be much clearer if we didn't had the world wars

Non Passaran's picture

It's not "balanced" to those who don't want it to be balanced the way German and Brussels planners see fit.

It is - or should be - called Corporatist Socialism.
Corporatism is that "balancing" (but not really) factor which doesn't allow a person to freely organize their life according to his own interest, but rather it is a balance among various interest groups.

Ghordius's picture

I'm not saying that a "balance among various interest groups" is perfection. though it's better than most other deals, and way more democratic to boot

Kinskian's picture

"A Zollverein is not a Fatherland"

NoDebt's picture

Thanks, Ghordius.  You made my point for me beautifully.

icanhasbailout's picture

"Corporatist Socialism" is just another way to say "Fascism"

Surprese's picture

I am a southern European, and I may say that we have no discontent for Germans.

We aknowledge that we made mistakes, and now Germany is benefitting from those mistakes (previously by selling us BMWs we couldn't afford, now through ridiculous low interest rates on their public debt).

Anyway, the East German model after reunification might well serve as a road book to what will happen to us, in the periphery, if we stick with the Euro.

Ghordius's picture

you seriously think that printing your way out is a solution? we are in a currency war - size is protection

any southern country with it's own currency would pay way more, at the end. just have a look at what the situation was in the 70's

printing/devaluing is a palliative - like taking two aspirins, it does not change your medical problem, just shift it in the future

Surprese's picture

I am not in favour of leaving the Euro, and I currently live in a bailed out country. Currency debasement and inflation are no solution for our problems.

I accept that the solution is austerity, together with most of southern Europeans that have elected conservative governments promising to keep it for the foreseeable future (except Italy).

But as several commentators write here in ZH, this is unsustainable in the long run, and we are starting to see youth riots and political chaos.

If we don't have a light at the end of the tunnel, I don't know if the rest of the populace will keep it together.

What happened in East Germany between 1990 and the 2000 would be a good 'light at the end of the tunnel' to us, meaning: "they did it in 10 years, so can we".

But for that to happen, we need to know if after having their economic system completely destroyed (as it is happening now in southern Europe), there was new Foreign Direct Investment to rebuild it from the ashes, or are they just living from handouts?

Surprese's picture

I am not in favour of leaving the Euro, and I currently live in a bailed out country. Currency debasement and inflation are no solution for our problems.

I accept that the solution is austerity, together with most of southern Europeans that have elected conservative governments promising to keep it for the foreseeable future (except Italy).

But as several commentators write here in ZH, this is unsustainable in the long run, and we are starting to see youth riots and political chaos.

If we don't have a light at the end of the tunnel, I don't know if the rest of the populace will keep it together.

What happened in East Germany between 1990 and the 2000 would be a good 'light at the end of the tunnel' to us, meaning: "they did it in 10 years, so can we".

But for that to happen, we need to know if after having their economic system completely destroyed (as it is happening now in southern Europe), there was new Foreign Direct Investment to rebuild it from the ashes, or are they just living from handouts?

kridkrid's picture

So the link just below is a photo with a banner that reads Merkel = Hitler or some such something or another. Clearly some have discontent for Germany. What I'm trying to figure out is whether or not the collapse of the Euro and the EU will lead to war or to something different. What are the sides? Just like people here in the states have everything all wrong. There is no "fixing" the current situation. The current situation can't be sustained. The dollar is dead, just like the Euro. What the chaos looks like when this becomes clear to everyone is what I'm interested in considering.

Ghordius's picture

collapse of the euro? even Cyprus is not leaving. look at the UK, if it exits the EU - Scotland already announced it would join back

and there is no "fixing", only "managing" - the EUR is a response to the 1971 USD, and all roads currently lead to Washington

kridkrid's picture

Oh, I agree with 1971 being the moment that this train-wreck was set in motion. But it's all going down together. Blame will be placed based on the outcome of war, I think. So too will the next system be decided upon by the "winners". To the victors come the spoils. Of course, in the background, is the assumption that the "sides" will be financed by the same establishments. I think everyone is trying to figure out what side they want to be on... realizing that the "good guys vs. bad guys" cliche is always bullshit.

Nussi34's picture

The Euro is a response to the FRENCH inferiority complex!

Surprese's picture

Discontent towards Merkel!, a right wing conservative politician, not towards Germans.

Most of the banners are created by left wing activists (Unions and political parties) that, by the way, are also a large part of the German population. I believe left wing Germans (Die Link) hate Merkel too.

In southern Europe we also have right wing conservative elected politicians that agree with austerity, otherwise we wouldn't have the social stability we had in Spain, Portugal and even Greece since last year elections.

Anyway, you're right, everything is fu*+ed up!

 

 

 

 

Dull Care's picture

If Merkel qualifies as a 'right wing' politician then there is no right in Europe.  A real right wing that focused on free markets, national sovereignty and commodity backed currency is exactly what Europe needs.

Surprese's picture

Discontent towards Merkel!, a right wing conservative politician, not towards Germans.

Most of the banners are created by left wing activists (Unions and political parties) that, by the way, are also a large part of the German population. I believe left wing Germans (Die Link) hate Merkel too.

In southern Europe we also have right wing conservative elected politicians that agree with austerity, otherwise we wouldn't have the social stability we had in Spain, Portugal and even Greece since last year elections.

Anyway, you're right, everything is fu*+ed up!

 

 

 

 

falak pema's picture

On the other side of the pond they imagine Mutti Merkel riding an east german bike "EAsy rider style!" into the now extinct East German but fiat real new Euro wall! 

Some hallucination! 

kridkrid's picture

I wonder why that's written in English.

kaiserhoff's picture

Do those thugs look European?

Ghordius's picture

actually Cyprus is geographically speaking an Asian island - nevertheless I'd say they look european enough, including where it matters: their EU passports

It's written in English because it's the island's second language - it was after all a British Crown Colony until 1960 - and way before it belonged to the Turkish Empire, ruled by a Turkish Pasha in Nicosia of the Venetian walls, who had his sorbets in summer made out of ice from the mountains

schatzi's picture

You're a fucking idiot. Way to go with bigoted stereotypes. Every German is secretly polishing his jackboots and waiting for the day to take over the world. This place gets dragged down by racist, bigoted tin foil hat wearers.

AnAnonymous's picture

'Americans' are 'americans'. They live their 'american' lives day in day out.

TheFourthStooge-ing's picture

Chinese citizenism citizen AnAnonymous is very bitter about anything which involves the former Deutsche Demokratische Republik. He invested his life's savings in a Trabant dealership in 1988.

GetZeeGold's picture

 

 

The Stasi....coming to a theater near you.

 

Because we can all use just a little more Staatssicherheitsdienst in our lives.