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Less Austerity? Nein, Nein, Nein Says Germany
"While I think this policy is fundamentally right, I think [austerity] has reached its limits," was EU President Barroso's firestarter comment yesterday. As the WSJ reports, the IMF also said last week that the bloc should ease back on austerity, while a number of governments outside the EU have made the same call, arguing that its belt-tightening is holding back the global economic recovery and could end up being self-defeating. Of course, the beggars are once again trying to be choosers as Spain's de Guindos pushes his agenda along this 'growth vs austerity' path, "What we are going to do now is strike a better balance between deficit reduction and economic growth," but it is the bagholders (or money-men) of Europe that has the last word. As we noted yesterday, Merkel's expectations are no more money without ceding sovereignty, this morning it is German MPs who are up in arms as Nobert Barthle condemns Barroso's statements on austerity and Hans Michelbach flatly rejects this path of no resistance as it "undermines fiscal consolidation efforts." Perhaps the most clear message was from Volker Wissing who added, "demanding more money or time would send a 'fatal' signal to financial markets on reforms." With German PMIs so bad this morning, we are reminded of Bill Blain's comment, that ultimately growth is about confidence - and right now, Europe is a very unhappy place.
Via Bill Blain of Mint Partners,
...German PMIs were shockingly bad – manufacturing down to 47.9 vs 49.0 expected! ...So, as the German PMIs highlight, what's the theme this morning? Growth versus austerity.
Great stuff from Bill Gross. Smart enough to know when to switch; the man who predicted a Treasury rout last year has acknowledged fault, and is now a Treasury bull on the basis the global economy remains fractured, stuck in low growth, and the talk of the great rotation from bonds to stocks has been massively over-played. (I still say buy Japan!) US bonds are the "cleanest dirty shirt" and will remain so until we see growth and "genuine" economic recovery. In a world of policy inflated bubbles, Treasuries are the "most stable of all the over-valued assets". New Normal economy indeed.
He attacked the Eurozone and UK over austerity. "You've got to spend money," was his comment. Despite all the QE attempts to stimulate economies via inflation creating attempts, (the slide in gold prices is because deflation means gold loses its inflation hedge status), austerity has essentially achieved nothing.
There is a global agenda developing against austerity. Last few sessions it’s been the public defenestration of Reinhart & Rogoff for getting it wrong about the evils of Govt Spending vs Growth. The IMF has been trying to cover its bureaucratic posterior with an about face on austerity. And last week it was the complicit G20 nod to Japan to devalue the Yen to kick start its export driven economy.
Europe is at the very centre of the great austerity experiment. But as France and Spain spectacularly fail the Eurozone's 3% debt/GDP ratio - NSS - I somehow doubt there will be much in the way of punishment. This morning we've got the European Commission's President Barroso telling us austerity is “fundamentally right”, but we may have hit austerity limits.
Where is a poor politician to turn? Last week he was beaten for not being austere enough. Barroso was the carrot - the stick is Angela now telling Europe there will have to be greater surrender of national sovereignty and closer Fiskal Union before Europe gets more German dosh. Er.. is that really on the agenda?
As this week's PMIs and GDP numbers will show - growth across Europe is pants. What creates growth? Forgive me a moment as we go back to Economics 101. Is it governments "spending" billions through QE, or really spending billions on regional policy, infrastructure or benefits? Nope.
Ultimately growth is about confidence. If consumers are happy and confident they spend money thus boosting the demand for goods and services. Business owners reflect confidence. Banks are confident to lend them money to expand. The business cycle edges upwards and all the issues like higher inflation, bond negative higher rates and stock positive higher profits come into play.
Unfortunately that cycle in Europe is well and truly broken. It’s a very unhappy place. The lack of confidence at the base of the pyramid is obvious: jobs, over-indebtedness, and the only thing folk can express a view on is political dissatisfaction. The lack of confidence at the base is magnified by austerity - so diminishes growth and fuels the flames of dissatisfaction.
Austerity policies lack prescription. The aim of European austerity is to force countries to restructure and reform: encouraging business growth by removing barriers, restructuring economies from public/private mix to removing red-tape, and ensuring the banks are able to lend. These things are taken as objectives but little is being done to ensure they happen in the face of burgeoning European legislation. All a bit of a contradictory mess.
But despite all the noise, it’s no surprise European bonds continue to outperform. Low growth and austerity mean low rates.. forget the Euro tail-risk or sovereign default.. So Spain failing the debt/GDP test by 10%... nary a problem. That Italy's political crisis is only just beginning (yesterday was utter farce - ensuring gridlock and Berlusconi not going to jail), is but momentary concern. So what if Portugal's debt load is now higher than Italy's? France failing the debt test highlights how the story has moved on from the days of Merkozy to France as just another struggling European mezzanine economy. Doesn’t matter. The ECB will know what to do in a crisis…. (Well, that’s the markets’ bet!).
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There is a global agenda developing against austerity
Turns out people really like free crap.
You forgot to put the word free in quotes.
not true-disability, foodstamps, rent subsidy, healthcare, rideshare, cell phone, and many more shit for nothing programs.
free is when you do nothing and get something(after initial effort, if that counts).
and all while you can sit and be idle while angry white males(and female i supose)fight traffic to play mind games to get a promotion to head donky dick/crack...
nice life eh!
Have you not heard of "FREE" Trade?
Probability of austerity to five neins?
There is a global agenda developing against austerity.
If you are 100lbs. overweight, loosing 20 is pure benefit especially if you are more austere about the crap you eat and not about the nutrition you need.
If you fall (yet again) for the “We casn't afford firemen!...we have to close hospitals!” bullshit whenever pennies are tight, you deserve the government you get.
But in the meantime it will be hard for most people to resist the temptation to vote away other people's money.
We can "NOT" afford firemen, at the compensation rates (includes retirement) they have gotten via their unions. We have to have EMS, and they use that to get over compensation rates. It use to be OK before "FREE" trade changed employment in the USA, for the greedy BIG employers.
to bad you have to go get that free crap yourself...
WHY DOESN'T THE GOVERNMENT JUST FEDEX ALL THAT FREE STUFF TO OUR DOORSTEP!!!
THIS CALLS FOR A RIOT!!!
WE WANT OUR FREE STUFF TO BE FEDEX'D!!!
People of Europe, repeat after me. Ich bin ein Berliner.
I EAT HAMBURGERS FOR LUNCH!!!
You really think so ? I think people are getting really tired of being screwed over on Food Costs, Energy Costs, Taxes, Wages, Postal Charges, Healthcare, Schools, Roads, Petrol, so the myth can be created that B A N K S are somehow victims of the greatest Bubble in global history and that THEY should not have to pay for it.
The Day that I-Banks were allowed to syndicate risk through Stock Markets instead of Partnerships is the day they thought they could syndicate Risky Assets ad infinitum and daisy chain them to oblivion.
I am tired of the stupidity in the UK, policy nonsense and crass incompetence. It is time that there were Executions and Confiscation of Banker Houses, Passports, Financial Assets. It is time that Government was brought under Control and madcap adventures for Qatar and Saudi Arabia were terminated and both regimes toppled and their assets confiscated.
Noone is going to waste more than 6 years of their lives on this crap. The USA has never started and simply under-taxes its rich and over-burdens its poor as it featherbeds the Oligarchs like Russia pre-1998
Time for more bank haircuts. The way things are going, they might have to be crew cuts.
Scalpings, with some skull in there.
These people are either on meth or really do not understand.
Nobody prescribes austerity.
Austerity is simply and simply imposed by:
1) Westeners not willing to work and produce, but rely on welfare
2) Exporting countries willing less and less to exchange their commodities and labor with electronic dollars and euros, hence currency swap agreements.
I mean, people, why is this so difficult to understand?
you are startig to sound nervous. Maybe it is settling in that people are not in fact catching on to anything?
Oh no, no. I'm trying to explain it to ZHers.
People in general will never catch up to anything. By definition, people are sheeple and do not react until they can't make ends meet.
When that happens, reaction is extremely violent.
The issue no onelikes to mention is aging. Europe has deathbed demographics. Failing health of a big part of the population means a lot of people need to collect pensions and pensions need to sell assets to do that. There aren't enough young people however to produce all that, or to borrow money in sufficient volume and interest rates from pensioners savings to provide the necessary yield fr those savings. Living standards are headed down, one way or the other, whether you call it austerity or or something else.
Thank you. I don't think I've read anything mainstream or even in the alt. media about that. China has a very sharp demographic shift comming as well.
The US isn't as bad when you look at the aggregate population, but nobody asks what percentage of the younger portion of the US are made of educated and industrious people or zomified, welfare addicted turds. Alien anthropolgists will look back at 1965 immigration reform that opened the floodgates to third worlders as when the west committed suicide. Then they'll wonder why we didn't do anything about it after the documentary idiocracy was released.
Idiocracy indeed.
A bad comedy described as a documentary.
There you have it.
Austerity is simply and simply imposed by:
1) Westeners not willing to work and produce, but rely on welfare
2) Exporting countries willing less and less to exchange their commodities and labor with electronic dollars and euros, hence currency swap agreements.
I mean, people, why is this so difficult to understand?
_____________________
For us, Americans, nothing. It's been a long time since we understood we can produce more than we consume.
That is why we are so great.
The reluctancy comes with the environment that has not yet understood that we, Americans, can produce more than we consume.
It'll come though, because, we, Americans, can overcome the environment.
That is because we are Americans.
Signed: an American.
My, my... Chinese citizenism citizens love their dilution of responsibility schemes. They have been the same since inception, in a nutshell, always others' fault, Chinese citizenism citizens have no free will and have to mimick the others in the ways the Chinese citizenism citizens revile the most. If some steal, stealing being against human rights in the AnAnonymist mythology, Chinese citizenism citizens have to do it.
Tibetans kill them selfs, Chinese citizenism citizens have to kill them Tibetans too...
Signed: AnAnonymous
Citizenism criticism.
The stupidity of Clinton selling himself to China and granting MFN Status despite campaign pledges not to
http://tech.mit.edu/V114/N27/china.27w.html
http://www.fas.org/man/crs/92-094.htm
shows exactly why China has had a free-ride on the backs of European and US workers
Austerity is fine for some animals, but not so much for others.
pods
Someone needs to bash down Mark Grant's basement apartment door asap and pull him out of the puddle of spilled brandy and vomit and tell him he is missing all the fun.
I'll do it for $50, how soon can you pay?
You'll have to break his legs to get that 50...
in this economy you have to work twice as hard for your money...
I guess the job won't get done then, perhaps a couple big mac sandwiches could persuade him.
Indeed and all animals are created equal, but some animals are more equal than others. Roasted pork anyone?
Put some sauerkraut on it?
pods
everything i just browsed thru said more risk, less reward-that is the dirtyist deed done dirt cheap-manipulation of markets.
Hire a few economists from the US Bureau of Labor Statistics. They will find 500 billion euros of intangibles to add to your GDP. And inflation will be lower and growth will be higher.
Real economic data is so unpredictable. Virtual data makes life so much better.
Especially since they now changed the way they calculate GDP.
"the stick is Angela now telling Europe there will have to be greater surrender of national sovereignty and closer Fiskal Union before Europe gets more German dosh. Er.. is that really on the agenda?"
No, it isn't. It's the whip. The gist of the Merkel/Schäuble "Fiscal Union specter" is this: if you agree with the megabanks on EuroBonds than remember: only if we federate. Otherwise, feel free to leave... If both options are unpalatable to you all as much as to Germans, than shut up and soldier, i.e. balance your budgets
to which I ask: what's wrong about balancing budgets? except that drives megabankers crazy, that is?
to this, a reminder: Germany is strongly federal - i.e. it has less qualms about federating, at least in principle - note the endless discussion about "Europe of the Regions" - where the Bundesländer identify with "regions"
but for most of the others confederation is the maximum thinkable setup
meanwhile, as an answer to Falak Pema: "why not EuroBonds?" -> have a look at the other side of the pond. who is in charge, politics, the FED or the megabanks? EuroBonds would increase intra-EU or intra-EZ bitching while leaving europe more exposed to "market pressures"
of course ZH is all for "the markets" - and often at loss in identifiying any market that functions as it should
we are in a currency war and everything follows the peculiar laws of this kind of conflict
« meanwhile, as an answer to Falak Pema: "why not EuroBonds?" -> have a look at the other side of the pond. who is in charge, politics, the FED or the megabanks? EuroBonds would increase intra-EU or intra-EZ bitching while leaving europe more exposed to "market pressures"»
Could you expand on that ? Actually, I thought that the blue/red bonds would be a good hybrid (blue debt up to 60% of GDP, is guaranteed commonly, red debt, beyond that point, is a state's sole responsability) once balanced with a common budget able to service that debt (e.g., EZ-wide corporate tax, instead of national ones)
sovereignty is based on raw power. and european-style central banking (for which we have a way longer tradition, then the FED is a bad copy) is based on authoritarianism coupled with raw power. imo this is a fact, and I'm not trying to make the "how it ought to be" case, then central banking is first a state war financing system and second everything else
as long as those bonds are national, they are coupled with the other power attributes of the nation: armed forces and tax authority
meanwhile, in the current banking landscape they are in the hands of both the national and the international banks, with wide differences in "who holds what"
meaning that banks have to "play ball" and can't stage too much Squid-like "market revolts", their power coefficient vs the wrath they could generate from the 17 eurosystem CB governors is not in their favour (i.e. they can't make too many of the ECB council angry)
as soon as you have eurobonds, blue, red or whatever, the market is truly global and "free" - which nowadays as often in history it means that Squid-like manouvers can be staged in a much greater style (instead of the skirmishes we have now)
remember, this works only as long as the 17 agree on the course of stability (the bane of megabanks, of course, then they love "choppy")
that's the reason why megabanks are still asking for eurobonds: they want the same as in the US
and on the other side, if you lose your own debt-issuance, you lose your tax-independence and so eventually you lose any chance to keep your armed forces - this is the true loss of sovereignty
a bit in haste, so I might have written some parts badly
There's still time to step away from the dark side and join the anti-Federalist cause, but it means giving up on Federalism (and not sliding down the very dangerous slope camouflaged by that darkness ... )
I'll try to reply later, but thanks for the international banks-states hint...
"Unfortunately that cycle in Europe is well and truly broken. It’s a very unhappy place. The lack of confidence at the base of the pyramid is obvious: jobs, over-indebtedness, and the only thing folk can express a view on is political dissatisfaction. The lack of confidence at the base is magnified by austerity - so diminishes growth and fuels the flames of dissatisfaction"
compared to...? btw, note how well europeans can express political dissatisfaction, with expressions that would be unthinkable anywere else. nope, imho this article has good points but it's laced with some of the superficiality I tried to express in this other linked rant
"Growth" is about the expansion of money supply via credit creation since all money is the product of debt creation.
There can be no more "growth" because of debt saturation, peak debt, the self defeating nature of exponential credit that carries interest (usury)
Once again words drive markets. Delusional hope that more of the same that led us here will cure us.
The masses have truly gone insane
last debt creation of money for growth is the sub prime markets of idiots that don't know what they are signing and want it so bad they will do it. then the gub will bail with ultimate printing to back this bad debt - ie fed balance sheet expansion.
nice system we have-still working
green energy, college loans, new cars and echo housing bubble and of course the epic treasury bonds financing the empire...
keep er goin ben...
My father-in-law says that all will be well because it always has been in his case. He says I should stop worrying and SS will be here for me too.
lol
(Realistically, I think he is scared shitless and finds it easier to say what he "wants" to be true).
Of course there is a global agenda developing against austerity. Damn bankers are walking away with more wealth than people can imagine while they are forced to eat worms. Fucking idiots..all of them.
Euro now on it's way to par!
I don't know if you noticed or not, but until japan made the move it made the central banks have been walking down their currencies in tandem.
Euro now on it's way to par!
The euro is pinned to 1.30. It has been for a long time.
I asked my bank if I they would lower my interest rate to 0.25% and give me unlimited credit. They told me to go f-myself.
BANKER: Let's meet in the middle here....
WE'LL CUT THE INTEREST RATE ON YOUR SAVINGS ACCOUNT TO 0,25%
AND LIMIT YOUR DEBET!
germany should prepare for higher unemployment
OR!!!
LOWER UNEMPLOYMENT and lower wages.
What is really astonishing is that it has taken until now for people to start reaiising that austerity does not work. Robert Reich wrote a book on this subject, explaining how austerity did not work in the 1930s and that Mariner Eccles took America out of the depression by making sure employees had enough money to buy what the factories were producing. We really are repeating the mistakes of the past when we should have learned from them.
On that note since many researchers, including Milton Friedman, laid the balame for the 1930s depression 100% on the private bankers who control the money supply and they are again involved, why not go after them, make them write off the debt that is causing the problem and remove their control over the issuing of money. There is a massive conflict of interest in them having this power and now clear historical evidence they are abusing it.
Dude, pass whatever your smokin- US employees weren't buying what US factories were producing before the depression ended, it was being tossed and littered all over the place in Europe and Asia (even today they're still digging up tons of that iCrap that they couldn't sell to the US sheeple)
Yesterday Eurostat posted new data regarding euro zone deficits:
1. Spain 10.6 per cent,
2. Greece 10.0 per cent,
3. Portugal 6.4.
So please define "austerity".
For the record, Thomas Nast was born a German...
So it is. Pork everywhere. The irony being you can't get any decent bacon for love nor money.
Long freezers and nitrites!
"Ultimately growth is about confidence. If consumers are happy and confident they spend money thus boosting the demand for goods and services. Business owners reflect confidence. Banks are confident to lend them money to expand. The business cycle edges upwards and all the issues like higher inflation, bond negative higher rates and stock positive higher profits come into play."
Right, if consumers are happy, they'll go into debts without thinking twice if it is right or not, and stop worry about being productive for their society. So much better...
I just don't get it. The people are already in misery. Nothing left to do but go Iceland on the central planning monsters. A reset is inevitable, stop fighting it.
Reset = instant fail and chaos. Not going to happen.
The rich and powerful want to remain rich and powerful. Therefore, they are going roast everyone else alive... little by little.
Kick the can. Kick the can again and again. They don't have a clue what they are doing. Just making this shit up as they go. As long as the population is kept divided and confused, the "can" can be kicked again.
You can't reset demographics by sudden means. Reparing this involves decades of sustained very high birthrates to make up the massive air pocket from decades of civilisational collapse level birthrates. That is a truly staggering investment to make. Pensioners would have to give up even more, and they wont. They are secular hedonists.
Sorry, that's bull if not specified. Confidence is the numero uno of credit financed consumption, so it plays a central role in the US and is not wholly healthy, ideal or even desired.
Confidence also plays a role in non-credit financed consumption, as it influences the savings/consumption relation, but for those not willing to consume discretionary goods via credit (as is more likely to be for the northern Europeans), the numero uno deciding factor is income and for the seething masses it is wages. With the real median household wage dropping like a stone in the US, but also in parts of Europe, I simply fail to see where all this consumption is going to come from - irrespective of confidence or not.
If they're purely maintaining consumption levels on credit, we're witnessing the next recipe for desaster unfolding.
AUSTERITY: YOU CAN'T BUY THE STUFF ANYMORE BECAUSE YOU CAN'T PAY FOR IT
You don't go to a restaurant, order a big ass stake and the best wine of the house when you can't even pay for the parking meter.
Net out everything they owe to each, default (haircuts) on the rest, restrure to manageable soveriegn and bank debt levels, preserve global trade, allow for reasonable credit and STRAT all over with leaders who get it.
Net out everything they owe to each, default (haircuts) on the rest, restrure to manageable soveriegn and bank debt levels, preserve global trade, allow for reasonable credit and START all over with leaders who get it.
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"He (Gross)attacked the Eurozone and UK over austerity. "You've got to spend money," was his comment."
They have to borrow money to spend it. So they get deeper in debt to spend money they don't have.
'Americans' in Europe are unhappy. Unhappy.
'AnAnonymists' should do with what they are.
But, hey, it would be known by now if 'AnAnonymists' were embarassed by contractions...
Das folk is in a funk.
Austerity you say ? More like obesity...
http://research.stlouisfed.org/fredgraph.png?g=hKR
If the underlying problem preventing growth is lack of confidence, the only people to blame are the political filth and their crony central bankers.
This is NO different than any private household or business...
You cannot achieve prosperity with cost cutting alone. At some point, you must increase your revenues. Via more clients, richer clients, via new or better products and services. Via a new job, a promotion...
The problem with all Western governments is that they want to spend less but can't spend less, because their ('expletive') electorate is aging. These aging/old ('expletive') are also living longer, which only compounds the problem two-fold: 1. More expenses to the working tax payers, and 2. Denying job openings to young workers/families.
As cruel as it sounds -- and it IS -- these ppl simply need to... not drain the budgets and stop competing for jobs. They need not 'die'. They could simply live with their kids. Thus cutting Gov costs and making job openings.
Alas, realtors in N.Am. are going to hate this.
To "increase your revenues" you have to either make something people are prepared to pay for, or steal it. The latter is known as government and banking, which keep getting bigger in all "advanced" economies.
Those government employees and banksters don't make anything that anyone is prepared to pay for. So nationally, no growth, except in the business of theft.
And at this stage the people who mainly have something you can steal are those terrible old people who worked all their lives to accumulate some assets for the end stage of their lives, which you are obviously keen to hasten.