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Germany on the Brink of Recession?


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#19 SINNED

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Posted 16 October 2014 - 09:22 PM

Gosh, perhaps tailors should be politicians.  Surely economics and politics in the final analysis is about human greed and self interest. The politicians who know how to direct and control that energy for the common good are the ones who have the answer. By the way I don't think anyone is seriously suggesting that the NHS in the UK should be privatised in the American sense, simply the use of commercial techniques to improve efficiency (which is the main fault line in a state funded service). The political opposition in parliament simply shout privatisation because they know it strikes fear into the hearts of most Brits so in reality no party will get away with changing the fundamental of state funding for our health service. If you want a Health Service like the NHS in the States though, be prepared for some big numbers - we spend £140 billion on health out of total public expenditure of £732 billion. 



#20 Sator

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Posted 16 October 2014 - 09:36 PM

Gosh, perhaps tailors should be politicians. 

 

Tailors were once notorious for being a very politically active group. Then again, they worked in sweatshops. They even had sweatshops on Savile Row once upon a time!



#21 jukes

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Posted 17 October 2014 - 03:22 AM

Large chunks of the NHS were privatised years ago. If it was,nt so top heavy with management it may perform better, same with local councils, same with government. There are far too many chiefs and not enough Indians.
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#22 Sator

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Posted 18 October 2014 - 12:47 PM

An interesting contrarian view praising Germany for maintaining a doctrine of fiscal austerity rather than 'selling out to Keynesians sirens':

 

http://www.zerohedge...uths-one-speech

 

The writer says that German success proves that adhering to austerity works.



#23 jukes

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Posted 18 October 2014 - 09:53 PM

No point being frugal, when all the money saved has to be given away to EU countries that should never have been allowed to join in the first place.
The dream of ruling Europe via the back door is becoming very expensive for the countries that duped the others into believing the EU was going to be a common market for free trade, instead its turned into a gravy train for the greedy few who tell us how we should be subservient to their whims. The EU is being run by people we have never heard of or voted for.

#24 ladhrann

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Posted 19 October 2014 - 10:53 AM

Germany is a bit better in that, despite being severely polarised, the system of proportionate representation has forced the SDP and CDU to form a grand coalition ("Große Koalition") of the unwilling. A bit like a coalition between the Democrats and Republicans. Imagine that! But still, even then, the German government is running an austerity based economic reform programme for the Eurozone, one that doesn't seem to be working. All because German voters feel resentful of the neoliberal thought that the German taxpayer is bankrolling a financial bale out of Greece and Spain. It's short sighted, but also self-destructive, and it will help drive Germany into recession.

 

It is bizarre that a form of Calvinism is masquerading in European politics as economics, all the more worrying when Merkel herself holds the ideal of the swabische hausfrau.  Spending no more than you earn is eminently practical for running a household, but economically illiterate at a macro level.  The problem with the German domestic economy is that its consumers do not spend.

 

There are only two things you can do with money, you can spend it, or you can save it.  If you save it, it will go to be spent by someone else, this is the basis of the banking system.  Money is like water it will flow to to point of greatest difference, so German money fuelled credit booms in countries with higher returns after the introduction of the Euro.   

 

As an Irish citizen I have suffered the indignity of the portrayal of the EU debt crisis as somehow being a moral failure on a grand scale on the part of my nation, 'feckless paddies' etc. of the Daily Mail and Star.  No country however is immune to political and regulatory failures, but no matter how great they were they pale into insignificance when compared to the numbers lent into the Irish economy.  Lets look at some numbers, in the third quarter of 2010 Germany had exposure of between $186bn and $203bn to the Irish economy, the UK also had exposure of $230bn.  These figures are from the Bank for International Settlements, and the Irish Central Bank.

 

And yet because of our supposed inherent fecklessness and cupidity we must pay off the liabilities of German, French and British pension funds and banks in order to shore up the EU banking system.  All of this I might add at higher interest rates than Greece.

 

 

A united Europe will always fail, it was set up for for the richer countries to get richer,(the auditors have not approved the accounts for 20 years) while the poorer countries live on the scraps.
The lunatics are running the asylum purely for self greed. It was always destined to fail, let's just hope it fails peacefully.

 

 

I certainly hope not, the European Union is not an economic project or a marriage of convenience, it is a political project to bind the Continent so closely together that it can never tear itself to shreds again.  Do we want to go back to the days of entry and exit visas for every EU country, work permits, customs duty etc. on buttons from Augsburg, tweed from Donegal? 

 

 

The UK still has huge borrowings but because we are in control of our own fiscal policy we have managed to confound even the IMF and are now the fastest growing economy in Europe. I am sure Germany will come through this because they have a strong economic heritage although I think sometimes they are slow to admit they are wrong.

 

 

The UK economy is not exactly a wirtschaftswunder and its recovery in employment has not led to a recovery in income or living standards for workers, meaning the burden of debt is proportionally greater.  This combined with the running of a two-speed economy divided between a London totally divorced from the rest of the country is not a good sign, who now remembers that Birmingham was only second to London in jobs added to the UK economy in the post-war period?  http://www.economist...3/05/birmingham  

 

Without a concerted stimulus package and inflation it is unlikely that the Euro-zone economy will recover at any rate.  And this is before we count the non-quantified costs to the youth of Europe and the enormous costs to their future lives from long-term unemployment which includes poor health outcomes, mental health issues, becoming risk averse and also a reduced life expectancy. 



#25 Sator

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Posted 19 October 2014 - 11:40 AM

The Guardian on the waning of the German Miracle

 

None of this is any good BTW for the world economy as a whole... Those in the UK have nought to be gleeful about.



#26 jukes

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Posted 19 October 2014 - 04:13 PM

The European continent can never be bound in a political project, when we break it down to basics, we are all different tribes, with different cultures and there will always be tribal disagreements
On any level the EU cannot be described as a success, it has become a gravy train for the few, and destroyed countries with historic greatness (Greece and Italy spring to mind) the mass movement of cheap labour is destroying cultures and causing resentment when locals cannot find work, we are paying more in taxes from wages that have stagnated ( due to the movement of cheap labour) to line the pockets of the greedy and bail out the poorer nations.
The ideology of the EU works well on paper, in reality its a recipe for disaster.

#27 ladhrann

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Posted 20 October 2014 - 01:28 AM

Gosh, perhaps tailors should be politicians.  Surely economics and politics in the final analysis is about human greed and self interest. The politicians who know how to direct and control that energy for the common good are the ones who have the answer. By the way I don't think anyone is seriously suggesting that the NHS in the UK should be privatised in the American sense, simply the use of commercial techniques to improve efficiency (which is the main fault line in a state funded service). The political opposition in parliament simply shout privatisation because they know it strikes fear into the hearts of most Brits so in reality no party will get away with changing the fundamental of state funding for our health service. If you want a Health Service like the NHS in the States though, be prepared for some big numbers - we spend £140 billion on health out of total public expenditure of £732 billion. 

 

The U.S. already spends more on health expenditure than any nation in the world, for the worst health indicators in the developed world.  Were they to implement an NHS their health spending would nearly halve as a proportion of GDP.  Privatisation as model does not work with many public services such as health, education, welfare and prisons because their results cannot be directly compared to private sector metrics.  For instance private hospitals always have higher mortality rates compared to public hospitals because they do not have the 24hr cover or broad range of specialists that a general public hospital will have.   

 

 

 

 

Tailors were once notorious for being a very politically active group. Then again, they worked in sweatshops. They even had sweatshops on Savile Row once upon a time!

 

Aye they were a famously bolshy group, like blacksmiths, a tailor was one of the men involved in killing Lord Leitrim.

 

The European continent can never be bound in a political project, when we break it down to basics, we are all different tribes, with different cultures and there will always be tribal disagreements
On any level the EU cannot be described as a success, it has become a gravy train for the few, and destroyed countries with historic greatness (Greece and Italy spring to mind) the mass movement of cheap labour is destroying cultures and causing resentment when locals cannot find work, we are paying more in taxes from wages that have stagnated ( due to the movement of cheap labour) to line the pockets of the greedy and bail out the poorer nations.
The ideology of the EU works well on paper, in reality its a recipe for disaster.

 

I cannot agree with you jukes, and the EU can certainly be regarded as a success.  For the first time a generation has been able to travel and experience European life and culture as never before which is entirely down to deregulation of the airline market, many mock them but Ryanair has made travel democratic and accessible to the majority of Europeans.  A growing number of people now work and live in different countries with all the advantages in terms of understanding and learning about different cultures.  For the first time in a generation the shared experience of young men has not been a world war.

 

The EU has helped with infrastructure and education in the poorer countries, some of whom were not democracies just over 30 years ago, Falangists/Franco-ists attempted a coup in Spain in 1981, Greece was under a junta until 1974, Portugal as well.

 

Now the reason real wages have stagnated in the UK is a complex one and it cannot be explained by immigration, in the UK in particular its due in a huge part to a dearth of social housing as rent inflation has eroded the wages of working people.  What you really need to get worried about is landlordism, not polish plumbers.  Ascribing problems to a group of people in the economy is known as the lump of labour fallacy and was the same argument used about women entering the workforce in the 1960s, or as was very common in Britain until recently, the Irish.

 

Alongside the inflationary pressures of rents, and other items, there is also the huge imbalance in investment in the UK, and the decline in manufacturing under Thatcher, the garment trade however did not move to other EU nations it went to Bangladesh, Morocco and China and the UK was part of the bloc that decided those reductions in tariffs on imported clothing.


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#28 jukes

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Posted 20 October 2014 - 04:09 AM

We agree to disagree, I see the EU as a trojan horse, you see it as a way for peace. There will never be peace as long as humans and their greed, tribe or religion differ from others.

#29 greger

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Posted 21 October 2014 - 12:57 PM

dearth of social housing as rent inflation has eroded the wages of working people.  What you really need to get worried about is landlordism, not polish plumbers

 

 

This is false. wages need ot keep up so you don't have social housing. social housing is bandaid on mortal wound



#30 hutch48

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Posted 21 October 2014 - 08:50 PM

I am inclined to agree with jukes on the value of the EU to the UK. The endless loss of jobs for English workers started in the Thatcher era and has been going downhill ever since. Shifting UK manufacturing to China killed off a lot of jobs but theoretically increased the profits with drops in labour costs for the companies that left but then the Chinese "knock off" industry knackered them and have taken a lot of their market. With the repeated loss of manufacturing in the UK it was the service industry that was supposed to take up the slack but then with loosened labour laws, those jobs are being taken by people migrating from poorer regions of the EU.

 

Now this may be fine for those folks who can migrate from a poorer area and get a job in the UK but it has decimated English working people and left some of the manufacturing areas as near ghettos of poverty. The US has a similar problem in the endless availability of Mexican people who will risk their lives to get to the US to get a job. Throw great numbers of Americans out of a job and hire the cheaper Mexican labour and you explain why parts of the US are in trouble.

 

Reduced labour costs and high unemployment to keep the costs down make for higher profits for corporations geared to play the international market then profit shift their takings to 3rd world countries to reduce their tax bill. Western countries with high value exchange rates are simply being bled to death by an international corporate sector that does not pay its way in tax terms. This of course impacts on the general living standard of the effected country as taxes have to be higher to make up the shortfall.



#31 jukes

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Posted 22 October 2014 - 04:09 AM

Lower wages = lower tax = lower government spending = cuts = downward spiral with no plan B = no way back = Trouble.

#32 ladhrann

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Posted 22 October 2014 - 08:48 AM

 

This is false. wages need ot keep up so you don't have social housing. social housing is bandaid on mortal wound

 

They do indeed need to keep up, but in the case of housing benefit costs to the Exchequer in the UK, due to the right to buy scheme councils in the UK do not have the housing stock to provide affordable housing, hence the enormous rent bills to private landlords.

 

I am inclined to agree with jukes on the value of the EU to the UK. The endless loss of jobs for English workers started in the Thatcher era and has been going downhill ever since. Shifting UK manufacturing to China killed off a lot of jobs but theoretically increased the profits with drops in labour costs for the companies that left but then the Chinese "knock off" industry knackered them and have taken a lot of their market. With the repeated loss of manufacturing in the UK it was the service industry that was supposed to take up the slack but then with loosened labour laws, those jobs are being taken by people migrating from poorer regions of the EU.

 

 

This is a post hoc propter ergo hoc fallacy, after this, therefore because of this.  Thatcher and monetarism dismantled the unions and the manufacturing industry in England, not the European Union. 

 

"The US has a similar problem in the endless availability of Mexican people who will risk their lives to get to the US to get a job. Throw great numbers of Americans out of a job and hire the cheaper Mexican labour and you explain why parts of the US are in trouble."

 

The only way illegal labour can undercut the minimum wage is if there are too many exemptions to the minimum wage or it is not enforced; as in the US where for instance the entire agriculture industry is exempt from paying even the federal minimum of $7.25 per hour or so-called tipped industries where servers can be paid $2.13/hr or people under 20 may be paid $4.25. 

 

I'm all for raising the minimum wage and enforcing it as part of boosting demand in the economy, but to state that immigrants in the UK take jobs from other workers is not how economics works, everyone working spends, and their spending is other peoples income.  Polish plumbers etc are not a threat as they must work and spend in the economy:

 

Irish navvies of my stock would go working in the tunnels under London, pick up a new suit on Friday, drink for a week or a fortnight solid and go to work again in the same suit as its all they'd have left after being on the tear.

 

 

Lower wages = lower tax = lower government spending = cuts = downward spiral with no plan B = no way back = Trouble.

 

 

The logic of a negative spending and retrenchment cycle seems to be lost on all the major governments of Europe sadly.

 

 

For another view on the E.U. and the practical effects on it and Cameron's plans would be this little piece:


Edited by ladhrann, 22 October 2014 - 08:51 AM.


#33 hutch48

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Posted 22 October 2014 - 11:17 AM

This is a post hoc propter ergo hoc fallacy, after this, therefore because of this.  Thatcher and monetarism dismantled the unions and the manufacturing industry in England, not the European Union.

 

Well, I did make reference to the effects on the UK economy rather than the whole EU employment situation. Being able to do this is a technical term "A Posteriori" which means being able to look back at events and track down WHY they happened. First you dismantle manufacturing in the UK and put thousands of people out of work with no hope of changing it. Turn entire industrial areas into ghettos of poverty, crime and drugs. Then you screw down the price of labour to maximise profits, kick the guts out of the coal miners and all the while reducing the spending pool in the consumer market so that small to medium business goes bust as well.

 

Then as the revenue drops, taxes go up and up and up, transport costs skyrocket and law enforcement joins the ranks of the Gestapo to try and keep the lid on unhappy, hungry unemployed people. Diseffected ethnic minorities start to feel left out of it and start to follow loonie tune radicalism because the existing system offers them nothing while an increasing number of Anglo Saxon kids turn into skinheads, neo-nazis and the like to try and get heard. Even the recent referendum in Scotland made the point that young dis-effected people want the system to change. It is no secret that in areas like Glasgow that the yes vote was very strong among young people.

 

Then you get involved in a war or three, the Falklands, Yugoslavia, Iraq and Afghanistan and waste a fortune on paying for armaments that kills off even more economic activity and you get the picture of why there are unhappy people in the UK. Now look at what the EU has to offer the UK, open floodgates of cheap labour to take the ever decreasing amount of work available, overrides of democratic elections that effect EU policy as happened in Ireland with attempts to introduce, crippling restrictions on economic activity from Brussels and the like.

 

Nah, the EU is an anathema on the UK (and most other countries in it) as it flounders from one debt crisis to another, made a fool of itself in the Ukraine and has no way to pay back its debts. Lets see a return to the Lira, Franc, Drachma and the like and let each economy compete with its exchange rate instead of propping up the Euro at the detriment to most in the EU.



#34 Schneidergott

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Posted 23 October 2014 - 08:54 AM

Just wait until the EU commission presents the final results of the TTIP negotiations with the US.

Held in secret, in fact so secret that not even the members of the EU parliament can have access to the files.

Apparently US corporations are trying to undermine EU laws and regulations, so that the standards are lowered and certain sectors are opened to privatisation (like health care, for example).

Having only one executive body to deal with makes it much easier to get what they want. Sadly, European or international law can override national law, which means that at any given time our American "friends" can have their ways with any European state that dares to resist or object.

 

Germany was until now lucky enough to have a strong export of high value goods. For decades the wages have been kept low, even below inflation rates, so people got less each year. And when they dared to demand more the industry managers or bosses would use the argument of job losses, if they had to pay the higher wages.

Small business owners pay higher taxes or guild fees than a large corporation like Mercedes or others of that size.

I often wonder what happens to the billions of profit (Milliarden). As soon as there is a slight drop of profit, all corporations start to lament and need public funding, while they hardly pay any taxes in their fat years.

Normal people have to save up to make it through tough times, but with interest rates so low, that doesn't make any sense.

 

It is quite strange though to see how much politicians act the same way regardless of party or country. All they care about is to stay in power. Merkel and Cameron are no exceptions.

I'm sure than many No voters in the Scottish referendum are starting to regret their decision.


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#35 Sator

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Posted 25 October 2014 - 10:38 PM

Back to the subject of the opening post. The Economist on why Germany is in a rut:

 

http://www.economist...economyisinarut

 

IN THE second quarter of this year the German economy shrank by 0.2%. Economists expect it to contract again in the third quarter, meaning that the economy will technically be in recession. Some believe that the economy will not grow until the middle of next year. This performance has taken some people by surprise—the German economy was supposed to be Europe’s powerhouse. What went wrong?

 



#36 jukes

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Posted 26 October 2014 - 03:26 AM

The UK has tightened its belt and has the fastest growing economy in the EU. The EU,s verdict is that the UK must now pay an extra 1.7Billion on top of what we already pay, to bail out the failing EU countries, because we have been good boys and girls and shown the EU beurocrats how to run finances.
We have the NHS crumbling, overcrowded prisons and government cutting spending all round. We should be paying the national debt before paying more to the EU.
The sooner we get out of the communist empire that is called the EU, the better.




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