Tuesday 25 April 2017

To Save the EU Germany might have to Change


I get into a lot of arguments about Germany's current account surplus which this year is around 8.6% of GDP. That is a huge number. It has drawn criticism from primarily the US claiming currency manipulation. It has also come under attack because of the German propensity to save. Lastly, the other old chestnut rolled out is Germany's ruthless efficiency (in manufacturing).

Germany carries an almost hysterical fear of inflation predicated on its experience of hyper-inflation in the 1920's. This has resulted in a national consciousness which focuses on financial stability with a strong tendency to save on a private as well as on a public level.

But Germany's current account surplus is only partially a result of trade. It doesn't subsidize its exports and only indirectly controls the level of the Euro by virtue of its economic might. Under the current structure the independence of the European Central Bank (ECB) remains as sacred as that of the Bundesbank with the caveat that politically there is monetary but not fiscal union which means Germany, like every other EU nation looks to its own house first.

Because there is no overt currency manipulation nor are there any subsidies paid to support exports the problem appears to boil down to excess savings at the expense of investment.

The Financial Times(FT) recently attacked the Germans suggesting that Germany should tackle its saving surpluses which they went on to blame on over-regulated service industries; low growth level of public and private sector investment; and damaging and unnecessary fiscal surpluses.

Hmm.

Damaging and unnecessary fiscal surpluses.

Just what is it that they would like Germany to do?

I believe they are referring to calls from some corners for a fiscal union, or at least the first steps to a fiscal union giving the EU/ECB the right to impose policies on member states to influence the relationship between savings and investments. But this would be a major step to a federal Europe. It requires relinquishing aspects of sovereignty that no one seems to be willing to do because they think Germany will run a federal Europe.

Sounds like a rock and a hard place.

What it really requires is a German politician- either Merkel or Schulz to admit domestically that although Europe has benefited from the EU and Euro, Germany has benefited even more. It might be time to spread some of the German benefit (ie surplus), and to do so will require more rather than less union.

The argument somehow always ends with someone yelling at me that the Germans run Europe.

I don't argue. I refer to their complaints about Germany's ruthless efficiency.

I ask would they prefer they were building tanks instead of cars.....



Thursday 6 April 2017

Of Nepotism and Ethics in a Banana Republic

The following is a quote from the New Yorker:

"Having sent Tillerson home from Beijing spouting Communist Party mantras, Xi’s envoys have turned their attention to the representative they really care about: Trump’s son-in-law, Jared Kushner. From a Chinese perspective, Kushner’s role in the White House is a clannish arrangement that they know well. Many of Trump’s current courtiers may be gone in a year of two, but the members of his family will remain. For a while, China appeared to be preparing to endear itself to Kushner in a way that only it can: Anbang, a financial conglomerate with close ties to the Party leadership, was nearing a deal that would have unlocked billions of dollars to help Kushner save a troubled investment in a skyscraper on Fifth Avenue. Last week, the Kushner family announced that talks had broken off, for reasons that were not clear. It’s certainly possible that a surge of negative publicity was making one side or the other uncomfortable."

Let me repeat part of that: "Anbang, a financial conglomerate with close ties to the Party leadership, was nearing a deal that would have unlocked billions of dollars to help Kushner save a troubled investment in a skyscraper on Fifth Avenue."

So let me get this straight. Jared Kushner, Senior Advisor to his father-in-law Liar Trump is in China negotiating a deal with a Chinese financial conglomerate to protect one of Jared Kushner's investments?

I expect to read articles like this concerning the antics of third world dictatorships (or corporate CEO's), but not about members of the president's inner circle, and especially not if they are related to the president.

From the cabinet of billionaires to the buffoons masquerading as counselor to the president and presidential press secretary it looks like a ridiculous sitcom parodying a tinpot dictatorship.

Unfortunately it is not a TV show despite the best efforts of Trump in conjunction with various outlets of the media who are determined to push their view that news in general and politics specifically are just another form of entertainment to be used by Liar Trump for self-enrichment and by the media to increase ratings in order to sell commercials.

It is real life geopolitics.

I can only hope that Liar Trump might be learning the lesson that despite his desire to phrase everything for the benefit of third graders the real world is a lot more complex. Cue Health Care, Tax Reform, Syria, China and just about everything else he will encounter.

While he's on that learning curve I have to maintain my faith in the integrity of the American form of governmental checks and balances to save us from HL Mencken's "narcissistic moron".

Tuesday 4 April 2017

Little Britain

I have been so overwhelmed by the cascade of garbage emanating from the White House and certain parts of Capitol Hill that I have found it difficult to reflect on anything else thus putting what I view to be one of the most self-destructive acts undertaken by a sovereign state into the shadows.

Of course I am referring to brexit.

I am not going to go over all of the inanities of the the referendum. I am not going to fall into the category of a "remoaner" as the brexiteers like to tar anyone who was against brexit from the beginning and is still incredulous at the we've drunk the kool-aid and brexit means brexit brigade.

No.

I am going to quote Tony Blair, who, for all his faults, came out with a concise description of where we are.

The brexiteers have made the decision that they don't like the house they are currently living in because the "utilities" are somehow controlled by people who don't live in their neighborhood. Their solution is to sell their homes without ever having looked at what their new home will look like, how much it will cost, what repairs will be necessary and whether the "utilities" will be any better once they are controlled by their neighborhood.

But I can report that the brexiteers tell me that I am wrong, that Tony Blair is certainly wrong, and then continue to bleat their brexit means brexit refrain.

I therefore now have chosen a different tact.

I tell them how happy I am that brexit means brexit and that now the NHS will finally get the funding it requires as brexit means Britain will save £350 million a week which will be put into the NHS.

You guessed it. They look at me with a perplexed look and tell me that I can't possibly believe that the NHS is really going to get £350 million a week.

And I can't possibly believe that they really voted for brexit.