The Cost of Austerity

Last week in Neuss, Germany a disgruntled long-term unemployed man apparently cracked under the relatively relentless pressure being applied by the German government to "force" the unemployed into employment.

It began with a change in the welfare and unemployment  payments paid once  unemployment insurance ran out under the new Hartz IV  laws (January 2005) which became dependent upon seeking/finding/accepting work through the new federal employment agency.

The most striking of the conditions is that within a codex of human rights including human dignity there are a number of jobs which if offered to recipients of Hartz IV payments and not taken up by them will result in their payments being reduced or totally curtailed.

Having lived in Germany and visited it often I can patently say that the general quality of life level is good given the amount of money spent on public infrastructure, transportation, health, education and society in general which was a result of a Sozial Marktwirtschaft or social market economy in which the state steps in to try and ensure that social inequities are kept within reason in conjunction with a vibrant market economy.

This functioned extremely well in Germany where it was combined with a strong work ethic, a pride in employment and an underlying understanding of the rights and responsibilities of its' citizens.

As with all systems which try and deal with broad problems in a "one size fits all" approach there has been much slippage one manifestation of which has been the occurrence of third generation welfare families.

Hartz IV was supposed to deal with this problem, among many others hence the "workfare" aspect of the new law.  As with many things German there are procedures to be followed which often means an almost endless filling (and apparently re-filling) in of forms in order to keep current payments.

So last week in Neuss, at what is essentially the Federal Employment Agency a 50+ year old unemployed unskilled labourer decided that the state was out to get him and the jobs center case worker assigned to him was the medium through which the state was acting and so took out a knife and stabbed her to death.

The office continues to receive death threats and there have been instances in other centers where the police have been able to detect and disarm knife-carrying men attempting to enter.

I am not suggesting that Hartz IV is responsible for these acts of violence.  I am saying that there is a segment of society even within a reasonable wealthy Germany which is being squeezed- apparently in some cases to the breaking point.

We have seen the result of debt reduction packages in the less wealthy southern European states such as Greece, Portugal and Spain.

It is what England's Cameron is trying to implement, and what America's Romney wants to implement- the removal of the State as a social "equaliser".  

Desperate times call for desperate solutions.  Desperate men also turn to desperate solutions-those on the top-and those on the bottom.

The Wrong Trousers

Upon my return from vacation in the US this English news story caught my attention.  Apparently the Tory House Whip, a  privately educated Oxbridge graduate from a privileged background took offence when a policeman told him he would have to dismount from his bicycle if he wanted to enter Downing Street.

Allegedly he responded somewhat testily adding the remark that the policeman was a "pleb" thereby insinuating, or at least immediately being interpreted by the press and then the Labour Party as an example of the rift between the classes in Britain and how "out of touch" the Conservative Party is.

Maybe it was because I had been out of the country and was missing something but it seemed to me that the media and by extension Labour had gotten the wrong end of the stick.  To reduce the alleged incident to class warfare completely misses the point.

I believe one of the biggest threats to society  in general and certainly to British society is the lack of respect for authority, for public institutions, and frankly for one another.  These were two public servants, both of whom should command respect, and yet one appears to have decided the rules didn't apply to him.

In my experience if a policeman tells you to stop doing something which is contravening some rule, the correct response is to acknowledge the fact and to stop whatever it was that was not allowed.

To enter into a discussion with the policeman, and then to insult him is to insult the public institution which he is representing.  This is not class warfare.  This is disobeying authority.  It is rampant in society.  Everything is reduced to some form of human rights where there is a huge sense of entitlement, through every strata of society, and no sense of responsibility. 

The social contract is what is at stake here- not a sideshow of class warfare.  Yes there are haves and have-nots.  They are all supposed to be equal before the law.  Stop prattling on about the insult.  Give the bastard a summons for not dismounting his bike when instructed to do so and then insulting an officer and get on with it.

Retirement Take Two

I have retired again, for the second time, after a very interesting and dare I say taxing two years with an agency broker in London where I ran their European Fixed Income Business. As is normal for Europe I am now on garden leave for the 30 days and so am on vacation for the moment and will be back in the "writing saddle" on I hope what will be on a more regular basis sometime early October. After almost 18 months of trying to rebuild a fixed income business under somewhat extreme circumstances I am looking forward to having time to reflect and analyse what is going on around me instead of tring to put out fires with gasoline. The world has not gotten any saner....

The End of our Dreams?

I met recently with a senior member of a major european bank who has to deal with his regulators in numerous jurisdictions. As is often the case in my meetings our discussions were wide-ranging. In this case we focused on the precarious state of the Euro in general and Spain's position as the next line in the sand. He was not optimistic and didn't mince his words. His opinion hung between two main pillars-the pure bloody mindedness of the national regulators and his conviction that the experiment was doomed from the start. His recent experiences with the regulators demonstrated that regardless of the the protestations of their national politicians that the Euro was sacrosanct and that they would do whatever necessary to protect it the fact of the matter was that behind closed doors their interest was always to protect their taxpayers above else, and defintetly at the expense of other the Euro nations. This was a perfect backdrop as to why he felt the euro experiment was doomed to failure. Monetary union without fiscal and political union was never going to work. And the only way to fiscal and political union would be to surrender sovereignty. What politician was going to run let alone win on that platform-unless he had 100 armored divisions at his back. Unfortunately the only thing constructive from the conversation was that despite his prediction that after the Arab Spring we would have the European Fall-a complete social disintegration brought about by austerity programs-it would not result in a continental war. No, he foresaw a slow collapse of Euro, perhaps of the European Union, dragging on for the next couply of years. Sell bank shares. Sell the periphery. And I guess buy Germany.