Germany needs a new business model

The ability to rely on your neighbors and friends in times of need can be reassuring indeed. However, it can not be a way of getting on in life.

Or, as PAUL KRUGMAN, who won last year’s Nobel prize in economics for his work on trade, wrote in 1993: “What a country really gains from trade is the ability to import things it wants. Exports are not an objective in and of themselves; the need to export is a burden that a country must bear because its import suppliers are crass enough to demand payment.”

Private consumption in Germany, alas, looks about as arousing as a wilted dick.

Small wonder with high taxes and the idiotic raise of the VAT rate.

Germany’s needs to get away from its addiction to exports. It will have to wean itself away from the whole car idiocy as it stands no chance to compete in the biggest growing segment, small, dirt-cheap cars, against China and India.

Oh, that will hurt the German pride big time – engineers of the finest cars with 24 airbags, ERS, AVS, QVS and what not – and it will hurt even more in an election year. And not to get started about the German love affair with a balanced budget.

Depression? Spoil me rotten!

Now please mortals, plebs and untouchables can we stop this morbid talk about the Kali Yuga.

Delight, shop and stuff yourself.

Wirtschaftliche Hoffnungsschimmer-Illusion

Bärenfallen, helle Punkte am Horizont, erste Lichtblicke …

W. Buiter bringt Klarheit in diese drogeninduzierten Wunschvorstellungen. Ebenso zum Oster-vorgezogenen G20 Windei.

The Great Contraction will last a while longer

This financial crisis will end.  The Great Contraction of the Noughties also will come to an end. But neither the financial crisis nor the contraction of the global real economy are over yet.  As regards the financial sector, we are not too far – probably less than a year – from the beginning of the end.  The impact of the collapse of real economic activity and of the associated dramatic increase in defaults and insolvencies by non-financial enterprises and households on the loan book of what is left of the banking sector will begin to show up in the banks’ financial reports at the end of the summer and in the autumn.  By the end of the year – early 2010 at the latest – we will know which banks will survive and which ones are headed for the scrap heap.  With the resolution of the current pervasive uncertainty about the true state of the banks’ balance sheets and about their off-balance-sheet exposures, normal financial intermediation will be able to resume later in 2010.

Vor allen Dingen nicht den Regierungsverlautbarungen trauen …:

Governments everywhere are doing the best they can to delay or prevent the lifting of the veil of uncertainty and disinformation that most banks have cast over their battered balance sheets. 

Denn wir möchten nicht so ganz raus mit der Wahrheit:

I used to believe this state capture took the form of cognitive capture, rather thanfinancial capture.  I still believe this to be the case for many, perhaps even most of the policy makers and officials involved, but it is becoming increasingly hard to deny the possibility that the extraordinary reluctance of our governments to force the unsecured creditors (and any remaining non-government shareholders) of the zombie banks to absorb the losses made by these banks, may be due to rather more primal forms of state capture.

Und die jüngsten G20 Vereinbarung, eh Erklärungen?

Indeed, the G20 delivered nothing in this regard.  It would have been preferable to maintain the overall size of the planned (or rather, expected) global fiscal stimulus but to redistribute the aggregate (about $5 trillion over 2 years, as measured by the aggregated changes in the national fiscal deficits) in accordance with national fiscal spare capacity (I believe the World Bank calls this ‘fiscal space’).   This would mean a smaller fiscal stimulus for countries with weak fiscal fundamentals, including the US, Japan and the UK, and a larger fiscal stimulus for countries with strong fiscal fundamentals, including China, Germany, Brazil and, to a lesser degree, France.

Der folgende Absatz geht ein wenig in die Eier, lies erhöhte Steuern:

Furthermore, a likely consequence of the fiscal stimuli we have already seen or are about to experience is a negative impact on the medium- and long-term growth potential of the global economy.  The reason is that, if fiscal solvency is to be maintained, there will have to be some combination of an increase in the tax burden and a reduction in non-interest public spending in most countries when this contraction is over.  The inevitable effect of the crisis and the contraction is a higher public debt burden and therefore a larger future required primary government surplus (as a share of GDP).  Almost any increase in the tax burden will hurt potential output – just the level of the path of potential output if you are a classical growth groupie, both the level and the growth rate of the path of potential output if you are an adept of the endogenous growth school.

… und zu Steuererhöhungen wird Inflation kommen:

For both countries there is a material risk that the mind-boggling general government deficits (14% of GDP or over for the US and 12 % of GDP or over for the UK for the coming year) will either have to be monetised permanently, implying high inflation as soon as the real economy recovers, the output gap closes and the extraordinary fear-induced liquidity preference of the past year subsides, or lead to sovereign default.

Das G20 Windei !!

The global stimulus associated with the increase in IMF resources agreed at the G20 meeting earlier this month will be negligible unless and until these resources actually materialise.  The statements, declarations and communiqués of the G20, including the most recent ones highlight the gaps between dreams and deeds.

Even the promise of an immediate increase in bilateral financing from members of $250 bn is not funded yet. Only $200 have been promised firmly – $100 bn by Japan and $100 bn by the EU.  Prime Minister Brown announced that the PRC had committed another $40 bn, but apparently he had forgotten to clear this with the Chinese.

As regards the plan to incorporate in the near term, the immediate financing from members into an expanded and more flexible New Arrangements to Borrow would be increased by up to $500 billion (that is by another $250 bn).  Unfortunately, nobody has volunteered any money yet.  It therefore has no more substance than past commitments by the international community to fund the achievement of the Millenium Development Goals.

Then there is the promise that the G20 will consider market borrowing by the IMF to be used if necessary in conjunction with other sources of financing, to raise resources to the level needed to meet demands.  That is classic official prittle-prattle – suggesting the IMF borrow without providing it with the resources (capital) to engage in such borrowing.

There is also $6 bn for the poorest countries, to be paid for by IMF gold sales and profits.  Nice, but chicken feed.

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Drogenabhängiger D-Land

D-Lands Exportdrogensucht bringt dem Land die schlechtesten Wirtschaftszahlen seit 60 Jahren. Junkie-mässige Abhängigkeit von der Autoindustrie, im IT-Bereich mehr oder weniger eine Null (sorry SAP), staatsunterstützte Teilzeitarbeiter und trotz vorbildhafter Bundesmutter von der Leiden (fünf mal erfolgreich geworfen – Glückwunsch bitch) geringe Kindergeburtenzahl …und dazu eine Wahl mit jetzt schon feststehendem Resultat.

mehr Details hier

Das ‘L’ und der Drogensüchtige Deutschland

Wenn man nicht gerade eine Agenda im Wahlkampfjahr verfolgt oder JCT heisst, dann drängt sich einem beim Blick auf die Wirtschaftsdaten, dem Derivatehandel, den CDS Spreads der Verdacht einer Wirtschaftsentwicklungskurve in der Form eines ‘L’. Und zwar ein L beginnend mit einer langen Senkrechten …

Wolfgang Münchau von der FT hat wieder einmal ein paar triftige Gedankensplitter.

From the Financial Times:

The US is dragging its feet over the financial sector. The European Union is doing the same, as well as failing to adopt policies that could shield it from an increasingly probable speculative attack. And judging by the state of preparations, the forthcoming Group of 20 summit is going to be a disaster.

So it looks like it is going to be an L – not a V or a U. I mean an L-shaped recession, one that starts with a steep decline, followed by very low growth for many years… This looks like Japan all over. Without financial restructuring, the economy is not going to recover. And Japan was lucky. It was surrounded by a booming global economy.

The best way to fight such a disaster is to restructure the banking system and provide short-term economic stimulus through monetary and fiscal policy. …the current stimulus package is woefully inadequate. In other words: we are looking at an L.

An L-shaped recession will make the adjustment of balance sheets even more painful. Unemployment will continue to rise. House prices will keep on falling. US consumers and banks will spend the next five or more years deleveraging, getting their respective balance sheets back in order. In that period, the US current-account deficit will fall sharply, as will that of the UK, Spain and several central and eastern European countries. This process can take a long time, and in an L-shaped recession it takes longer.

But the effect is also brutal on the rest of the world. The fall in current-account deficits will be partially compensated for by lower surpluses from oil and gas exporters, such as Middle Eastern countries and Russia. But the bulk of the adjustment would be borne by the world’s largest exporters: Germany, China and Japan….

If we had a simple U-shaped recession, we would still have a painful recession in Germany and Japan, for example. But under a U-shaped scenario, both countries would be among the first to benefit from the recovery.

In an L-shaped recession, however, recession gives way to depression, despite the fact that both countries thought they had done their “homework”. If nobody can afford to run a large deficit for a long time – which is what an L recession effectively implies – the economic models of Germany and Japan will no longer work. Germany had a current-account surplus of more than 7 per cent last year. It is the world’s largest exporter. Exports constitute about 41 per cent of national gross domestic product – an extraordinary number, given the size of the country.

So what should these countries do? The right policy response would be to reduce the dependency on exports and undertake structural reforms that facilitate the shift towards non-tradable goods…

Unfortunately, the opposite is happening. Germany is clinging to its export model like a drug addict. An example is the debate about the future of Opel, the European car manufacturing subsidiary of General Motors. Opel is unlikely to survive without help from the government. The proponents of a state bail-out of Opel argue that the company is systemically relevant. This argument is obviously wrong. There can be systemically relevant banks, but there can be no systemically relevant carmakers. But the answer is also revealing. What it means is that Opel is systemically relevant for the country’s export-oriented model. The bail-out adherents are clinging to an industrial structure that has no hope of survival in an L-shaped world…

We are nowhere near a solution to the crisis. After committing errors of omission, global leaders are now producing errors of commission. The Americans dream about a return to a world of credit finance consumption while the Germans dream about assembly lines. In an L-shaped world, these are nightmares.

Deutschlands Exportabhängigkeit – auf die das Land kurioserweise auch noch stolz ist – ist nicht haltbar in der gegenwärtigen Lage und wird auch nicht bestehen können gegenüber dem weiteren wirtschaftlichen Machtanstieg Chinas und – bedingt – Indien (wenn es denn endlich mal die katastrophale Korruption eindämmen kann, besser will). Wenn D-Land nicht den Binnenkonsum stark steigert, dann sieht die Zukunft nicht rosig aus. Aber, Lohnsteigerungen würden das Land in der Konkurrenzfähigkeit in Nachteil bringen. Damit gibts nur eins: drastische Steuersenkungen. Und die wirds nicht geben.

Hinzu kommt noch die lächerliche Auto-Drogensucht des Landes. Hier sind etlich Firmen überflüssig. China und Indien wird hier big time kommen.

Charts, die Ungutes ankündigen

Das CFR hat ein PDF veröffentlicht mit einigen Charts, die wirtschaftliche Abschwünge in der Nachkriegszeit mit dem jetzigen bisherigen Verlauf vergleichen. Einige Charts lassen für 09 nichts Hoffnungsvolles erkennen. 

Insbesondere fallen starke Unterschiede bei Nonfarm PR, Ölpreis, ISM Manufacturing, Autoverkäufe, Konsum, Investment Grade Spread und BAA Spread auf.

Kanzler Merkel: Steuern werden nicht gesenkt. Oh doch!

Kraut Queen Titte Merkel talking Assets oder wie ein ausgeglichener Haushalt aussieht.

Keine Steuererleichtungen vor 2010, laut Anjie aus der DDR. Wirklich so sicher?? You might wanna read this, babe and then go fug yourself:

Things are going to get ugly in Europe…at least that’s what movement on credit default swaps for European corporate debt are indicating. The Markit iTraxx Crossover index, a measure of the spreads on swaps for 50 mostly junk-rated European corporations rose 39 basis points to reach an all-time high of 929 basis points today, according to FT Alphaville. 

With gloomy economic times ahead, investors are increasingly rushing to insure themselves against default on lower-rated corporate debt as they calculate that weak companies will be the first to fall as consumers cut back on spending. Expectations for investment grade debt are more optimistic, although still cautious, as the iTraxx Europe index was up roughly 13 basis points to around 183 basis points. - George White 
 
See FT Alphaville post

Fantastisches Businessmodel: Internetbetrug

Autoindustrie, Banken, Export … alles down? Cheer up, bugger. Internetbetrug hat Zuwachszahlen, dass einem die Augen tränen.

FT: Cybercrime was anecdotally growing “very rapidly”, the company said, in spite of the absence of comparative data from previous years.

“These forums are a genuine marketplace where people are playing different roles of buying and selling,” said Liam O’Murchu, security analyst at Symantec. “It does appear to be apeing real business models.

“It’s a little bit like when e-business was kicking in. It’s a free market in labour and an international market.”

Symantec monitored servers across the world as the basis for its report and found more than 69,000 fraudsters advertising their services over the past year, sending 44,321,095 messages to underground forums.

Symantec found that credit card information was the most advertised category of goods and services, accounting for 31 per cent of the total, with financial accounts the next biggest on 20 per cent.