Tuesday, July 30, 2013

Russia's "Child Protection scheme" is about Censorship

I commented on the British porn filter and claimed that it will be about censorship. Meanwhile in Russia, a similar law with only the intention to keep the children safe, was used to silence reporters according to techdirt and now swearing will be made illegal online, because we all know that that is something one just does not come across in the "real world" (TM). Of course the UK is totally different: one can still opt out!

One British ISP isn't all that happy with the active choice idea and will offer either uncensored Internet, and support on how to enable filters on the PCs of children for the parents, or the advises to move to North Korea if one tires to choose a censored version.

Perhaps there is still hope after all.

German Journalism and Google News

Thursday, the new "Leistungsschutzrecht", a law which was supposed to help the struggling news media, by making it illegal for news aggregators and search engines to quote snipplets from news articles. The idea behind it was to generate revenue through licensing fees for the publishers. Most media outlets engaged in a propaganda campaign honest reporting on their own behalf. (Heck, that made me so angry that I started this blog)

The effort which was led by Springer, the publisher of the Bild Zeitung, the biggest tabloid in Europe, ended in absolute and utter disaster this week. The service was changed into an opt-in scheme, and Google asked the publishers if they want to partake. According to Sueddeutsche, the ten biggest German news sites now all allow Google News to use snipplets. Of course, the unconditional surrender includes all Springer papers.Well, that is not entirely true, several publishers are claiming that they might opt-out in the future and seem to believe that this will lead to the following:

1. Opt-in
2. Opt-out
3. ??????
4. Profit

Interesting plan, but I am not fully convinced, yet. Perhaps they believe that if they build a collecting society on publishing rights, like the GEMA, which does the same for artists, Google will somehow agree to pay them. Since, GEMA is also in a fight with google over money, which has not let to anything other than many YouTube music videos not being accessible from Germany, this does not seem all that likely.

This law will still do significant damage to many services and thereby it will cement Google's monopoly. Rivva, a small, one person news aggregation project, for example, is having problems to get some publishers to opt-in. So, without doing anything wrong, its service is now by design worse than google's.

Also, the media seems somewhat surprised that after engaging in a shameful campaign on their own behalf, supported by easily disprovable "facts", they now are seen by the Germans as pretty corrupt. Well, more corrupt than before that is. My guess is that this just might have had something to do with getting in bed with the government and together with the coalition making up a fantasy universe where robots.txt does not exist, and google forces them to be listed. Some people might actually believe that so called "favors" were involved like "nicer" reporting on policy, which makes the media in general seem more corrupt.

On Thursday the Leistungsschutzrecht will become law. It has only downsides; nobody gained or will gain anything from it in Germany. Only Google can be quite happy that their monopoly was most likely strengthened. The German publishers who are not in a healthy state have done nothing more than damage their own reputation, and the German government has created regulation that clearly hinders competition and favors an American company. Good Job.

Sunday, July 28, 2013

"Great" Britain's March into Dystopia

Mr. Cameron wants to protect the children from the horror that is porn, or so he claims. Of course, everybody with half a brain knows that the filter system -from which one can opt out at least for a while - is directed at much more than just porn.

The German media seems quite puzzled that the British seem to accept that their freedom is being reduced. For example FAZ thinks that one cannot score many political points by "supporting open access" to porn, which leads to "little resistance", and sees GB in the "good company" of Iran and Saudi-Arabia.

Still, some might be surprised that it is a coalition that includes self proclaimed Liberal-Democrats pushing for a nanny-state clearly imposing conservative values on everybody, who does not opt-out (while that is still possible). Sadly, liberalism today is about inflicting economic pain on the weak (students in GB), while accepting ever increasing state power. Hayek must be spinning in his grave. The nanny-state is not just interested in protecting children, their parents, most people in relationships, all women and lazy male singles from porn, though. Other filtered contend will probably include, according to Wired:
  • violent material
  • esoteric material
  • suicide and eating disorder related websites
  • extremist content
  • and of course material showing how to circumvent blocking (and total surveillance since both is achieved the same way)
Mr. Cameron does not talk about these other issues. The goal seems to be to use women to prevent men from opting out of censorship by declaring it is about porn. Actually, I have to applaud him for that excellent strategy, I think this will work just fine. The only ones opting out will be some single men.

The censorship tools child protection system will of course be implemented in part by a Chinese company, for China is a great success story when it comes to finding the delicate balance between civil liberties and security.

To anybody that likes movies, Britain's march into a censorship and surveillance state should be expected. There seem to be two types of movies coming from the island:
  1.     violent comedy in the form of Snatch, and Lock, Stock and two Smoking Barrels among others
  2.    dystopian movies about fighting against a totalitarian state in England. The best known examples are V for Vendetta, Children of Men and of course the cinematic adaption of 1984 (haven't seen that one)
Therefore, what we know of GB is that it is a funny, but violent country, full of royal babies that can spin their head 360° and defy gravity, which is headed for a totalitarian regime (oh and that England just cannot win a World Cup without really shady goals, of course). Well known  movies about Germany are about the "Untergang" (demise) of totalitarian states past, the "Life of the Others" in and the few people trying to safe some victims (Schindler's list) of such monstrosities. I am really puzzled that there is movie after movie about the horror of future GB totalitarianism, while every party seems to be working towards the goal of increasing the surveillance state (Do I even have to mention Tempora).

But fear not, further "reforms" to the NHS will eventually prevent the "Road to Serfdom" that is general health care, while total surveillance and censorship will keep the citizens safe from extremist content like free speech and esoteric material like Islam and atheism (for everybody knows that it is just another pagan religion). porn and terrorists.

Saturday, July 27, 2013

On Cyprus

Cyprus mail has a good comment on the situation in Cyprus and the way forward for the (half) island. It is nothing new though. The situation will through the rescue continue to deteriorate without any hope for a better future, and the troika keeps making up fantasy forecasts to show that it will always be the next year where we will see that the plan is working, or in the case of Cyprus next year will see a much slower decline of GDP than this year.

The solution that is suggested is also nothing new: Cyprus should leave the euro. The banking system lies in shambles, anyway, therefore there the country is already experiencing most of the downsides of a exit without the upsides. That being of course, that the island could become more competitive much faster and easier if it does not deleverage within the euro zone.

There are several things that need mentioning though. First up, I am quite sick of people who invoke Einstein when they want to call others idiots. Also, the Cypriot politicians aren't even the ones that have tried the same plan over and over again. Why not just call the troika incompetent fools. They are (the ECB is at least trying to actually make this union work, it just has to also fight an enemy within). Of course, every time somebody does call them out, they will point at Ireland, in the hope that nobody has realizes, that the other divided European island isn't recovering either.

Second: Cyprus should have left the euro before the "rescue", since the plans are specifically designed to cause high damage in the beginning. Of course that would have been difficult to sell to the population, it would have been better to act than to react. Also, it will get significantly harder for government to leave once the unemployment rate has reached Greek levels. Still, to make the sitiation even more messed up: without significant hair cuts in both Greece and Cyprus, the countries have no other way than to leave the euro eventually, which will cause further damage. It was an all round horrible idea to accept the package. The advise is late, possibly too late.

Third: the island should not bet on improvements to tourism just because a new currency is introduced and devalues. Germans not having to exchange money is actually making Cyprus more competitive compared to other countries. A falling currency will keep tourists away. It seems unlikely that a bet on tourism will pay off.

Still I agree that the Cypriot government has to think about exiting. If they do they should do it within this year and more importantly via a referendum. The people should be shown both scenarios. Both will cause significant harm to the economy but only one provides a chance to recover. 

Friday, July 26, 2013

Just When One Believed That We Had Reached The Maximum Incompetence Level...

... suddenly a wild Hans Peter Uhl (CSU expert on being old) appears and tells us (via golem):

I have seen the Hitler-diaries in a different magazine. In hindsight that was also something completely different than the truth.

Well, awesome that you remember that episode from 30 years ago Mr. Uhl. It just does not have anything to do with Snowden, or the NSA, or Spiegel. We know for a fact that these documents are real because the US government admitted as much. Pentagon spokesman Lt. Col. Damien Pickart on why military access to guardian and other websites is blocked:

"If that particular website runs an article that our filters determine has classified information... the particular content on that website will remain inaccessible,"
Why will these people be most likely re-elected? Even if one does not care about being spied on for no reason with basically no oversight, then one should still feel disgusted by the stuff that comes out of the coalition parties. This person is supposed to control the BND and other intelligence services and has nothing better to do than to say that:

We will answer all questions and in the end the result has to be: the German intelligence service  abides by the German privacy laws.

That just is not how parliamentary control works. He is not supposed to a cheerleader for the BND. He is also not supposed to answer questions in that role but to ask them.

Still nobody is saying how the NSA accesses the communications meta-data of German citizens. OK, then it wasn't the BND. I don't care, who it wasn't! It is the BND's job to find out how they did it and put an end to the warrantless collection of phone call, IP, and e-mail meta-data. If it is not capable of doing what it is supposed to do aka. counter-intelligence, then we need a structural reform. We need a secret service that is more than just a NSA pet, and begs for US data because it is not able to do either intelligence or counter-intelligence work. The only noteworthy thing the BND has done in recent history was to provide Curveball to the US. That did not play out so well, did it? Ok, back in the 1960ies there may have been a time when the BND was a bit more than an US play thing but these times are long gone. Perhaps Uhl has some stories about those good old times, but more importantly I want a capable intelligence service back.

Thursday, July 25, 2013

Stagnation - the new Boom

The new IFO index is out and is like most other economic data showing stagnation in Germany. Yes, it rose a tiny bit from 105.9 to 106.2, but that is no improvement that anybody should be proud of since it is well below the level of 2011. and it did not even reach the level of Febuary and March 2013.

The press release's language suggests, otherwise:

The Ifo Business Climate Index for industry and trade in Germany rose for the third time in succession. Assessments of the current business situation are more positive than last month. Although the six-month business outlook weakened slightly, firms remain cautiously optimistic with regard to their future business outlook. Conditions in the German economy remain fair.
That last sentence is not bloomy enough. I liked the language of the German release much more:

There are only few clouds on the economic sky.
Of course, if one compares this awesome looking skybox with March (106.7) and not April, which due to the early Easter had fewer workdays than normal and should be considered an exception, then one can see that there is still no reason whatsoever to proclaim an end of the stagnation in Germany.

Still, the German news media were quick to jump aboard the boom-times-train. FAZ was finding green shoots everywhere, including but not limited to France and Italy. Best sentence:

Therefore, the indications are solidifying that the phase of weakness in the first half of the year could be over.
Well, yeah the first half of the year is over.  we are seeing stagnation, after a very weak second half of 2012. Spiegel basically just copy-pastes most of the press release and avoids any own thought. The above is an example for the typical overly optimistic economic reporting in German news. Every positive number is the new green shoot, indicating and end to the euro-crisis. So what in the world is wrong with German and also European news?

Kevin O’Rourke wrote two days ago:

There is an additional cost to the two-quarter rule of thumb in the Irish and Eurozone context: it implies that Ireland is periodically proclaimed to be out of recession. This then allows Eurozone politicians and central bankers to defend the status quo monetary and fiscal policies prolonging the economic crisis in Ireland and elsewhere.

I fully agree, but it is important to add that this wouldn't be possible if the news media employed more people with a functioning memory, or the ability to understand graphs, or the will to actually look at the context of what they are reporting on. The main reason that the politicians can get away with their failed policy is media incompetence.

Additionally, the German reporters for the most part seem to have bought into the neo-liberal believe system of  austerity good, state bad, structural reforms good. It is very much simplistic thinking, one might argue that there is actually no thinking at all involved. This believe system makes it very easy to make deadlines for content, and is therefore journalist friendly. Bad numbers? Call for structural reforms. There isn't any need to mention any specifics.Worsening debt to GDP ratios in Europe? Not enough reform pressure: call for more structural reforms. Increasing unemployment in Europe? Call for structural job market reforms. Somebody wants more state investment? Public investment is always short term: call for structural reforms. This is the perfect believe system for any journalist reporting on the economy. No need to think to sound smart.

Since the wishes of the austerity god have been fulfilled one should now be seeing improvements. Stagnation is not what should be happening, and if the situation is still deteriorating in Europe with no growth in sight, then it must be due to not praying enough  structural reforming fast enough. Also, the journalist will look to to any news reaffirming his/her believe that boom times are just around the corner. Green shoots everywhere!
The media is significantly invested into this believe system. Calling for stimulus programs is not an option anymore, since they have written comment after comment after.... in favor of austerity. Abandoning the believe now would mean that their credibility is significantly reduced. This was easier in Germany than elsewhere since here austerity is called saving policy (Sparpolitik).

Also, the media is scared of initiating a self-fulfilling prophecy. You tell your readers that Germany is not the locomotive of everlasting growth, but instead is stagnating, and there are significant downward risks of under-investing industry in the country itself,  the risk of Italy needing help that nobody can actually pay for, and China might see significantly lower growth in the coming months, over and over again and you just might cause a change in behavior. The population will reduce their investment and thereby the recession one has been seeing might just be caused by the media itself.

Some might also say that German experts have something to do with the reporting. This might also be true, but the journalist chooses whom to include. So if one is looking for an expert opinion and calls Sinn or Hüther, then the result will of course be a state bad article.
The result of failing to make it clear that the current policy is not delivering the promised results, neither in Europe nor in Germany itself, will get Merkel re-elected. Her coalition is at least partly responsible for the mess we are in in Europe. There might be some more critical reporting until the election, but I think the damage has already been done. Europe's political system is not stable anymore, the debt to GDP ratios and unemployment numbers are significantly worse than before the German government came up with the plan of keeping German inflation low and pushing all of the adjustment, which was needed, onto the program countries thereby forcing them into deep recession. The media is responsible for letting them get away with a policy which is not making us more competitive but is in fact destroying more and more absolutely legitimate industry jobs all over Europe.

Monday, July 22, 2013

My Game of Thrones Fascination

I am quite sick of all the nonsense coming out of our government on the issues of the economy and PRISM et. al. for example the Spiegel (English article for once) reported about the usage of XKeyscore by both the external and internal German "intelligence" services, who then answered a) gibberish in case of the BND, as they denied something nobody actually said, and b) the Bundesamt for Verfassungsschutz said they only tested it, but did not use the spy software (the internal secret service is called "Constitution protection" in what must be considered an inside joke). A story almost as believable as the tale of the two PRISMs.

Schäuble visited Greece last week and applauded the country specifically for the 30 % reduction in unit labor costs, achieved for the most part through lower wages. The same week he published an op-ed which included the following statement:

This is why the adjustment plans for countries that are receiving financial support call for fundamental structural reforms that aim to put them back on track towards long-term growth and thus secure sustainable prosperity for all.
 Prosperity for all is achieved through lower wages? And when if the South recovers the euro would be strengthened, which would make Germany less competitive, and therefore wages would have to fall again? Thus ensuring that sustainable prosperity is nothing but a never ending race to the bottom and actually means poverty for all? So that's the plan?

All this fiction to hide selling out the German citizens, and to excuse inflicting pain on millions of Europeans is just making me angry, so today nothing more on prosperity through poverty, or ever-lasting test phases for spy-software. On to something completely different: actual fiction.

Yves Smith asked yesterday:

If you’ve stuck with Game of Thrones despite the pain factor, to what do you attribute the personal and cultural appeal?

Thursday, July 18, 2013

German Media and PRISM

My comments in[..]

Sueddeutsche isn't happy that the German government only reacts to media report,s and did not mention that it had knowledge of a "second" PRISM, "that is possibly not identical to the first PRISM." Spiegel initially seems to buy the second PRISM story and says that it might be a:

P lanning Tool for Resource Integration, Synchronization and Management.

[Of course it might also be a

Partnership for Research Integrity in Science & Medicine
or a
Photo Reconnaissance Intelligence Strike Module]
But, since both PRISM's seem to do exactly the same thing are both NSA programs and access the same data bases ,according to Bild, it seems rather unlikely that we are actually talking about two different programs.The Spiegel article then becomes less and less convinced of the two PRISMs story. To go on to say that Minister of the Interior Friedrich is now not sure anymore that the NSA isn't conducting industrial espionage in Germany, but GOOD NEWS not five but seven terrorist attacks have been "prevented" in Germany[ 2+2=7 or something I guess. Well, he probably realized that one cell can commit more than one attack. Therefore he could actually from now on increase the number at will. My guess is 11 is next and 13 the day after.]

Welt, Bild's less hideous looking sister newspaper, shows its face without make-up on, and speculates about a pill, invented by the KGB, that has already made Snowden tell all his secrets. But, since it also makes him forget about that, we will never ever know. [OK it is only one op-ed writer but if you want to be a reputable newspaper your by far top rated reader comment on one of your pieces shouldn't be "Nonsense, under drugs, as if he had memorized everything, it is on a data medium and not in Snowden's head, you are making s*** up.[..]" ]

FAZ [google translates a word in the headline to liar but it should be rattler] praises the oversight over the NSA by the Senate, allot. FAZ claims that our legislative counterpart is "rattling" because they have no power. [They seem to believe that mentioning oversight more often will change the facts that we are a target and in the eyes of the US constitution have no rights. True, the current process where our G10 commission is basically only informed about specifics if the executive branch wants to, is absolutely unacceptable, but that does not make the US oversight sufficient when it comes to Germans.]

TAZ goes all out on cynicism:

The Minister of the Interior informs TAKE CARE OF YOURSELVES YOU MORONS!

[Sadly google translate turns the article into something about rappers selling porridge and even decides to change Friedrich's last name. I have written about most of the things mentioned (fantasy SUPER basic rights made up by Friedrich e.g.)]

Wednesday, July 17, 2013

European Car Registrations

The new passenger car registrations for June did not look as abysmal as last month, EU 27 sales were down 5.6 percent compared to a year earlier. Still this is the fourth June in a row with weaker car sales than the year earlier. For the first half of 2013 this means 6.6 % less sales than in 2012.

Of the major European companies FIAT Group (FIAT, Chrysler, Alfa ...) (down 12.6 % yoy) and PSA(Peugeot and Citroen) (down 10.8 %) were hit the hardest in June. Of the German manufacturers only Daimler improved sales by 1.3 % in Europe.

At first glance the Irish registration numbers are catastrophic. The market collapsed by a mind boggling 73.7 percent. But this seems in large parts to be due to new license plates being introduced in July. So one should expect much better numbers for the beginning of the second half of 2013. In the first six months 20.2 percent less new cars were registered, but some of this is by design, since according to the Irish Times the new plates are an attempt to reduce the "start of the year surge" and spread the car sales more evenly over the whole year.

The overall car sales in The EU are not stabilizing. This should not be expected before the beginning of the next year. With any meaningful growth probably returning not before 2015. Before car sales go up unemployment has to come down and firms need to regain some confidence in their own future. Great Britain is again showing that having your own currency is a major advantage during recessions, since new registrations were up 13.4 percent and 10 percent for the first six months.

All new PRISM

The German government pretended to be surprised that a program called PRISM exists. Well, they lied: Bild, the biggest tabloid in Europe and usually a good soldier for the cause of Merkels party, has published a document sent to Bundeswehr officials amongst others, detailing that:

All COMINT nominations submitted outside of PRISM must be resubmitted into PRISM IOT extend the nominations past 15 SEPT 11.
The document also mentions that this PRISM is used for surveillance of e-mails and  telephones. Why, you might ask, do I write the obvious again? Today a spokesperson for Chancellor Merkel claimed that this PRISM is a different PRISM (my translation):

The program that was mentioned today by the Bildzeitung, called PRISM is a NATO/ISAF-program, which is not identical to the PRISM program of the NSA.

even though it is used for exactly the same purpose and is obviously a NSA program:
The director NSA delegated SIGINT Operation Tasking Authority to US Central Command (USCENTCOM) Headquaters (HQ)
 So let's get this straight: we are talking about a program which is in direct connection to the NSA, does largely the same as the original PRISM, but is not PRISM. Well, it is PRISM, but a different PRISM. Something.. stuff yadayada. Even I can tell myself lies that I am more likely to believe than this.

The Minister of the Interior Friedrich called security a "super-fundamental-right" (of course there is nothing like that in our constitution), a right standing above all others, and also advised every citizen to use encryption. I guess that for him it is necessary to be able to " be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them, to use logic against logic[..]."

Merkel will most likely be re-elected in September. This means that Friedrich, the man who told us a about the "FIVE" terrorist attacks that were "prevented" will most likely have the same job for four more years, fully aware of this they don't even seem to try to sound truthful. Their voters don't care, they are old and scared of basically everything new. So he knows he can get away with telling stuff about the "super-fundamental-right" to watch every citizen at every time security. The Angst of the dying generation will bring us closer to a future where the state knows everything there is to know about everybody, to use against them at a time and in a way they the US gevernment sees fit. It is just depressing to see that there isn't even any effort put into telling plausible lies, anymore.

Tuesday, July 16, 2013

A bunch of FIVES

Last week the German Minister of the Interior Friedrich went to the US to "learn" about PRISM. He defended the program with what Jakob Augstein called "Mickey Mouse" numbers. The Minister told us that the NSA's around 40,000 employees (classified - Spiegel's estimate) initially overstated their success in stopping terrorist attacks by FIVE or ten percent. Not 50 but 45 terrorist attacks have been prevented altogether twenty-FIVE in Europe and FIVE in Germany.

Of course, it took no more than a few days until it became clear that the "FIVES" had no basis in reality. A spokesperson said that there were "five incidents" and that some of those were "considerations" to plan. It was claimed then that the only two actual attempts that ended in arrests were due to PRISM, which is strange since the "Sauerland-Gruppe", who had rather advanced plans and already had explosives, got parts of their equipment, including the fuses, from a CIA contact. In fact the wannabe terrorists called the CIA person "the boss". He gave the orders and therefore it seems unlikely that PRISM played any meaningful role in preventing their plans, since that would mean that the CIA went rogue, and actually planned to conduct attacks.

It makes more sense to connect other group mentioned the "Dusseldorf cell" to PRISM. Their leader downloaded a Al Qaida manual on building bombs. One of the group then went shopping. Here is the actual conversation accourding to "Welt" after they failed miserably to get the necessary tools (in broken German - my translation):

But, went to other shop, dude. Wasn't there either.
The leader then decided to go shopping on the Internet because "there nobody asks: for what?" Excellent plan there dude...
So, we can safely assume that the NSA might have helped in catching four slapstick morons and  only costs around $ 10 Billion a year which seems "reasonable". Of course, Friedrich also said that the NSA is not conducting industrial espionage. How could they? They have no resources available at the moment since they are preoccupied catching hikers. I am not making this up. Somebody invited his friends on Facebook to hike with him near the Dagger Complex in Germany to "research the NSA spies in their endangered natural habitat." He advised to take flowers to "spice up their biotope." For that he got one visit by the police and one by the internal secret service. The German side was informed of the hiker by the US military police, but I think we should give credit where it is due and this is exactly what PRISM was made for.

What is starting to piss me off the most is that our politicians aren't even trying to make up good lies anymore. The government defends what the US does with fantasy numbers and the opposition pretends that they were not involved in setting up this system designed to undermine the constitutional rights of German citizens. Of course they were. The Dagger Complex became what it is today in 2003. Both the Greens and the SPD were in power at the time. A five is the grade at German universities to indicate failure. perhaps the person responsible for making up those numbers wanted to tell us something about the competence of our leaders. They are all a bunch of fives.

Monday, July 8, 2013

Boring Economic Numbers

Update: Changed the title of the first graph to German Domestic New orders of Investment Goods BV4.1 Trend.

Some are all dizzy from running around, screaming that the apocalypse is here (ok,ok I get it - that's their job, and I love them for it), and I thought that the numbers on industrial production  released to day were largely boring and what was to be xpected. Last Friday's, German domestic investment new orders were worrying . I had written about that in my rant about incompetent central bankers unwilling to do what they are paid for due to dogmatic reasons. Investment is what is keeping Germany competative not unit labor costs, as some claim.

Anyways, I have written a few months ago that one can largely forget about X12-arima and should focus on BV4.1 trend, when looking at new orders. Of course this also goes for industrial production. The news should have been today: industrial production largely unchanged. German stagnation "stability" continues.

ZH also seems quite surprised that exports into other EU countries have been falling:

The details are a horror-story. Exports to the euro-zone, where 40% of Germany's exports are sent, fell by a stunning 9.6% (while exports to the rest of the world dropped 1.6%).

Right. Actually that kinda was the point of the whole internal deleveraging exercise in Southern Europe, more still it actually began years ago but accelerated in the beginning of the year. (see here). Of course it should not be accepted at all, that Germany is still seen as the European powerhouse. That nonsense hasn't been true since 2011 when the great industrial stagnation in Germany began. (Graph only with April numbers)

Germany is becoming more and more dependent on exports (falling in May though) and the lacking investment means that we will be less and less competative. So of course ZH is right in the end, every month of stagnation is abysmal. But we should not use a single month of worse than usual data to pretend that the world is ending, that would be just as bad as all the others telling us that a single seemingly positive month is a great sign of improvement.

The Black Channel Thinks It Knows What Germans Think About Total Surveillance

Spiegel columnist Jan Fleischhauer - whose weekly articles are published under the name "Der schwarze Kanal" (the black channel) translated last weeks piece and published it on zero hedge under the name "What Germany Thinks Of 'The Biggest Bugging Scandal In History". Black is the color of Merkels party the CDU and its Bavarian sister the CSU. But one actually does not even get the view of those two parties in the column. 

The conservative parties are divided on the issue: while  Federal Minister of the Interior Friedrich (CSU) is all for foreign governments collecting data on basically all German conversations, his party leader Seehofer said that German politicians should "use all chances for a rigid and strict protection of privacy." let's step back a little: in 2007 CDU, CSU, and SPD pushed through a law  to collect all meta data for six months from every German. The only institution in Germany that has any interests in protecting constitutional rights, the Federal Constitutional Court, struck down that law in 2010. We actually still have to get a such a  law to collect all meta data, because the EU, just like the CDU/CSU, is obviously scared of European/German citizens and to that end issued a directive (let's call it the data mining directive) to do so. Of course, in order to pretend that there is a rule of law the data could only be retrieved if a court, agreed.  We all now know how that went with FISC in the US. Anyways, Seehofer now seems to be moving away from the total data mining idea. FinMin Schäuble, who failed miserably at stopping right wing terror while he was minister of the interior (a man of many talents, I guess), claimed that we were "in part able to prevent acts of terror in Germany due to information from America" and argued against getting "agitated too early" (in what can only be understood as a warning that there is more to come).  The CSU "Mittelstandsunion" (small firms union) feared that the NSA is possibly conducting industrial espionage in Germany. But of course there is no division on the issue that CDU/CSU do not like to be watched by "Big Brother" themselves. Even the former socialist youth secretary for agitation and propaganda in the Stasi state, Frau Merkel had her spokesperson say on that issue that we aren't in the cold war anymore. Of course there was *crickets* from Merkel on the matter of constitutional rights of citizens.

The SPD was six years ago also a big fan of destroying constitutional rights. Today there seems to be no party official that is happy with the spying of the US. For example, the party leader of the SPD, Germany's second biggest and formerly left wing party, Gabriel, not only claimed that Merkel knew, to which a spokesperson said that that is "cynical" (IMO implying that the SPD leadership was also informed), he also wanted to allow Snowden to come to Germany under a witness protection program. The Greens are very much on the side of the SPD on the issue.

What comes as a surprise to me is that there seem to be some remnants of actual liberalism left in the FDP in the person of the Federal Minister of Justice Leutheusser-Schnarrenberger. The party "The Pirates" (not making this up) is the one which will profit the most from the revelations. It has been in self-destruct mode for years now, but it is the only party that actually really cares about citizen rights and freedom off- and online. It seemed unlikely that it could make the 5 % hurdle only a few weeks ago, but the more people like Merkel talk about the Internet being virgin territory for everybody and defend spying by foreign entities on German citizens, the higher the chances for them to be part of the next Bundestag.The euro skeptical party AfD reminded Merkel "that she has to not only act in the interest of the government, but also for the whole German population" because she did not say a word about citizens being spied on.

The German industry is deeply worried that the USA is under the guise of preventing terror conducting industrial espionage. The VDMA (Verband Deutscher Maschinen- und Anlagenbau - German Engineering Federation) manager for product and know-how protection Rainer Glantz said that "specially the focus [of the  spying] on the West and the South of Germany, where many hidden champions are located, raises the concern, that targeted industrial espionage is being conducted."

In the media there seems to be - except for that one poor Spiegel columnist above, who had to pretend that he actually fears terror in Germany and the Welt, who is still actually buying that terrorism story and getting ripped apart by their own commenters for it - pretty much universal criticism of the program led of course by Spiegel, even Bild, hard right tabloid and biggest "newspaper" in Europe, asked: "Is the NSA really worse than the Stasi?"  and had an "expert" conclude: YES!

A new poll asked if Germans see the USA as trustworthy partner. 49 % agreed down from 65 %. The lowest result since Bush left office. The backlash in Germany is so large that, even if the US ever really captured a terrorist through prism, the country has to expect higher losses than gain from the program. With less than half of the Germans believing that the USA is a trustworthy partner, one can expect that this will actually affect US companies, too. In a few months, one will have the choice to either invite total NSA surveillance into ones home or buy the Sony PS4 if one wants a new console, for example. The X-Box One sales can be expected to be hit very hard because of this. Really, Microsoft is a collaborator and the only way this ends is if their revenue is hit hard. Choosing the PS4 over the largely similar X-Box One is the obvious choice if one does not want an always-on camera and microphone in one's living room. Moving away from Windows and using Linux based operation systems is a must for all German companies since MS informed the NSA about security bugs before patching them.

Sunday, July 7, 2013

ECB Already Lost Its Independence

Euro area inflation was 1.6 % in June, therefore beneath the close to two percent that the ECB targets. A normal central bank would now lower the base rate. Sadly, there is nothing ordinary about the ECB. Its goal is not to keep inflation close to a certain target anymore. Weidmann et. al. try to and are successful at enforcing so called "reform pressure" aka making sure that the pain in the crisis countries stays high.

A while ago Weidmann compared economics to engineering:

And much as engineers are accused of making buildings that are not earthquake-resistant, economists are accused of building design flaws into the financial and economic system, with whole nations now suffering under the consequences.
 Of course he forgot to mention that design flaws in buildings in fact lead to real life consequences for the engineer. For example the engineer who was responsible for the collapse of the roof of an ice rink in Bad Reichenhall was sentenced to 18 months prison on probation. We have strong evidence that austerity is not only self-defeating, but causes deaths, too. That is what was to be expected when one forces other countries to reduce their health care expenditure. This policy causes Greece to become more like the USA, and not the other way round. The ECB officials know that 40 % of the population have been pushed out of health insurance on demand of the troika (of course nobody is responsible for anything as always). Greek hospitals now look much more like third world clinics, lacking even the most basic utensils and medicine. An engineer responsible for something like this would definitely not be running around claiming that we need less structural integrity more structural reforms; he would be in prison.

This is the bitter reality Weidmann's "reform pressure" and he wants to keep it up. So again, even though inflation is below target he refuses to agree to a lower base rate. According to Spiegel, Weidmann and Asmussen "reasoned" strongly against sound and independent central bank policy in favor of senseless pain and death. Peter Praet and Mario Draghi actually wanted to lower the fixed rate to 0.25 %. But let's not forget the Netherlands, who are in recession, but still Klaas Knot was also against the ECB actually trying to fulfil its mandate. Hopefully, our NSA overlords or a whistle blower soon releases those "arguments" against a lower base rate. I have a few ideas what they might have been:

"Guys! I just read about this woman in Greece [sadly a true story], who cannot afford treatment for her breast cancer, because we destroyed  the welfare beast in Greece. It now has breached her skin and is wetting her clothes. Guys! We shouldn't lower the fixed rate, since that is just hilarious!"
"Guys! Lowering the base rate now, reduces the chances for a European Breaking Bad in the future, and I love that show!"
"Guys! Just realized that if we turn southern Europe into third world countries, vacations for us Germans will become cheaper."
"Guys! People having access to pain-killers in hospitals is the road to serfdom!!1!" 

Of course, Weidmann, Knot and Asmussen are fully aware that austerity has horrible consequences, but sadly it is unlikely that they accept any responsibility for the outcome whatsoever.  So it is much more likely that the arguments went something like this:

"Yada, yada competitiveness bla bla structural reforms yada yada risk .... political independence ... future inflation .... unit labor costs. Slippery slope!

Meanwhile in the real world, even Germany is becoming less competitive because - fun fact - today's investment is tomorrow's competitiveness and domestic new orders for investment goods released on Friday were at the lowest level since July 2010. In fact, if there is no improvement soon 2013 will look much like 2005 on investment. Germany will most likely not see any growth this year, all the talk about the successful structural reforms is just that. Of course, neither the German government nor economists will claim responsibility for stagnation. They will blame Greece, Spain, and I guess China, and point out that others are doing worse than Germany.

The ECB has become the slave of a policy designed to destroy the welfare state and the people responsible for that will tell everybody, that is not yet sick of their denial of reality, that they fear for central bank independence. They want the crisis to continue ("reform pressure") to implement their  dystopian fantasy where everybody is totally free of a safety net, and most likely a job, while at the same time every step is being watched by surveillance algorithms to keep us them safe. They will keep on telling us about new agendas, that - by structurally reforming away even more jobs - will lead to growth, somehow increasing the confidence of the private sector. Every bad outcome will be blamed on lacking willingness to reform. That will keep us off the road to serfdom!

An idea failing as miserably as neo-liberalism would be dead in engineering. But these people are still respected economists causing pain, suffering, and death everywhere they can, while blaming everybody else for their vision failing to deliver positive results. So make no mistake the ECB is not independent anymore. It, on behalf of the German government, pushes through an economic model everywhere in Southern Europe, that is based on the silly assumption state bad - private good. The unwillingness to lower the fixed rate, even though inflation has been significantly lower than the targeted 2 % shows that there is no interest in actually ending, or at least reducing the damage caused by the crisis in the minds of many ECB officials.The worst crisis since the WWII has turned into a necessary tool to achieve more privatisation and less welfare state. These aren't actual structural reforms. They are using a hammer to wipe out every achievement of the last decades and in the meantime they tell us it is for our own good, and we are letting them get away with it.