Immigration Up 11 Percent In The First Half Of 2013

As expected, immigration into Germany was up significantly in the first six months of 2013, according to destatis. I have written about this new issue and had this to say:

Germany has changed its tactics. Beggar thy neighbor to solve domestic economic issues is dead. Long live beggar thy neighbor to solve demographic problems. Merkel  herself stated on the issue of labor mobility within the EU(my translation):

We have to be open for young people who come to us, since we already know today that we will have six million less workers by 2025. 

So, is it working?

Krugman, Weidmann And Why It Is Actually Worse

Krugman isn't happy that Weidmann is against further ECB measures without offering any justification. But it is actually worse than Krugman thinks.

European Car Registrations In October

The automotive industry in Europe is rebounding. According to ACEA, the  registrations of new cars in the EU were 4.7 percent higher in October 2013 than a year earlier, reducing the gap to last years' sales over the first 10 months to "only" 3.1 percent (down from 6.6 percent for the first 6 months of the year). But make no mistake this was still the second worst October since 2003; and some of the improvement is due to very high rebates.

Further Deterioration Of The Spanish Bank Balance Sheets

You might have heard a few days ago, that Spain wanted to exit the ESM program. You might have also heard that the European officials were "fully supportive" of the decision. So all what was missing was the new Banco de Espana data showing that the banks actually did not need another bail out. I have written a few months ago, that the Spanish bank balance sheets were actually in the process of deteriorating in relative terms. Today, the numbers for September were published.

Massive 0.1 Percent Eurozone Growth In Q3

The European Commission pretended a few months ago that the modest second quarter GDP growth in the eurozone (0.3 percent) proved them right. We have learned today that the success story continues - at an even slower pace of 0.1 percent compared to Q2. Germany "lead" the way again with a 0.3 percent (down from 0.7 percent last quarter).

Commission Slowly Realizing That The Commission Failed Miserably?

When one sees a question in the heading, the answer is often: "No!" Just look at the Fox Nation homepage which often asks questions, that have little to nothing to do with the article below. But in this case the answer seems to be: "Well, kinda..."

EU "Shutdown"

Now that the US shutdown is over, it seems to be time to create our own little budget crisis in Europe. The EU Commission, the European Parliament, and the Council of the European Union (member states) agreed on a budget for 2013 in 2012 under the assumption that all payments due for 2012 would be paid 2012, which just did not happen. Additionally, the member states decided to start reducing the budget, which lead to a budget which was €2.9 billion below the 2012 one. So the 2013 budget needed amending, and since currently everybody in Europe is a big fan of paying in tranches, it was decided to use several installments for the needed sum of €14 billion. Everything went fine with the first and largest one, but now we seem to have a problem.

Demographic Change, Reforms, and the Commission

Olli Rehn recently reiterated his sustainable growth for Europe story. I have shown that Greece has lost more than "just" a decade and talked about how the the secondary effects are now coming back to haunt us, among other things. Let's today address something else. Almost two months ago Mr. Rehn said at the European Forum in Alpbach:

This is not just to combat the current crisis! In the coming decade, a major drag on growth will be the decline in the working-age population in Europr[sic]. Reforms are important not only to overcome the current crisis but also to address the long-term demographic change.

 (emphasis added)
It's fascinating how this person can easily switch from very short term - look at this one not completely awful quarter: it proves that we are doing everything right, never mind the disaster we have caused since 2010 - to long term demographics. I strongly believe that anything Mr: Rehn says has to be taken with a lethal dose of salt. Here's why that is also very true for the demographic situation.

Automotive Industry In Europe - The Light At The End Of The Tunnel

The automotive industry in Europe was hit hard by the Great Recession. The car sales fell in every year from 2008 until 2012. The whole market shrank by 22.4 percent compared to 2007. The first half of 2013 did also not look good as registrations fell by 6.6 percent. Today, ACEA published the car registrations for September, and the situation seems to have improved significantly.

Helper In The Introduction Of The Euro Now Member Of Euro Sceptic Party

The Spiegel (German) has an interesting article on Wolfgang Glomb, who for years headed the department "European Monetary Union" in the German Finance Ministry. Today, he is a member of the euro sceptic AfD.

European Growth Strategy - Staying The Course for Disaster

A few days ago some EU officials together wrote an op-ed in the WSJ claiming that "Europe's Crisis Response Is Showing Results, well of course it is; but those results just aren't good (via). In this article they had to say the following on growth:

The euro zone's economic prospects have improved over recent months. Modest GDP growth returned in the second quarter of the year. Industrial orders and output have increased, and many countries' sovereign-bond yields have decreased. Unemployment, while still much too high, appears to be stabilizing. Further modest growth is forecast for the second half of this year, and the recovery should pick up speed next year as long as we stay the course.

Economic Arguments on Airstrip One

Airstrip One, formerly known as United Kingdom, is headed towards political and economical irrelevance. British industrial products are for the most part nothing but the bread crumbs left over by important countries like the US, Germany, and India. All that seems to be left is the banking sector. Still economists and government officials argue as if the Island and a third still had some relevance. As if it mattered if they went for austerity or not. The small state doctrine has turned Britain into what it is today Still conservative journalists live in some kind of fantasy empire, and tend to blame immigrants (Jeremy Warner, Telegraph) for bad productivity performance. But there are only a few industrial bright spots left; and those are in part not even British anymore.

United In Hunger

The leaders of the European non-union gave talks and wrote articles - after a single quarter of growth - to pretend that their completely failed austerity experiment was somehow a success. Schäuble and Barroso are clearly the main offenders; and Draghi, yesterday felt the need to join the chorus.

Draghi said yesterday at Harvard University:

Many commentators on this side of the Atlantic looked at the euro area and were convinced it would fail. They mistook the euro for fixed exchange-rate regime, when in fact it is an irreversible single currency. It is irreversible because it is born out of the commitment of European nations to closer integration.

Well, there's everything wrong with that. Merkel is not a fan of closer integration, she wants competences to be moved back to the executive of the countries. She is not alone in her fight against the EU institutions. Britain and the Netherlands also want less EU. Merkel will win this fight without question; the Commission is already retreating before it even has begun. The only reason why the euro hasn't failed yet is that the peoples suffer in silence. Nothing good has come out of austerity; and the troika brought mass unemployment to the program countries and damaged the social safety-net everywhere they could.

Not only that, the austerity which the fools claimed would increase investment has also damaged the production industry all over Europe. The worst part of course is the suffering they purposefully inflicted on the poor. Today the Red Cross gave their own assessment of the humanitarian aspect. IFRC Secretary General Bekele Geleta said:

Europe is facing its worst humanitarian crisis in six decades.

This is how good our leadership really is. Nobody has been able to cause more harm to Europe with the exception of Hitler. Not only that this is not a short term problem anymore. The damage they have done will be with us for decades, according to the Red Cross (pdf):

The long term consequences of this crisis have yet to surface. This report shows that the problems caused will be felt for decades even if the economy turns for the better in the near future.

Sadly, they are correct. The Red Cross are the ones who with these two sentences show more economic competence than all of the IMF, ECB and EC combined.

 

Even if Greece, for example, grew at an annual rate of 5 percent then the country would be back to where it was in 2007 by 2018. A more realistic 3.5 percent growth scenario would mean that Greece wouldn't make it back to 2007 levels before the next decade. 

So just how bad is the humanitarian situation in Europe, according to the Red Cross? 

• The number of European Red Cross organisations giving out food aid has increased from 18 to 22 from 2009 to 2012.
• Overall food aid had to be increased by 75 percent during that time.
•  In Spain the food aid distributions went up 133 percent
• More than half of the Greek unemployed no longer have health insurance. (just a reminder over 27 percent are unemployed)
• Suicide rates in Greece have gone up 40 percent from 2010 to 2011

So, no it is not just some economic numbers that look bad. The Troika has brought suffering to the program countries with no upside. Austerity even as expected failed to get the debt under control, caused economic and social pain without gain; but all this does not matter to the defenders of austerity, since we have seen a single quarter of growth.

Yes the euro has not failed yet, but that is not due to good work by the parties involved or a will to come closer together. The countries are scared to be the first to leave. It is very similar to using the nuclear option. Nobody wants use it but in the end somebody will and the house of cards will fall. Europe hasn't been as divided as it is now since Adenauer and de Gaulle became friends. The people who live under this third-worldification regime are the ones that have really allowed the euro to survive; perhaps now it is time to stop stepping on them and actually switch to a policy which makes Europe better and helps the people and not a small minority of bankers.

Free Trade Propaganda?

The  Bertelsmann Stiftung(Foundation) published a study today claiming that a Transatlantic Free Trade Area would increase employment by 160.000 in Germany. Together with the Munich based IFO Institute they proved that in economics there is only extremely limited knowledge of how companies operate; and how different standards in the EU and the US affect engineering. Additionally, I don't think I value life the same way they do.

Short Note: Switzerland Conducting Military Maneuver in Which the French Attack

All militaries undertake maneuvers. Typically, they want to train for a realistic scenario. In Germany it was "Red Land" attacks "Blue Land" in the past; and Germany being part of the latter was the first line of defence.

Switzerland, which has no enemies felt it had to get a bit more creative, according to Tages Anzeiger. Their scenario was that France breaks up due to the crisis in the eurozone. One of the new states thinks that Switzerland is responsible for their woes, so they try to acheive debt forgiveness by conducting terrorist attacks. [The simulated French "plan" sounds a bit mad, but so is shutting down a government to try to reach an unachievable goal, or breaking up a coalition to blackmail the president into giving amnesty to Berlusconi. Mad but not unrealistic, I'd say.]

A Swiss tank brigade had to fight off that enemy. Of course, France isn't happy with that scenario. Also, this isn't the first time that Switzerland has trained for a eurozone breakup. Last year, in a similar scenario the country simulated the army having to keep refugees out of Switzerland.

In my opinion, a euro breakup is the only realistic scenario in which Swiss troops would have to fight, since the country is strictly neutral and the army is used almost exclusively for defensive purposes, though they did participate in the KFOR mission in Kosovo. So, I don't understand the French criticism that Switzerland should rather train for "threats of the 21st century." They would have been right three years ago, but the utter incompetence of the leadership in the eurozone has turned such scenarios into possible "threats of the 21st century".

First major victory for ICSIF

The International Conspiracy To Sap And Impurify Our Precious Bodily Fluids (ICSIF) has achieved its first major victory. (I wonder why almost nobody read that post) Italy probably does not have a government able to do its job anymore, now that Berlusconi has withdrawn his ministers from their post. Prime minister Letta will try to find a solution next week, but it seems unlikely that anything but new elections are possible. 

Beppe Grillo could be quite happy that the "establishment" is just as incompetent and unpatriotic as he always claimed.  His five star movement, which looked like it was getting weaker, will now be stronger than ever. He rightly wrote that "what has died is democracy" in his recounting of the events that led to this government, which was bound to fail from the beginning. 

How are the other fronts that ICSIF is fighting on looking?

• Nothing new on the western front: the republicans will most likely force a shutdown of the US government. Stan Collender sees a 90 percent chance that it will happen.
• Greece banned a protest march by special forces reservists, who seemed to be calling for a revolution. They are also arresting members of the neo-Fascist Golden Dawn party. 
• In Germany the euro and Europe play absolutely no role at the moment. The after election talks are about if Germany should increase the top tax rate or not. All parties seem to think that we are some kind of island that cannot be affected by the chaos that we caused and which surrounds us. 

 Oktober will be a very interesting month. It is quite understandable that Greek citizens are extremely disenchanted by the German election result. Germans have likely voted for four more years of destruction in Greece.The ICSIF might just win if Greece becomes less stable and the German Constitutional Court decides that the Bundesbank cannot participate in the ECB's OMT program.

Germany As Currency Manipulator

Paul Krugman today wrote about Germany as a currency manipulator.

"The general point is that if we imagine a euro breakup, I think everyone would agree that the new mark would soar in value, making German manufacturing much less competitive.

Well, I guess I am not everyone. A euro break up would wipe out most of the banking sector in Germany, so no I don't think that the new mark would soar at all. But the general point that Krugman seems to be making is that the euro is weak, much weaker than the mark would have been if the euro had never happened. But, I also disagree on that point.

• Compared to the yen, the euro is today 33 percent stronger than it was one year ago.
• Dollar 5 percent stronger
• Pound sterling 5.8 percent stronger
• Rouble 9.6 percent stronger

The euro is now relatively strong compared to other currencies. The German trade balance is below what it was in 2008. Non domestic new orders have been pretty much unchanged for two years now.

 

Add in inflation and the German trade surplus is actually becoming smaller. I think the picture we are seeing is that the euro is pretty close to the level that the Deutsche mark would be. Is this good or even acceptable? Hell no! This is an absolute disaster for all other eurozone countries. Germany needs higher inflation, much higher inflation. It is a pretty strange situation in Germany wages need to be higher and at the same time the ECB should try to weaken the euro to get all other countries more competitive.. But, the German media starts crying Weimar if we even get close to two percent. 

One more thing. Krugman shows a graphic of Target2 to support his point. But the German Target2 net position has been falling, without affecting the trade balance at all, since the announcement of the ECB OMT program in 2012.

So, yes Germany is a currency manipulator. It is keeping the euro stronger than it should be. Either Germany starts accepting high inflation, or it should leave the euro.

International Conspiracy To Sap And Impurify Our Precious Bodily Fluids.

I mentioned several reasons yesterday, why it is possible that the new German government might have to fight a battle for the euro they cannot win. I included the Republicans and their most likely successful attempt to damage the reputation of the US. But we are seeing struggles against sanity for the purity of our bodily fluids elsewhere, too.

So Schäuble Has Made A Fool Of Himself...

Schäuble just couldn't keep quiet after one single quarter of growth in the eurozone. He had to claim that:

What is happening turns out to be pretty much what the proponents of Europe’s cool-headed crisis management predicted.

No it isn't. Quite the opposite is true. It cannot be repeated enough. The country which saw the highest growth rate was Portugal. Portugal's Constitutional Court, ruled may of the austerity measures unconstitutional, and once the self defeating austerity was gone the country recovered at a pace of 1.1 percent in a single quarter. The other southern countries are still contracting.
Ambrose Evans-Pritchard wrote an excellent article explaining pretty well why Schäuble's claim is complete bogus. 

Just a few nitpicks:

• The German Constitutional Court is in now way in the pocket of Schäuble. The laws that Merkel's government creates get mowed down faster than they can make their unconstitutional stuff they call laws up. In fact even the German voting law was unconstitutional and they barely managed to make a new one in time for the election on Sunday.
• Schröder's "reforms" "achieved" a lot of things e.g: they created a gigantic low wage sector, in which the work is subsidised by the government so people can make ends meet. More than every fifth worker is in that sector (meaning they get payed less than 9 euros an hour). Germany does not have a minimum wage, which has lead to some - let's call them - creatively low wages. The country now has two labor markets, one with secure jobs and one to exploit everybody else. Two are always better than one. Pension reform has made many in finance obscenely rich; and the best part is the money one is "saving" isn't yours anymore (in the so called Riester pension); it cannot be inherited, once a single payment to the pensioner is made. It created a strong leech industry with negative productivity, since those people are nothing but a tax on anybody that now is trying to save up for retirement. 
• He should have emphasised more that even if austerity had been a success, then the depreciation of the currencies of Brasil, Russia, and India in the last month completely negated any competitiveness improvements in the South. Three years of chaos and destruction and it all went down the drain in a single month. Germany now has trouble exporting since Abenomics is doing exactly what it was supposed to. This might very well be the finishing blow for the euro.

German Economists Against ECB Bond Buying on the Secondary Market

The Bundesverfassungsgericht (German Federal Constitutional Court) will rule within a month if and up to what scope the Bundesbank is allowed to participating in secondary market bond buying schemes like OMT. 136 German economics professors signed a plea letter claiming that these are against the law. Specifically, they mention Article 123 of the Lisbon Treaty which prohibits direct bond purchases by the ECB. So, buying bonds on the secondary market is allowed. The economists therefore had to undertake significant intellectual gymnastics to also pretend that these are illegal, too. It was an answer to a similar open letter by for the most part foreign economists.