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.

The Economist Hans-Werner Sinn

Krugman in last Friday's op-ed wrote about the euro crisis and the German reaction to the ECB rate cut. He mentioned the reaction of economists to the decision. One of them was Hans-Werner Sinn:

The influential German economist Hans-Werner Sinn declared that Mr. Draghi was just trying to give Italy access to low-interest loans.

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.

Industry, Real Wages, And Childish Managers

This weekend, the CEOs of several German car manufacturers decided to behave like three year old kids because they really want that chocolate bar low labor costs; and are against a minimum wage of €8.50 and for a huge amount of "temporary" workers. The CEOs of Daimler, VW, Opel and BMW were interviewed by the Bild Zeitung and Daimler CEO Zetsche even threatened Mutti* Merkel that the company would "have to think about a relocation of production".

Let's take a look at some of the firms and the overall situation in the German industry.

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).

Sinn, Unsinn, And The ECB

Paul Krugman wrote that there are huge tensions over the ECB rate cut. German "economists" are criticising the rate cut decision. Well, that is true, but for the most part it's just stuff we've heard a hundred thousand times before.

For example, Michael Hüther head of the IW institute said that the policy is both not working in program countries (which is true) and damaging the North (which is wrong) at the same time, because ... poor savers. He claimed that the rate should be "around 3.0 percent to 3.5 percent" for Germany, which is completely laughable if one actually looks at inflation which just "reached" a new low three year low of 1.2 percent in Germany, in Oktober. But hey, the ECB could also look after German savers instead of doing its actual job of keeping inflation close to but below 2.0 percent.

Reforming The Renewable Energy Law... Again

We still don't have a coalition contract for the next government, but today we learned more about the plan to reform the Renewable Energy Law. Merkel has realized that offshore wind energy is quite expensive after, well, Merkel massively increased (from under 9 €ct/kWh to around 15 €ct/kWh - depending on location - for 12 years plus 8 more at a lower level) the subsidies in the form of an allocation fee paid by consumers in 2009.  This new "reform" will not lead to any significant improvements to the consumers.

Using The Right Words When Criticising German Export Dependency

This weak both the European Commission and the US Treasury Department have criticised the German export dependency. The "Report to Congress on International Economic and Exchange Rate Policies" uses untypically clear language:

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..."

Quotas For Women On Company Boards

Merkel's conservative CDU/CSU Union and the social democrat SPD are still working towards a coalition contract. According to Sueddeutsche, they have come closer to a agreement on quotas for women for supervisory (Aufsichtsrat) and management boards (Vorstand) of the largest German companies.

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.

Economics Isn't Science - "Economics Is Harder Than Physics" Edition

So, while Higgs and Englert got the Nobel prize in physics after the biggest machine we have ever built had produced conclusive evidence that proved them right, the "Nobel prize" in economics went to both Shiller and Fama and additionally Hansen, one of whom has been conclusively proven wrong by the biggest disaster of our time. (Yves Smith posted an excerpt of her book concerning Fama which I completely agree with)

Reading what people had to say about two contradicting ideas) both getting the same price at the same time, I came across this gem, by Justin Fox. It started out great, but seemed to completely collapse in the second paragraph.

He claimed:

This is, to a certain extent, further evidence that economics isn’t a science like physics is a science [..]. But that’s not because economists are all frauds — it’s at least partly because economics is harder than physics.

Wait what? I completely agree with the first part, but the second part is, well, interesting. I would have at least expected some kind of explanation, but non is given. The rest of the post is actually a good read, but that is a pretty big claim. Let me try to explain why economics is in some respects harder than physics and why some economists are still frauds (but often not intentionally).

On Productivity, Diversification And Engineering - Or Why Engineering Jobs Might Be Endangered By Machines

Many economists seem to believe that productivity increases come from the automation of jobs "in the middle", which has led to both a higher demand for low and high skilled labor. For example, David H. Autor and David Dorn recently wrote an article in the NYT, which is based on that believe. They argue that people performing "abstract tasks that require problem-solving, intuition, persuasion and creativity", working in professions like "law, medicine, science, engineering, advertising and design" "benefit from computers". Let me focus on engineering and design and show that these assumptions do not show the whole picture. Also, I will focus on only one industry: automotive

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.

Savings Banks' Head Georg Fahrenschon Says Something About Low Interest Rates

Don't like the headline? Well, i don't like Mr. Fahrenschon's supposed insight. He was a CSU politician and Bavarian finance finance minister during 2007-2011; and therefore possibly one of the responsible parties in the BayernLB and the related Hypo Group Alpe Adria disaster, which has cost billions both for Bavaria and the savings banks he is now leading.

How The German Industry Is Damaging Itself

Bertelsmann Stiftung is pushing for a smaller state and and more economic "freedom" to fire people. I can understand their current support for a free trade agreement with the US, since content providers will profit the most; and the Bertelsmann Group is Germany biggest content provider. Their fight against against worker rights also makes sense since Bertelsmann is not dependent on good workers, they are only the middle man. Also, a minimum wage would mean that it would be harder for the middle man industry to exploit workers. But for inexplicable reasons, the German industry wants the government to go in the same direction. These are firms dependent on good engineers, proficient craftsmen, and actually have a very good track record working with unions.The metal and electronics industry employers' federation has their own lobbying institution - the Initiative Neue Soziale Marktwirtschaft (INSM) - which aims at "reforming" Germany to become more like the US. In other words the INSM is trying to turn Germany into an industry free zone, like Britain; and sadly it is very much successful.