Merkel’s coalition talks peskier than that surplus gibberish

Everybody now seems to be laying into Germany and its surplus (which in the German media translates into ‘awesomely successful export nation’). First the treasury, then Krugman multiple times, then “Mr. Euro” Prodi, and now Olli Rehn.

That is really surprising and he is baffled as well:

Surprise! I (sort of) Agree with Olli Rehn!

  • He acknowledges that Germany’s surplus is a problem.
  • He acknowledges (albeit indirectly) that the initial source of the problem were capital flows from Germany and the core to the periphery; flows that did not go into productive investment but fueled bubbles.
  • He (correctly) argues that over the long run some excess savings from Germany is justified by the need to provide for an ageing population.
  • He points out that investment has been too low and needs to increase (possible within the framework of an energy transition).
  • He also mentions, without mentioning it, the problem of excessively low wages and pauperisation of the labour force, calling for increases in wages and reduction in taxes to boost domestic demand.

The most important and to the point sentence in Rehn’s post is:

First, the creation of the euro prevented the German exchange rate from appreciating to reflect the large surplus.

Of course nobody wants to hear this in Germany and so they urge every member state to become more competitive. The BDI  is speechless how anybody could accuse a country of being so successful and asking for more infrastructure investments and and increase in private consumption would mean taking on more loans. This is not prudent the Germans say.

What seems to be forgotten over this is the conspicuous absence of any signs of an end to the ongoing CDU-SPD coalition talks. At one point the SPD stormed out of a meeting. There is a real possibility that this might lead to a breakdown. New elections?


If you ask Hans-Werner Sinn, these Club Med printing presses have to go.

He’s back and Germany’s Hans Werner Sinn had another bad day.

Who protects the bailout of the ECB?

There is just too much money sloshing around in the EU and it comes from all the wrong places. The usual suspects are at it again.

About 80 percent of the monetary base of the Eurosystem are caused by credit or open market operations of the central banks of the six crisis countries (Greece, Italy, Portugal, Spain, Ireland, Cyprus), although these countries account for only a third of the economic strength of the euro area up.

How do they do this?

The rental of the printing press

A pictorial metaphor of electronic payment transactions that are behind the Target balances is so: The south prints the money he needs to buy in the north patrimonial goods and objects, as well as redeem old notes, and the central banks of the North shred the previously already spent money because it is no longer needed as a lubricant for domestic transactions. It is thus quasi awarded the (electronic) printing press from the north to the south, which establishes the target assets and liabilities.

That is bad behavior but let’s see about this excessive note issuance:

At this point in our story we can almost feel the frustration and anger building inside our northern European readers. “Yet another way the euro system help siphon of my hard earned money to profligate southerners!

But that is NOT the case! Excessive note issuance is (almost) inversely related to sovereign bond yields! The deeper a country has sunk into the euro-quagmire, the less the NCB has resorted to excessive note issuance!





This looks rather tame but back to HW Sinn as he dishes out more bad news:

The undercutting of the capital market with the printing press is now the main reason that the German banks and insurers can not earn risk-adjusted interest rates and more insurers are even forced to withdraw their interest guarantees.

Which in the end means that German banks would be just fine and that Germany’s hard workers will lose, yet again, on their life insurance nest egg.

Twitter IP. Oh!

How could it possibly fail?? A service that feeds into the social sphere, the personal vanity, the urge to express yourself, to join a trend. The new NOW and this NOW has some delirious numbers.

On Twitter you are always IN …  the timeline. Don’t dare to step out, people will miss you.

Who would dare to out himself saying this stuff I am twittering here is not exactly useful? Gee, nobody retweets me. Which does not mean that twitter is idle chatter pure and undiluted 100%. Twitter is constantly moving, FB is static.

Yet it falls into the category of companies with strong growth, no profits, mounting losses. Incidentally Groupon came out with some great numbers the same day. The new normal … until it goes pffffft.

Some old-fashioned companies that actually produce products one can buy for real money look rather sedate against Twitter’s valuation.

Draghi’s rabbit

Unexpectedly Dr. Aghi pulled it and promised to pull it again down to zero%.

So despite Rehn, Schauble et al. essentially calling the crises in the EU solved, it is not.

Expect Germany’s surplus to wide even more and at the same time, since this is a union, Club Med drift further south and further into deflation.

A new LTRO is off the table it seems which will bear down for a while on the DAX, but with no other place to go with the moolah it should reach 9,500 easily.

2015 might be the time the EU enters ‘Japan 1990s’. Unless a country like Italy decides enough is enough.

Publishing photos of looted Nazi art find could hurt ownership feelings and induce orgasmic sensations in other people like Meike Hoffmann has experienced.

The presser started off with a vivid description of the almost orgasmic spams art Amazone Meike Hoffmann experienced when her eyes fell on those pieces of art. She was touched for the very first time. Chief state prosecutor Nemetz had to somewhat calm her down in order to get the presser back on track.

No, the pics would not be published which was a huge relief for the actual owners who feared that by not knowing what paintings were actually found in the place where A. Hitler started his awesome career they might lay claim to art they did not know exists. And perhaps overpay.

Meike Hoffmann also refused to give any financial assessment as to the value of those pics so as not to hurt feelings of potential claimants for a shabby piece of a cheap sketch.

The audience was relieved to hear the paintings were no more in the place where they used to be, rather in a secure secret place because at this point it was of the utmost importance to first thoroughly assess all tax implications about the euro 9,000 discovered with Mr. Gurlitt in a train 2 years ago.

Focus magazine discovered the loot was stored unsecured in Mr. Gurlitt’s apartment and Focus journalists voiced their concerns over this rather reckless way to keep such treasures.

The presser took a very interesting twist at 11:18 when Chief state prosecutor Nemetz admonished a journalist saying “it would have been counterproductive to go public with this. We did not want to keep the pictures and besides I have no fucking idea who Klimt is.”

The 11th hour could have brought the venue to a full stop when one journo asked how the heck Focus got wind of the whole story to which the Chief replied he would also love to know that, get his hands on that guy and he would gladly hand a trophy to that person before squeezing his balls.

So if you have any claims or have the feeling to perhaps have some, this would be a good time to come forward.

Timeline of Augsburg presser here. It’s in German, you have been warned.

Some accuse Bavarian judicial establishment of secrecy and lack of transparency.

“Restitution work is alive and well”, says Christopher Marinello in a video and that was directed straight at Germany. That translates into PAY, Germany.

Prozess um Doppelmord von KraillingBut before we delve a little more into this sordid new thing coming straight out of Munich, launchpad of A. Hitler, it might sound interesting to hear the speaker of the Upper Court of Munich.

Before the cameras speaker Mr. Andreas Titz professes that  details of the trove found in Munich in 2011, gee that’s 2 years ago,  although the German FAZ says it was 2012 which makes it even more mysterious, “is due to the nature of this case at present classified.” What, those paintings were found during a police raid 2 years ago! Still classified?

Well, so much from Munich’s court on this. Let’s look how this was published on the Focus website and Paul Murphy from FT Alphaville has the scoop. The placement of the article is not bad, for example right above some big tits in the Panorama section.

FT Alphaville

FT Alphaville

Murphy is somewhat incredulous: “Is that credible, that in-the-loop art historians have been keeping mum about a secret €1bn prize hoard of Impressionist fare for more than two years? And no one in the police blabbed, or anyone else in the German establishment? Did the major auction houses know? Is there a case for a Stewards into the art market here??”

Well Paul, one answer might be this is Munich and this is the Munich justice system. How about this here from 1980?

Anyway, then there is a certain Mrs. Meike Hoffmann.

FT Alphaville:

Hoffmann is an expert in “degenerate art.” In fact she runs the Degenerate Art Research Centre at Freie Universität. See these previously designated degenerate sculptures she helped uncover three years back.

The Guardian tried to get in touch with her for some information on the art pieces:

Since their seizure, they have been stored in a safe customs building outside Munich, where the art historian Meike Hoffmann, from Berlin university, has been assessing their precise origin and value. When contacted by the Guardian, Hoffmann said she was under an obligation to maintain secrecy and would not be able to comment on the Focus report until Monday.

Why all this secrecy? Might it come to light that German authorities were in cahoots, knew everything? Want to keep the loot? Bavaria is certainly a seedy place.

Anne Webber, founder and co-chair of the commission for Looted Art in Europe.

“It’s actually been two and a half years since these paintings were found, and they’ve been kept completely secret. And there are some very hard questions for the Bavarian government about why they’ve kept this list secret.”

“We need to ask why they haven’t published a list of all the paintings that have been found, so that the families who are looking for their paintings – and have been looking for the past 75 years – can find them, and have them returned to them,” she added.

Here is more on Bavaria in the Telegraph:

“There is a culture of secrecy in Bavaria, and other parts of Germany – but particularly there. We need a culture of transparency and to return these works as quickly as possible.”

She said that many people who dealt with looted Nazi art were interrogated after the war, but claimed that they didn’t have anything.

They then continued to sell the works – “trading it, laundering it, particularly in Bavaria,” said Mrs Webber.

You have to wonder what is behind the extreme reluctance to provide information,” says Anne Webber, of the London-based Commission for Looted Art in Europe. “We have reminded the Bavarian authorities of the need for transparency and requested a full list of the works. So far we have had no response.

“Germany was a signatory to the Washington Principles in 1998 and 1999, along with 44 other countries, making a commitment to identifying the looted works in their collections and publishing the results. Bavarian state collections contain thousands of works acquired during the Nazi period, but they have failed to publish any list. An annotated catalogue of one of the main dealers of the Nazi era was discovered, saying which families the works were taken from and their eventual owners. This would be fantastically useful to the families concerned who are hoping to create a link with their past. This also hasn’t been published.”

The Telegraph gets it right about rotten Bavaria, they are racists:

It is tempting to see this apparent blocking by the Bavarian authorities as something more than the embarrassment that characterises Germany’s official response to its 20th-century past: bloody-mindedness, perhaps, or even belligerence. Bavaria is synonymous, certainly from a British perspective, with social and political conservatism. Munich, though it was an avant garde stronghold early in the century – home to Klee and Kandinsky – provided the platform for Hitler’s rise to power. You don’t have to dig too far below the surface in this part of Germany to encounter an attitude of “what more do these Jews want from us”.

Yet this apparently wilful obfuscation regarding the return of looted works of art is far from exclusively Bavarian. Webber quotes culture minister Bernd Neumann, who declared recently that until the thousands of looted art works in German museums are returned to their owners, there can be no line drawn under this issue. Hanover’s Sprengel Museum, for example, home of the largest collection of the works of Kurt Schwitters, one of the most notable of the banned “degenerate” artists, has yet to publish a list of contested works. The head of the German Museums Association recently went on record as saying that the reluctance to publish lists of works is tied to the likelihood of large numbers of claims.

Whole Telegraph article here

US Treasury speaks up and Germans react indignant

It does indeed sound unjust when you are the growth locomotive in the EU, when you work your butt off for low wages, discover that you are amongst the poorest in the EU to hear these slanderous voices coming from that country that listened in on the phone of your Dear Leader.

But, dear Germans, these two topics are unrelated and the reason that you put them in a context shows a lack of understanding of economics and is secondly smug to the extent that it runs against the personal experience of the vast majority of Germans, or did you forget that just days ago an article said that 16% of Germans live in poverty??

Exports Germany_0


This export dependency looks a little bit scary, does it not?

The Treasury:

Ireland, Italy, Portugal and Spain are all now running current account surpluses as import demand in those economies has declined. Thus the burden of adjustment is being disproportionately placed on peripheral European countries, exacerbating extremely high unemployment, especially among youth in these countries, while Europe’s overall adjustment is essentially premised on demand emanating from outside of Europe rather than addressing the shortfalls in demand that exist within Europe.

target2Just assume this is a graph of a poker group that meets once a week for a game of poker. One person is constantly winning. It is hard to imagine that this group will exist for a longer time span.

P. Krugman has a new follow-up on this. He quotes the German Spiegel report:

“The worst thing, if you ask me, in the Spiegel report on the controversy is the statement by Germany’s Economics Ministry that Germany’s surplus is

a sign of the competitiveness of the German economy and global demand for quality products from Germany.

Economists everywhere should read this and weep. It is a basic accounting identity that

Current account = Savings – Investment

You can not get this into the head of a German and certainly not in the head of the Economics Ministry. What Krugman forgets here is the typical German mindset. Being thrifty is prudent for a German. He loves his savings account which yields below the inflation rate and thus guarantees him he is losing money. But the German loves the security of that account because his government guarantees it. Just don’t mention the Disselbomb.

A German does not see the difference between his private economy (i.e. his/her private bank account) and a state economy. Whereas it makes sense to keep € 200,000 in your account for your pension, it does not make sense for a state economy to keep 200 billion in surplus and not invest. One difference is that the private person will have no recurring income after he stops working and so needs a nest egg. A state has ongoing recurring income in the form of taxes.

Sorry Mr. Krugman, but you will not convince Germans. When a German invests in a stock (that is a very remote idea after the crash of the Telecom stock and the Neuer Markt) he expects it to go up. If not, he will sue, he scrambles for his government to make him good and he might consider suing an actor who promoted that stock way back.