WELL that didn’t last long, did it? The financial market euphoria, which greeted the announcement that the ECB would buy bonds in unlimited quantities, has melted away. In its place, the realisation that Europe’s economy is weakening quickly is puncturing short-lived optimisms.
Yesterday, we had more evidence from Germany that business confidence is ebbing more quickly than anyone anticipated. The IFO index of businesspeople’s expectations about the future has now fallen for the fifth consecutive month.
The rolling recession, which started with the collapse of Lehman, initially affected highly leveraged countries like Ireland, Iceland and Greece, then mutated into a slump in Spain and Italy and it is now moving in a crashing wave to the core of Europe. Affecting France at the beginning of this year, it is now being felt in the industrial powerhouse of Europe, Germany.
Until recently, China’s demand for German exports — particularly heavy machinery, which Germany excels at — kept order books healthy. But now Chinese demand is not there any more as its exports and economy weaken. The real fear in China is that it will prove to be the mother of all property bubbles, which will burst.
This is its own fault because, as money flooded into China, the revenue from its exports should have caused the Chinese currency to rise. But the Chinese didn’t allow this to happen and they allowed the local money supply to grow, providing cheap loans for speculation on property. Now the result isn’t just ghost estates, but entire ghost cities of unsold apartments.
All this is having an impact on Germany. The economy that was once a powerhouse may well prove to be regular after all. The slowing in Germany will cause a renewed crisis in the eurozone because Germany, as well as being an exporter, is an importer and France and Italy are her main clients.
As always happens when there is a slowdown, the least competitive supplier loses. This will put the spotlight again on Italy and, for the first time in the crisis, on France.
If growth stumbles again, the inconsistencies in France will become more evident. France is a country which has been running a budget deficit for years, but in recent times it has also been running a current account deficit. Of more concern is that France is a country that has proved itself incapable of even the most modest reforms to its labour market. This inflexibility will prove to be highly damaging if it has to seek ECB assistance (as Spain will definitely require and Italy is likely to need). In short, France is Europe’s Achilles heel and, next year, we should expect more financial fireworks as the French bondmarket is sold by investors.
This cyclical slowdown is coming in a German election year when the hostility between the German Bundesbank and the ECB’s Italian leadership will be difficult to conceal.
You know the world is in a strange phase when the Pope is a German and the head of the central bank is an Italian. But just how Italian, is now dawning on many in Germany. Make no mistake about it, Mario Draghi is turning the euro into the lira because he realises that in order to survive, the euro needs to look and feel much more like the lira than the Deutschemark.
Whatever the Germans were expecting when they reluctantly gave up their Deutschemark, they sure as hell weren’t expecting the lira. But this is what they are getting.
As growth wanes, open war is likely to erupt between the Bundesbank and the ECB in a philosophical as well as economic confrontation.
The Germanic view of money, exemplified by the Bundesbank, sees money as a ‘common good’, protected by treaties and laws and it is a common good that no government or institution owns: the economy adapts to money, not the other way around.
The alternative school of thought, exemplified by Mario Draghi, views money as a tool: the state or institutions have a responsibility to use money to achieve desired outcomes, such as full employment, or economic growth, or saving the euro.
Thus we are set for a titanic struggle in Europe and the trigger for this struggle will be a crisis in France, where faltering growth will force it into an economic adjustment, which the country is simply incapable of effecting.
Europe’s economic problems are: too much debt, too little growth and a lack of coherent political leadership.
None of these issues has been addressed by what is in effect monetary financing through the back door announced by the ECB two weeks ago. These problems will resurface in 2013 and, when they do, expect the next move from Draghi in 2013 to be printing of more money as the gradual but unambiguous “lira-isation” of the euro continues.
This is good for us because our major trading partners are Britain and the US, so anything that weakens the euro is good for Ireland. In addition, the bank debt deal will be supported by Draghi and we should play to this audience and for his affection in the months ahead.
But the question for the euro is how long Germans will tolerate the debasing of a currency that they intended to be as least as strong as the Deutschemark. In the past few days, the financial markets are suggesting that the Germans will not remain sanguine forever.
In the next few weeks, economists and analysts at large banks and pension funds will be locked in meetings trying to figure out what is likely to happen next year and how to position their funds accordingly.
Looking at the recent numbers, we are likely to see recessionary conditions in core Europe in 2013. Before the end of the year, Greece will need another bailout and Spain will be bounced into an IMF/EU programme.
But the big story for 2013 is likely to be France and the row, in a German election year, between Germany and the rest as the euro morphs from a mini-Deutschemark to a mini-lira under the eye of Mario Draghi.
Events are unfolding at an exponential rate.
IN A WORLD OF UNDERPRICED RISK, WHAT COULD POSSIBLY GO WRONG?
http://www.eugenelinden.com/news7510.html
And behold the mouse trap fission effect.
We are screwed.
Nice though somewhat depressing prediction for next year.
I’ve a gut feeling that if the Coalition here can get any iota of a “feel better factor” moving, that we could well be into a snap election come next Autumn. Particularly if they can play the Big Bad European Bogeyman card.
Which seems likely because the further this rumbles on, the less likely we will be of any significance as a “Poster Boy” and even less likely to get any relief on banking debt.
subscribe.
Let the Germans go. They still refuse to take any responsibility for the reckless lending of their banks. Haven’t they ever heard of due diligence or co-responsibility of the lender?
If they want their precious currency, they can have it. As far as I am concerned, money is but a tool. People are far more important than abstract ideas.
By ‘Germans’ and ‘they’, I mean their government and financial institutions etc. I may no distinction among people on the basis of so-called ‘nationality’.
Gensler Says LIBOR Still Being Rigged Sept. 26, 2012 (LPAC) — London Interbank Offered Rates (LIBORs) are {still} being rigged, and should be ditched and replaced by other interest-rate measures, said Commodities Futures Trading Commission chairman Gary Gensler to a conference at the European Parliament on Sept. 24. Gensler’s CFTC was already investigating the biggest international banks’ rigging of LIBORs in 2008, and was part of the $540 million settlement compelled from Barclays Capital on these crimes in July. It has become clear that at least 8, and perhaps 15-20 big banks were deeply involved in rigging the LIBOR rates… Read more »
German Social Democrats Go for OECD Model of “Bank Separation” Sept. 26, 2012 (EIRNS)–Former German Finance Minister Peer Steinbrück briefed the SPD Bundestag group yesterday, and the press today, on the results of the working group on financial reform over which he presides, and the question has been whether the Social Democrats will finally take notice of the ongoing struggle for Glass-Steagall in the United States and internationally. At many public events and other political occasions before, Steinbrück had avoided making any specific reference to Glass-Steagall, and also yesterday, he did not make that reference, but instead openly endorsed the… Read more »
I think the current government will start to fall apart, it already started last night with the resignation of the junior health minister, they have played the goodie goodie card in their naivety and it hasn’t worked, they don’t understand the German physic well what should we expect from the Taoiseach he’s a teacher after all. But who will take there place the far left? i think we should take our chances and revert back to the punt, there is also the possibility of a monetary deal with the UK which is the way i think it will end anyway,… Read more »
After selling the ESM, FG now is told it will only address future problems, not from before it goes into effect!
http://www.irishtimes.com/newspaper/breaking/2012/0926/breaking16.html
This is the kind of revelation that can change everything.
Australias losing steam too. Chinese stopped ordering and more important paying on time for iron ore. Wait til all the Ozopaddies arrive back to Mammy and bankrupt the dole system.
This article is a complete contrast to the previous one which posed the question of whether the excessive currency creation being undertaken across the world will lead to the money becoming poisonous swill. This article fully endorses this currency debasement and even says it will be particularly good for Ireland. Well is it swill or is it the best thing since sliced bread? Well Jans Weidmann, president of the Bundesbank, is very strong in his view that excessive currency creation can turn into a nightmare for everyone involved. In a recent speech he gave entitled Money Creation and Responsibility he… Read more »
“Whatever the Germans were expecting when they reluctantly gave up their Deutschemark, they sure as hell weren’t expecting the lira. But this is what they are getting.” This is generally contrary to what was spoken about hereabouts in the past in relation to the Euro and Germany’s economic performance; you jave argued that the Germans have been benefiting export-wise from a Euro that is weaker than any German Mark would be. You described the Germans as getting a free lunch with the Euro.So weaker was good for them. This line of argument you use here isn’t backed up by international… Read more »
Our government’s lets see what happens approach is unravelling quickly. If the current period of pain resulted in some major restructuring of how the country is run and organised the pain may be tolerable. But there had being no change and no sign of change despite the endless embarassing waffle. Europe not just the euro is falling apart with police and army being used to control the populace in Greece and Spain. We meanwhile are being controlled by spin from people who do not even know what they are spinning. I do not belive all this is part of some… Read more »
Murder in the Banks by DraghiN Beths
Is this a Devalued 5 million Deutsch Mark Stamp I hold
Hitlers face towards my hand ?
Come let me clutch this useless toilet paper
I have thee not and I see thee still
Art thou not ,fatal vision ,sensible
To feeling as to sight , or art thou but
A Dagger of the Printing Press of the ECB , a false
creation from a DraghiN Brain ?
What you can do for yourself while your government waffles
Those of you that want a correct analysis of what is happening and what to know how to help themselves may be interested enough to invest an hour and listen in.
http://www.successcouncil.com/live_presentation/recording.php?cid=
This is not just a European problem and will not be overly affected by France or even Germany. It is a world asset price problem. The only thing that is keeping hyperinflation at bay worldwide is the current tacitly agreed policy of maintaining the value of bonds artificially high in order to prevent a global collapse of asset values. Maintaining high asset values acts as a tax, sucking spendable income out of the economy. Many homeowners are paying one-third to one-half of their incomes on negative equity mortgages. A worldwide recession is thus the cost of keeping hyperinflation at bay… Read more »
As politicians are pushed into a domain they never experienced before, look how quick things can change.
http://laroucheirishbrigade.wordpress.com/2012/09/27/the-inevitable-resignation-of-roisin-shortall/
There is no normal predictability anymore, and any forecast must deal with this.
Imagine a snap election and Gerry Adams as Taoiseach and EU president!!!
Germany is being played and in some way Europe is trying to pull the wool over Germany and its about time German people changed there leader ship . In someways the German people are being lied to the same way we are. Ireland needs the USA ,UK,? So why are we paying bond holders back and in the process destroying our country FOR MOST PEOPLE not the chosen few. If we had not payed the bond holders would USA An UK turned there backs on us???? We the Irish people are being sold down the river for what ? For… Read more »
From the Irish Times today – that 2011 annual report of the Comptroller and Auditor General; “The value of the National Pension Reserve fund decreased by 41 per cent last year to €13.4 billion.” And; He concluded: “I am disappointed at the range of findings in this report because it shows that things are not getting better and that the reform process is not delivering when it comes to ensuring that taxpayers’ money is handled with probity and efficiency.” http://www.irishtimes.com/newspaper/breaking/2012/0927/breaking27.html Of course this is in stark contrast to Enda’s recent support of the public service’s implementation of the Croke Park… Read more »
“You know the world is in a strange phase when the Pope is a German and the head of the central bank is an Italian.”
That’s a good one David. Previously I have had suspicions that you are really a superficial fellow but that betrays some insight.
In the nineteen sixties and seventies, when technology was growing up, it was often said that technology would solve the worlds ills by making more abundance, shorter work weeks, and less toil and struggle. Robotics and computers were supposed to make life better for everyone. Our financial system has no mechanism to distribute wealth created by technology to the common good. In the current model, a robot, or a human slave’s work can never feed the person it replaces; it can only increase the profits of the company that uses it. This causes a redistribution of wealth from the ones… Read more »
Hey Tony,
Gold strike in south county Wicklow, some where around Avoca. The company IMC, reckon there’s 1 million ounces.
The operator commented – A few more strikes like that and we could show the IMF the door.
Green Light for Imposition of Nazi “T-4” Program in Portugal Sept. 27, 2012 (EIRNS)–Portugal’s National Ethics Council for the Life Sciences (CNECV) has given the green light for the Ministry of Health to ration medications issued by the public health service, in order to cut those whose lives are deemed “too expensive” to maintain. Responsibility for this monstrous decision lies with the European Troika, as well as the Portuguese government. Asked by the Ministry of Health to issue a formal opinion on the “ethics” of financing decisions for HIV retrovirals, cancer medications, and biological agents for rheumatoid illness, the CNECV… Read more »
The economic situation in France can only be described as explosive. Spent a few weeks in Ireland in August and I honestly feel that things are a lot worse here in France. 3 million unemployed (real figure is about 5 million). Debt will be 91% gdp in 2013. Salaries are low and working people can no longer live on what they earn.
A ‘Michael Moore’ type documentary on what life is really like living here would be frightening to look at.
I know more and more French people who are looking to emigrate.
John Maudlin, commented that Japan is a bug in search of a windshield, due to it massive public sector debt. David is telling us that France will go that way too. He is correct in his assessment. France is unreformable. The country that gave the world the spoiled brats revolution in 1968 is now heading into a mess. Every time there is any effort to rein in the borrowing, there is a tantrum in France. France is living beyond it’s means. It is heavily dependent on the Common Aggricultural Porgram, and a range of state subsidies for “protected national champions”.… Read more »
Without Words
2003 UN Security Council:
2012 UN General Assembly:
listened to John McGuinness about the civil service.
A POLITICIAN SPEAKING OUT WELL DONE.
a question, if the Bretton Woods System, was a means of international monetary control etc. and it also being a response to the economic effects of WWI WWII, and with emphasis also to allay military conflict between Countries….Have the elements of it’s (otherwise) failures exposed the World again to the latter effects I mentioned?
@ Tony re your last reply in previous article It’s not at all the same. The demand for profit would be absent; and the credit would be going to production. These two together would produce entirely different economic outcomes than the current privately owned system which currently refuses to invest in production. There is a virtual capital strike, with respect to production, in the West at this time. Our political elites are in thrall to private capital; this is why they are supporting the current system. Therefore the moral hazzard problem you mention….ie dont let politicians near the money….is already… Read more »
If Ireland’s dept can never be replayed then why does this government keep on limping along and giving the impression that with enough cut backs and enough hardship trust on its people that we can pay our way ?
An interesting viewpoint of the Eurozone, and the fact that the PIGIS are heavily reliant on imported oil and gas.
http://ourfiniteworld.com/2012/03/05/why-high-oil-prices-are-now-affecting-europe-more-than-the-us/
Are we in Ireland giving ourselves a lifestyle that we cannot afford, because we do not have access tp hydrocarbons like they have in California, and because we need to feel equal to the best there is in lifestyle purely for the sake of self esteem ?
My restaurant closes for last time tomorrow. Turnover down 70% in four years. Eight people signing on on Monday. God bless austerity. Of course its working.
Why go back to the Gold Standard, if it didn’t work up to 1971. Do you think the time lapse between then and now (if indeed the right option is a return to the Gold Standard) was like a ‘respite’? Or do you think, we have reached a boundary as we know it? Will we ‘have to’ eternally switch between the two, Standards?
Or is there a Bretton I, II, III…..?
https://twitter.com/ballyhea14
Fair juice to the Ballyhea says no group, marching every week in protest against bondholder repayments. There’s another 1 billion € due to be paid this Monday 121001.
March tomorrow Sun 30 Sept starting at 11:30am in the Garden of Remembrance. If any of the posters decide to go, I hope to see ye there! Tony, if you’re around, you could ‘slow bicycle’ it :)
These protests are gaining media traction slowly. NAMA wine lake is a supporter and retweets/writes articles about the actions on a regular basis. Constantin, Stephen Donnelly have joined them before.
Looking forward to it.
13 States Now Considering Gold and Silver as Money Posted on September 28, 2012 Backwoods Survival Blog 13 States Now Considering Gold and Silver as Money:When the governor of Utah signed a bill that made gold bullion and silver bullion legal tender in the state last March, he had no idea of the groundswell he was going to start. The Utah Sound Money Act outright flies in the face of the fiat money system, which is the printed money used today; backed by nothing but the promises of politicians… … It is not practical for people to carry around heavy… Read more »
The Greens: Ever Loyal Footsoldiers of the Empire Sept. 28 (EIRNS)–Particularly the German branch of the Green Movement has always been on the forefront of the Empire’s numerous genocidal projects- deindustrialization, population control, European Union financial dictatorship, “humanitarian interventions,” to name only a few. Therefore, it comes a no surprise that Sven Giegold, member of the German Green Party in the European Parliament, was elected as one of two chief coordinators of that parliament’s steps towards the planned EU banking union. Giegold claimed yesterday that the banking union is crucial for Europe, in particular the aspect that the plan envisages… Read more »
Is’nt it interesting how the Greens team up with global finance. Charming bedfellows indeed.
your going to get your communist federal europe david
a central bankers dream realised
european technocrats and bureaucrats have taken over
German President’s Signature Gives Go-Ahead for ESM Sept. 28 (EIRNS)–Germany’s Federal President Joachim Gauck yesterday signed the ratification document for the bailout fund European Stability Mechanism, including amendments by the German government that were requested by the Constitutional Court in its Sept. 12 ruling. The move came just hours after ambassadors from the 17 countries that make up the Eurozone signed a joint declaration that amended the text of the ESM, designed to make it comply with the court’s ruling. That includes a statement by the German government that Germany’s participation in the fund be capped at EU190 billion ($244… Read more »
Putin: The West Is Reviving the Roman Empire’s Genocide Sept. 28 (LPAC)–Russian President Vladimir Putin today, speaking to the provincial leaders of the Ryazan Region, compared the “regime change” policies of the West to the Roman Empire’s destruction of Carthage. “Our partners just can’t stop. They have already created chaos in many territories, and now they are continuing the same policy in other countries, including Syria.” Putin reiterated Russia’s policy of contributing to peace in Southwest Asia without imposing policies by force from the outside. “We did warn that prudent action was needed and that it would be wrong to… Read more »
Where can one see the actual accounting for Ireland Inc. is it possible to see in plain english income by tax type e.g car tax, vat, tv licence etc and expenditure by type. I firmly believe that if car tax was earmaked for roads we woold have the best roads in the world and if TV licence money was earmarked for RTE only with salaries constrained within that tax take etc… dept of justice, judicary and courts service paid for from court charges and fines etc.. health service paid for from PRSI, at leasy we would see exactly where the… Read more »
Today my sister drove me out around some Devon side roads as we chatted about this and that. A lovely sunny day with a breeze and cotton wool clouds. The country side was lovely. we passed fertile fields and moorland. Large new farm building and many old ones. We reached Holesworthy and stopped in a small country town on a Saturday afternoon to do a little casual shopping and look around. While in the local butcher we admired the local produce from neighbourhood farms and I decided on 20 rashers of streaky bacon as suplies for the next three breakfasts.… Read more »
Bankrupted by Rigged LIBOR and Financial Fraud? Blame Tony Blair Sept. 29 (LPAC)–University of Missouri professor and financial crime expert Bill Black fingered Tony Blair as key to the creation of the crooked speculative financial system whose disintegration has ruined most normal mortals. That’s right: the same former British Prime Minister, now campaign advisor to Barack Obama, who sunk the United States in the Iraq war with his lies, and is now driving for a U.S.-Israeli strike on Iran, the better to start World War III. Black pointed to Blair’s role in the financial debacle in an interview with {The… Read more »
What does that tell you and the many other small business in Ireland , that we are supporting the gravy train for these people . Look at the waste, the councils need you money and mine to fund there cushy jobs and if the cant get it from one sorce they will get it another way , the tax you in the poor house way . Two man living beside me one a retired plumber the other a retired council employee one has a 12 year old car , the other has a brand new car. One has his pension… Read more »
So’ The Good Room’ is out on October 25th David?
I have a plan to save the state a lot of money that they pay out in social well fair .
Anybody claiming should be offered a cash sum enough to pay for there flights out of this country and in so taking people of the dole .
Saving the state money and helping people to get as far from here as possible.
Who wants to be stuck in a country where the cost if living is out of controll,anyway tge government need the cash to pay there high wages ect ect .
Forget statistical trends, make them :
http://laroucheirishbrigade.wordpress.com/2012/09/30/clear-your-desk-enda/
It is inevitably going to be “burn the bondholders” – known transatlantically as Glass-Steagall.
By the time the book comes out, Enda may have cleared his desk in the “good room”. Then we will see some very interesting changes.
http://www.davidmcwilliams.ie/2011/11/01/yet-another-golden-opportunity-is-missed
My granny had a “good room” too!
Paris now.
Thousands marched in Madrid and Paris, protesting the austerity imposed by their respective governments. While the march in Paris was peaceful, in Madrid, riot police attacked and wounded at least 12 Spaniard protestors who called for the government’s resignation, the dissolution of parliament, and the adoption of a new constitution amid a deteriorating economy and the eurozone’s highest unemployment rate that has hit 25 percent.
I entered this discussion posing Eugene Linden’s question – IN A WORLD OF UNDERPRICED RISK, WHAT COULD POSSIBLY GO WRONG? No one answered this question or even attempted a go at it – which shows a profound lack of understanding of what we are looking at. Fundamentally, we bet on low risk and we are now being scorched. Insurance companies, banks you name it are running for cover – the bluff is being called globally and all we are seeing is the fallout as governments scramble to retain the traditional means of keeping an economy going and wind out robbing… Read more »
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