IF you want to know where the classic 1980s power ballads (the theme from ‘Dirty Dancing’, Laura Branigan’s ‘Self Control’, Heaven 17 numbers and assorted gems from the New Romantic era) ended up, look no further than German radio. While I was driving through the northern bit of the Rhine yesterday, the car radio offered up an eclectic mix, ranging from the reasonably nostalgic to the God-awful, in a display of Catholic music tastes befitting a journey that concluded just outside Cologne cathedral, Europe’s biggest.
The other noticeable thing about driving in Germany on a weekday is the sheer amount of commerce on the roads. The inside lane of the autobahn is an uninterrupted convoy of trucks shipping Germany’s exports all over the continent.
If you want to feel the German economy, the best way is to sense the shudder of the thousands of trucks on the A3 autobahn, which bisects Germany top to bottom.
But commerce and trade don’t end there. In front of the cathedral last night, the Rhine was a scene of controlled industry as dozens of barges plied their way up and down this beautiful river. The melodious repetition of the giant diesel engines — thud, thud, thud, thud — might be a soundtrack that some of Germany’s more excitable radio DJs could do with taking time to listen to, given the cacophony to which they subject the average driver.
But listening to the local radio gives you a sense of what the producers deem to be news. Yesterday it was all economics; Greece, the differing internal German political views on the euro and the best way forward.
The biggest news — and this is what is setting the political tone here — is that business sentiment fell for the fourth successive month in Germany.
There is a real sense that the assumption that the European crisis would stop at the Rhine, the Roman Empire’s natural boundary with Germany, dividing the Latins from the Teutons, is now in shreds.
The five-year crisis in the eurozone has been the story of slow but progressive contagion as one economy after the other weakened and orders dried up, affecting more and more suppliers until they ultimately affected Europe’s biggest supplier, Germany.
Worse still from a German perspective, the historically low interest rates which were designed to kick-start demand in the periphery have only served to drive up things like property prices in Germany, threatening to inflict upon Germany the very virus that floored some of the peripheral countries in the first place.
First, there was a banking crisis in Ireland and a government crisis in Greece; then Portugal got sucked in; then the contagion spread to Spain and its consumer bubble deflated rather too quickly for its bankers’ tastes as some of the banks were exposed as little more than ponzi-scheme operators. Then Italy began to grind to a halt, led by consumers who stopped spending.
The assumption at this stage was that Europe’s prudent core countries would be okay, but then France started to slow down and ultimately its biggest trading partner, just over the Rhine, felt a chill. But Germany hasn’t been able to shrug off that chill. In fact, it is feeling progressively worse.
The question we should now be asking, one which seemed utterly implausible a few months ago, is whether Germany is heading not for a slowdown, but for a recession?
And if it is, what would a recession in Germany do to the tolerance of the German people for more European bailouts?
Hans-Werner Sinn, president of the Ifo Institute — one of the most accurate German economic think tanks — said export expectations were slightly negative for the first time in almost three years.
“The German economy continues to falter,” he said.
Last week, we had a fascinating piece of research from GaveKal — an influential Hong Kong-based think tank — which suggested that a recession in Germany was on the cards, very much so.
Despite the fact that the highways and byways of Germany are still choca with commercial traffic, something very familiar to those of us in the rest of Europe is happening; the recession is moving in waves and no one country has sufficient economic levies to hold back the tide. For Germany, we have the added, non-European problem of a sharp drop in Chinese demand for machines. This affects Germany’s heavy-industrial export sector disproportionately.
Looking at survey data, export data and output data, as well as assessing the prospects of the countries to which Germany exports, and taking into account the fact that Germany itself is a huge importer too, the authors of the GaveKal report conclude: “There can be no escaping the fact that reduced German imports must cause a decline in French and Italian exports. This will likely be a shock for those who expect the German juggernaut to drag the southern economies back to growth. To put it bluntly, Germany will very shortly be subtracting from growth in the rest of Europe.”
Because Italy and France are not competitive against Germany, a slowdown in Germany will, as it always does, expose the least competitive first, impacting on Italian and French producers.
If the authors are even half-right, this puts huge question marks over the entire EU’s strategy with regard to the euro crisis. Up to now, there has been a sense that ultimately, if everything goes pear-shaped, Germany will pay.
BUT what happens if Germany can’t pay because it is in a recession? Then all bets are off and it is the slowdown and, more acutely, the encroaching recession that might explain the hard-line stance of Germany and France with the Greek prime minister last weekend when they said that Greece had run out of road.
We should not gloat over the Greeks’ dilemma, because if Germany’s industrial muscle atrophies, we are next in line.
We, more than any other country, are dependent on the willingness of the Germans to dig deep for Ireland at this stage. Up to now our negotiating tactic has been based on the “Germans will pay” dictum.
Strolling along the side of the great river last night, listening to the thud, thud of the giant barges, the idea that a weakened Germany would remain ever willing to dance to someone else’s tune seems, at best, fanciful.
I am sending this to a friend in San Francisco who said almost the exact same thing in a conversation we had a week ago. Great minds think alike. A lifelong accountant and economics and political junkie she loves when I forward your articles to her. Nice one David.
Shouldn’t that be ‘levees to hold back the tide’ rather than ‘levies’?
Otherwise great article as usual David.
My only question is , when will it start? , I mean when will the phony recession end and the “real” recession begin, when, oh when. I thought June 2012. Back in the 90’s I said it would start 2003 , then 2006 , I was oh so wrong. I love to read all the comments on this site, but now I challenge the contributors, when will it start ?????. I define a “real” recession as Ireland being in an 80’s mode, That is, no holidays abroad, one car families, 8 to 20 years old cars, 10% of youth going… Read more »
Volks
There is something nice how the Germans think in their culture when referring to their kinsfolk . The predominance of the word ‘Volks’ symbolises their entrenchment how they attach to themselves and ‘others’ .Its their symbol of power together to work together to be better and better . This word morphs metaphorically when addressing things to the word ‘ System’ ie ‘Kaffee mit System’ .
I often wonder was Bugs Bunny a German Immigrant to the USA .
Thats All For Now Folks.
I was recently in Germany myself in a town called aschersleben.Small town surrounded by some heavy industries in mainly an agriculture dominated landscape.I too was surprised at the amount of trucks on the autobahns particularly the A2 near Hannover. It simply was hundreds of kms of trucks.However when I went shopping in Ascherleben I was surprised also to see small cafes & specialised shops closed down. Only the Aldi & Lidl shops busy.It made me think why so many shops & cafes closed down in such a prosperous country.I was thinking is this a sign that Germany is also coming… Read more »
Well, the article merely explains that the final domino is falling. Look over the last few months articles and it is as plain as nose on your face. Demand is disappearing everywhere. Question now is WHY? It’s not totally the euro’s fault. Global trade imbalances have allowed people to become more dependent on forms of income which are dependent to fewer sources of wealth generation. Our primary industries are in the control of very few interests. Food, Fuel and Minerals – when these get locked up, you pay the piper. It was not always that way. When everyone was doing… Read more »
Couldn’t agree more with what’s been said!! It’s true. If Germany is heading into a recession then quite literally the ‘brown stuff’s going to hit the fan’.End of story!! Things aren’t getting any better. In point of fact they’re just getting worse, especially in this country!! I’m sorry to have to say it, but the banks should’ve been left ‘go to the wall’ back in September 2008. Ever since the time of bank guarantee being brought in things have just gone from bad to worse!!Unless the banks all over the world aren’t brought into line soon then nothing is going… Read more »
Some short backup to David’s theme above from the usual media outlets:
http://in.reuters.com/article/2012/08/23/pmi-flash-germany-idINL6E8JNDAP20120823
http://www.cnbc.com/id/48761149
http://www.bloomberg.com/news/2012-08-30/euro-area-confidence-drops-more-than-forecast-to-3-year-low-1-.html
Deutsche Presse noch dazu….
http://www.finanzen100.de/finanznachrichten/wirtschaft/euro-krise-laesst-auch-deutsche-wirtschaft-schwaecheln_H2101013912_8150/
http://www.n-tv.de/wirtschaft/Wachstum-verliert-Tempo-article6962361.html
http://www.finance-magazin.de/maerkte-wirtschaft/deutschland/deutsche-wirtschaft-schwaechelt-bricht-aber-nicht-ein/
subscribe.
Around 1.5 years ago, I exchanged opinions with H.W. Sinn on this global heist. He was the one who started this somewhat academic Target II discussion. As some of you might know me from earlier contribution, I do call a spade a spade. In a somewhat longer email, I argued that taking “everything” – This was the longer part – into account, I see no other way out of this but large scale debt forgiveness, cancellation of odious debts, a seismic restructuring to be required to have the slightest chance to get a grip on this mess. He agreed! His… Read more »
David’ In the “car – crash, in slow motion” analogy of this five year till now protracted “Bust”….what makes you think the EU hasn’t had the time to figure this part out? Have we not defied’ conventional economic consequence to date? The “resume play” or even the “fast forward” button could ‘in my opinion’ have been pressed at many junctures over the past five years. In this analogy, would “x2 slow motion” not be a likely reaction? P.S Please go easy on me if you choose to answer this post. I’m a confused, angry, unemployed Construction Labourer. My construction skills… Read more »
David’ you missed an opportunity as per your opening paragraph with “Nena-99 Red Balloons” (1983) & “Nena-99 Luftballons (2009)…..
…wasn’t there a connection to the 1983 version to Armageddon?
German exports Q1/Q2
The “Statistisches Bundesamt”. the German equivalent of the Irish CSO, hence the official government statistic forgers, just reported:
Q1 and Q2 German exports to:
Portugal -14%
Spain -9.4%
Greece -9.2%
EuroZone total -1.2%
Netherlands and France saved the day increasing >4%
Total of German export Jan-june+4.8% a total of E550.5 billion, with 211.6 billion in the Eurozone. Exports into non EU contries increased 11.1%, hence count for 42% of total german exports.
The bigger European picture
via Dr. G
http://trueeconomics.blogspot.ie/2012/08/3082012-25-quarters-of-europe-standing.html
Hi, I am not sure I agree with the article. I don’t have the stats but my understanding is that the UK and the USA are our biggest export markets and ad we all know Ireland has two economies; The internal economy and thd exporting external economy. As the euro continues to slide exports which currently are in surplus will continue to grow even if Germany contracts. The internal economy will be ground into the dust to facilitate the reparyment of the failed speculative loans of international banks irrespective of what happens in the fatherland. I can’t see how trouble… Read more »
So Gunther invested in Lorries, when Paddy was investing in overpriced properties. Gunther still has his lorries. Paddy has his overpriced properties.
Shurr….aren’t we all happy….
Marc Faber Swiss Economics commentator resident in Thailand, has declared that it is “100% certain that we will enter a global recession” in the next few months.
Given how Just in Time inventory works, Germany, The Netherlands, Switzerland, Singapore, Australia, Canada, Russia, Brazil, South Korea, Ireland, and many more export driven economies countries will get sudden changes in their economic predicament.
13
The Genie is out of the bottle in Germany! DMcW wonders what will be the effect of a recession. Well obviously the focus on the banking system will be become priority. Former German Chancellor Helmut Schmidt Moots Glass Steagall and Blasts Foreign Interference into Other Countries Aug. 29, 2012 (EIRNS)–Former German Chancellor Helmut Schmidt was hosted at a public event by Munich Mayor Christian Ude, who heads the SPD slate in the Bavarian state elections next year. The event was held in a theater in order to allow Helmut Schmidt to smoke, which is now prohibited in Bavarian pubs and… Read more »
Germany: The Trennbankensystem Genie Is Out of the Bottle August 29, 2012 (EIRNS)–Under the headline “Hot Debate, the Situation in Germany,” the first German TV channel, ARD, ran an article on its website, acknowledging that the debate on banking separation is on in Germany. Obviously, they had to take up the issue unwillingly, and therefore they report mainly negative voices, such as Bundesbank Deputy President Sabine Lautenschläger, who told the {Fnancial Times Deutschland} that even after a separation, bailouts may be necessary. ARD also quotes German Banking Association head Michael Kemmer, who bluntly lies, saying that the collapse of the… Read more »
Everyone is waiting for the Constitutional Court ruling on the ESM in Germany. Credit creation must be brought back into the hands of sovereign governments, and whenever one discusses this in Germany one is labeled “right-winger”. A well known economics journalist put it so : “its something we have to live with”. This journalist is studying some of the debates for government credit/monetary creation under FDR in the mid-1930s, when, despite Glass-Steagall and the Reconstruction Finance Corp., the banks were still pursuing a credit crunch to the real economy. In fact it is well known that FDR activated the Credit… Read more »
On the physical economic front, Germany has made some hugely damaging mistakes, or more correctly disastrous moves. 1 – the nuclear power exit, a tsunami waiting to hit manufacturing and 2 – the Transrapid cancellation. Result is that the highest prices for power in the EU, likely the world are going to be even more damaging in 2013. And the roads are totally over stressed – that cargo should be on 500kmh Transrapid mainline trains. Deutsche Bahn made a catastrophic error putting its effort only into the ICE, which cannot run fast without totally repalacing track – all “unexpected costs”… Read more »
David wrote: “The question we should now be asking, one which seemed utterly implausible a few months ago, is whether Germany is heading not for a slowdown, but for a recession?” Well, only people who had their heads stuck in the sand would have thought that. Or put another way — only people who had their heads stuck in the mainstream media might have thought that. Which sadly is just about everybody. This entire debacle has played out as a sustained propaganda exercise in denial and misinformation in the mainstream media. David’s analysis is couched in the standard economic pundit’s… Read more »
It is traditionaly known by Germans that if one of their folks were put into a forest they would come out with a complete house . Nowadays a German would be lucky to come out with a branch.Thus this infalibility value added unit they once enjoyed is diminishing and the older age profile of the nation is a contributary factor to this in addition to the influx of other nationalities . The original promoters of Aldi and Lidle who are both brothers in their late nineties will upon their deaths cause changes in the projected corporate philosophies and in good… Read more »
Can we the people of Ireland put a stop to the bailout agreements and push an Iceland style approach.
Is it a case of Riot Riot Riot Now Now Now?
Hi Tony, Gold FELL $8/oz in the last day or so. David’s previous article regarding deflation seems to be playing out in the Market place as bonds are returning almost nothing in real terms. Deflation it seems is what thd markets are expecting and if that is the case cash is king! There is one caveat though. Thd fact that the US is so hopelessly insolvent leads me to believe that the investors in long term us tresuries invest their money because they believe the us will use it’s military to keep up the value of those bonds at all… Read more »
German Jokes –
1:
Knock Knock
Who is ther?
The Gestapo.
2:
Why is there no Aspirin in the rain forest?
Because it wouldn’t be financially viable to try and sell pharmaceuticals in the vastly unpopulated rain forest.
Glass-Steagall Comes to Wharton School August 30, 2012 (LPAC)–Long a British intelligence-run bastion of anti-human economics in the United States, Philadelphia’s Mellon-funded Wharton School acknowledged the raging brawl over the restoration of Glass-Steagall, in an August 29 posting to its “Knowledge” blog titled: “Should Big Banks Be Broken Up? Yes — or Maybe.” Referencing Sandy Weill’s July Glass-Steagall-backing CNBC interview, the blog writes: “According to many analysts, Weill’s comments signal a much larger shift. `There is a growing chorus of voices from the financial sector that is calling for the breakup of the big banks, so his voice does not… Read more »
Garbage Disposal To Prepare the Way for Glass Steagall August 30, 2012 (EIRNS)–Rowan Bosworth-Davies, former Chief Investigator for FIMBRA, the U.K. predecessor to the Financial Services Authority (FSA), has called for the U.K government to start prosecuting banksters. Bosworth-Davies stated on his Blog Aug. 29th: “…we must insist that Government implement an urgent review of the powers of the regulators to bring criminal prosecutions, and their relationship with the Serious Fraud Office (SFO) and the Crown Prosecution Service to be upgraded and given far more flexibility, in the hope that we shall see many more banksters being forced to grip… Read more »
Ding dong , the tax man calling!
http://www.thedailybell.com/4230/Wealthy-Yacht-Owners-Subject-to-Elite-Divide-and-Conquer-Scheme
From the Daily Mail. Dumas: ‘Without euro exit, Germany will soon be in big trouble’ Charles Dumas of Lombard Street Research suggests Germany should not, perhaps cannot, afford the euro. According to Dumas: It is a myth that the German economy has gained from euro membership. Its growth has decelerated. Its growth of productivity has halved. Its citizens have accepted severe wage restraint without the former benefit of a rising currency, leading to negligible gains in consumer welfare. The undervaluation granted by their wage restraint has benefited producers artificially, and weakened the incentive to cut out waste — hence lower… Read more »
The last government and the present government and the banks killed off Ireland .
What would have happened in the past if Germany went into recession WAR,after the seckond world war Germany was rebuilt .
The German people can’t prosper without exports and ireland is like German it to puts to much into exports saving Ireland.
We are heading back wards and I believe we ant seen nothing yet so batten down the hatches we are in for a ruff ride.
Doctor James Reilly was going to reform the HSE and cut out all the wast of money, we now now that this government has not got a clue , they tell the HSE we are cutting your budget and what’s the first thing the HSE is going to cut ,front line services and close beds . God help you if you get sick try to travel up north or over to the uk if you get sick, you will have a better chance of living, now add all this crap to the property tax and the cost of living in… Read more »
This is how berlin, brussels, london and washington are solving the problem…
http://www.youtube.com/watch?v=HSD1d-6P6qI
It’s all under control folks
Slightly off subject I know but it would appear that NATO are getting ready to launch a false flag chemical attack in Syria in order to have an excuse to send in their own troops instead of merely paying mercenaries to do their dirty work. The attack will be launched from ambulances posing as humanitarian aid and the mainstream (bought and paid for) media will pin the blame on the Assad government. Before any of you anti conspiracy nuts go mental on this lets just see if what is being warned about actually comes to pass.
http://www.infowars.com/nato-plot-to-use-ambulances-as-cover-for-humanitarian-invasion-of-syria/
UNCTAD World Investment Report 2012
to be found here:
http://unctad.org/en/Pages/DIAE/World%20Investment%20Report/WIR2012_WebFlyer.aspx
From ZeroHedge.
http://www.zerohedge.com/news/germany-cornered
Yanis Varoufakis, was not he the Greek economist who predicted that if Greece was badly handled, the whole lot would be destroyed and Germany would be doing a runner. I remember the Vincent Browne show…it was a cracker
Could we be seeing the ultimate fallout of having uniformity for economies of scale versus lots and lots of fragmentation whose individual units are self reliant.
I mean, when you think of it – Germany is really a collection of communities, small businesses where the communities have strong local representation and empowerment. Contrast that with our “republic”. Indeed, I would say that if you wanted to see where there real wealth and industry is in the western world, just look at the local community democratic structure and how progressive it is.
News flash the crow park agreement is dead in the water Ireland’s version of the world at war is about to kick off,let’s see what this government are made of now,my message to the government is its time long over due time to separate the men from the boys.
I am the economy and I am sick and tired of you messing with me. Every time I try to make a move there is a banker or a politician or some too big to fail business telling me what I have to do. I’m getting really pissed off at all this interference, changing my interest rates, giving out subsidies, not letting a business go to the wall, practicing cronyism, changing my money supply. Do you know what that does to my self esteme. It gives me a headache just to think about it. I am ready to blow. You… Read more »
Tremonti Blasts Draghi for Having Abolished Banking Separation Aug. 31 (EIRNS)–At a public meeting in Belluno, Italy on Aug. 29, former Italian Economy Minister Giulio Tremonti blasted European Central Bank President Mario Draghi for having abolished the legislation that since 1936 had regulated Italy’s banking system under Glass Steagall-like rules. Tremonti’s statements echo the recent confrontation between {EIR} and Draghi on this issue at the last ECB press conference, which was reported in the {EIR Strategic Alert Service}, a publication which is circulated among business and political layers. Tremonti also called for an FDR-like solution to the financial and economic… Read more »
Maybe Germany needs a good recession in order to see things from our point of view. Maybe then it would focus their minds on a solution we can all engage in.
ECB Bankers’ Dictatorship To Be Formed Aug. 31 (EIRNS)–The European Commission will soon release its proposals which will institute a full bankers’ dictatorship over the Eurozone financial system. The front-page story of the {Financial Times} today is the European Commission’s plans for all bank supervision to be conducted by the European Central Bank (ECB), that “would strip existing national supervisors of almost all authority to shut down or restructure their countries’ failing banks, giving those powers to the ECB.” Banks would be bailed out directly by the European Stability Mechanism as the ECB sees fit. The move is obviously aimed… Read more »
Bubbles Ben: Money-Printing Is a Success, But Doesn’t Work Aug. 31 (LPAC)–Federal Reserve Chairman Ben Bernanke gave a much-awaited, extremely long, and paradoxical speech at the Kansas City Fed’s Jackson Hole banking conference today, in which he claimed that large-scale central bank money-printing is a justified success historically, theoretically, and in the recent financial crash–but has not worked on the economy. He also appeared to be promising more money-printing from the Fed in the near future. But because Bernanke was promising more hyperinflation while obviously acknowledging that it had failed, the response to his oracular speech by financial “experts” and… Read more »
Some Work Available on Obama’s Low-Wage Plantation Aug. 31 (LPAC)–The National Employment Law Project (NELP), which tracks Americans receiving and losing unemployment benefits, released a report today on the destructive spread of low-wage employment throughout the economy during Barack Obama’s Presidential term. The report is based on analysis of Bureau of Labor Statistics reports for the past six years. Obama constantly claims he wants to give tax relief to “the middle class,” but middle-class work has disappeared on his watch, greatly accelerating a process underway during the Bush Presidency, the report shows. The NELP defined low-wage work as earning $7.35-13.85/hour,… Read more »
http://namawinelake.wordpress.com/2012/09/01/leaked-at-last-the-ecb-extortion-letters-to-brian-lenihan-in-octobernovember-2010/ The three letters which have “been seen” by the Irish Times are indeed threatening but there is no mention whatsoever in today’s reporting of bondholders… “The three letters which have “been seen” by the Irish Times are indeed threatening but there is no mention whatsoever in today’s reporting of bondholders. It has commonly been believed that the ECB threatened to withhold liquidity funding of Irish banks if Minister Lenihan did not agree to protect bondholders — there is no allusion to this in today’s reports. The letters are threatening in that they tied the continuation of the ECB continuing… Read more »
Must read : “The Dog and the Frisbee” !!! Speaking at The Central Bankers conference at Jackson Hole, one of the top directors of the Bank of England called for a return to the Glass Steagall principle of reforming the banking system. The speech was written by Andrew G Haldane, Executive Director, Financial Stability and member of the Financial Policy Committee and Vasileios Madouros, Economist, Bank of England and delivered by the former. Haldane is well known as an advocate of Glass Steagall. His speech, entitled “The Dog and the Frisbee”, while have the disclaimers that “the views are not… Read more »
http://www.independent.ie/national-news/hse-chief-overseeing-130m-cutbacks-defends-pay-hike-3216507.html
” Asked if it sent out the wrong message when he is overseeing €130m in health cuts, affecting many elderly and the disabled, Mr O’Brien said the salary figure was a matter for the Government and it was less than his predecessor earned…”
http://www.thedailybell.com/4237/Anthony-Wile-Ben-Bernanke-Plots-More-Mayhem Another opinion that messing with the economy by the likes of meglamaniac bon bon kills any hope of a recovery or stable economy. some one else who knows that FDR fixed nothing. The depression ended after the WW11. don’t be fooled by those who promote a nation state on the one hand and then propose a grandiose scheme that overrides any authority of the nation state such as his favourite NAWAPA. Beware Glass Steagall as it is a sop to the masses to pretend a fix to the banking problem. It addresses a symptom and allows the perpetrators of… Read more »