Thursday, April 29, 2010

Petunias In The Park

“In many local communities, fountains are not switched on and flowers are not planted in the public parks because of a lack of money,” said  Andreas Blätte, a political science professor at the University of Duisburg-Essen in the state of North Rhine-Westphalia, explaining why so many Germans oppose lending money to Greece.

Hold the presses.  Germans can't afford petunias in the park and, thus, are willing to chuck European solidarity and integration into the compost heap of history.

 Revealed At Last:  The Missing Link To European Monetary Integration
Helloooooo?  Wake up Germany, this is the most important test ever of the euro as a major global reserve currency and, therefore, the EU's prospects for becoming  a real player in the balance of power game.

Unless, of course, the vision is to shrink the eurozone to an uber-alles core of Germany, Holland and Austria by ejecting the "weak" South and other such untermenschen from the club.  If this is the plan and your euro becomes so strong vs. their drachmas, lire or pesetas... who's going to buy your products?  Surely not the Chinese, so we'll see then what productivity is all about, eh?

Figure it out: Alles cannot be in ordnung all the time within a Union of so many different  and disparate members.  The skills necessary for the Union's leaders are flexibility, diplomacy, a willingness to cut deals in back rooms and (gulp) a certain amount of charm.  Come to think of it, maybe you should leave the job to the Italians.

26 comments:

Fabrice said...

Hello,

I ve been a little hurt by a word germans haven't pronounced for 6 decades now.
By the way, your blog is excellent. I'm a long time reader.
Keep going on.
F.P from Belgium

Lord Blagger said...

Quite right. Why should they be forced by the government to pay for the failings of the Greek government?

Half Empty said...

As long as the Italians can match their charm with equal amounts of bailout money...

Alessandro said...

Come on!

For good or bad the Germans are the only people on earth who care about public debt and this is the only reason the European Union matters at all.

If the Greeks want a clear check Germans have no reason to handle it. If they and the other PIGS want a bunch of money to cover reckless and foolish government expenses they need to change their way.

As you know all too well, no Country will grow its way out of its debt. They need to change and change radically.

Giving them the no-strings-attached check that they ask is simply moving the EU break-up one year in the future.

Anyway, this is the first time I strongly disagree with you since 2007! Keep up the great work.

daniel de pari said...

"Anyway, this is the first time I strongly disagree with you since 2007! Keep up the great work."

+1

Germany is clearly handling the stuff as they should. Since the Chinese are playing their new "grand bond en avant" they are the only net creditors of this system.

The fact that all OECD countries are building both massive useless real estate and long term debt whilst having a demographic bust just does not change the facts.

This is a Lemming attitude. I'd be glad you do not join the lot.

Either we can get to decent asset prices - it looks like you are aware of the RE prices in Southern Europe - or the whole monetary system, USD and EUR alike is bust. Dead. The risks are much higher than a banking melt-down.

The fact that the Chinese people is joining the mania - re A. Xie articles - does not change the picture in any way.

Hellasious said...

I believe the EU stands for much more than the Germans' attitude towards public debt.

It may seem to today's folks that the EU is nothing but a monetary union with some few extra attachments, but this is entirely untrue. The EU vision is a Europe free of continuous, ruinous wars - which was what happened for centuries right until the end of WWII.

Debra said...

You're absolutely right, Hell.
That is what the EU SHOULD stand for.
With all the continual harping on.. filthy lucre the measure of all things, it has gotten harder to maintain some kind of... ideals.
We have been shooting cooperation in the foot for a long time now.
Cooperation, and solidarity.
It's difficult to imagine what France looked like at the end of WW2, and the incredible SOLIDARITY that arose from... EVERYBODY, ALMOST being bust, and the country being an economic desert.
It's a little easier to cooperate when you aren't obsessed with what you stand to lose all the time.
Why... even IMAGINING that glass half empty has got people shitting in their pants with fear.
The economy locks up under fear.
No... grease to keep the machinery going.
To be fair, I'm not really sure that the Union is really viable in the face of so many... linguistic barriers.
It's difficult to build political union with so many linguistic differences.
We'll see what happens.
But.. North and South exist within the Union itself.
The mentality of those people in the North just doesn't look like that of the people in the South...

Tiago said...

Ah... the myth that Germany stands for low public debt. Maybe people should get a hold of a chart of EU public debt before opening their mouths?

http://lightwater.files.wordpress.com/2010/02/chart-of-uk-debt.gif

Spain beats Germany. While Spain has a hell of a public deficit this year, it was having surpluses in the past (when Germany was having deficits ABOVE the growth pact limit). To the point that, as off today, Germany is still ahead of Spain.

Prejudice.

Debra said...

Thanks for setting us straight, Tiago.
You're right. There's still a lot of prejudice.
After all... think about where the Marshall Plan went, right ??
And... when will California be comin round the bend ??

Anonymous said...

repost from yesterday's blog...

Lord B…

I think what’s being lost (and what I stated above somewhere) is that this fixed income, debt and dollars aren’t being valued at a fixed moment. The value is finite base on time. The dollar exists now, the debt is paid tomorrow. That debt issued is infinite.

In zero sum… there has to be a winner and a loser. When you have bank 1 and bank 2 both on opposite side of a CDS bet, but yet you have both bank 1 and bank 2 holding and pledging that each of their CDS for more credit, you realize that you don’t have +1/-1.

They are both holding, collateralizing, and recycling that credit for more cash in the system. They both hold this as +1 / +1, (Net +2) when in actuality it is Net 0. …and this isn’t FRAUD!!! That’s the way it works. FASB 157A,B,C!!! …and there is nothing stopping this because that’s the “correct” way this is supposed to work. In chess, you don’t say, you can have my bishop, queen, and king, and the victory in exchange for your all your pieces in this same game tomorrow. Chess is fixed in length.

Financial voodoo.

So the worldwide pool of credit stands at $1,000,000. (now in actuality, all that credit is nothing. Fiat! Logically, people think of that fiat dollar in your pocket as an asset. It’s actually not. That dollar is just a Gov’t issue I.O.U. The most basic modern day asset… is actually debt!)

So now that $1mm pool of credit is just the modern version of price for the real tangible assets. Oil, food, shelter, etc… As those are consumed they need they deplete the $1mm pool. So growth has to outpace or maintain that $1mm pool. Our “assets” can’t depreciate either, or else they need to also be added to this net growth. …but in the modern world, supply and demand pricing, free markets decided that this was no longer good. Instead, securitization of this whole $1mm pool happened. …and fractional reserves of credit were now issued against all assets. No longer is just the deposit of cash/credit fiat… but the ownership of the whole $1mm pool became fiat.

…and Bank 1 and Bank 2 have helped make that pool now equal $2mm. Sure the pool is still the same size, but the value we assign it is more. Then the pool became $4mm because the banks decided to further securitize the out of thin air credit/debt that was associated with it. The pool being $1mm or $2mm is all relative. The securitization of the product from thin air in not! The actual size of the pool and the value of it still remains relative, but the fact remains that people perception of wealth remains.

If we call the market’s peak that $4mm moment, then when our “perceived wealth” was market to market through depreciation of ABS, (the #! product, through MBS, RMBS, CorpRe, etc..) we take that $4mm pool and bring it down to $3mm.

…but the world isn’t realizing that deflation. We’re filling the void with a fiat payment from tomorrow. No one is actually forced to absorb this fiat loss. …but everyone is consuming from that $1mm pool (that’s valued at who knows what now) based on the fact that they still have something like that $4mm. It becomes no longer relative because the market can no long correctly price the true hard asset as they depreciate, …and growth (which isn’t happening) no longer knows how to maintain or outpace the needed existing size of the pool. The pool is still whatever sustainable size it is. It’s collaterization, is relative to it s market price, say current value, $3mm (even with a $1mm created from parallel securitization of the fiat thin air debt mixed in) …but we spend like we have $4mm. That difference is pushed out in time. or printed when needed NOW.

In tragic irony, all those dollars created from thin air, stand under the guise of a Gov’t backed I.O.U. …but when in actuality we are carrying around “as an asset” this debt like it is something positive.

All the Best,
Miss America Rich Hartmann

Anonymous said...

In trying to simplify I went to my most hated source… Wiki! (Hate it) In hopes there was a clearer def I actually found a simple statement that I hope you find useful:
Economics
Many economic situations are not zero-sum, since valuable goods and services can be created, destroyed, or badly allocated, and any of these will create a net gain or loss. Assuming the counterparties are acting rationally, any commercial exchange is a non-zero-sum activity, because each party must consider the goods it is receiving as being at least fractionally more valuable than the goods it is delivering. Economic exchanges must benefit both parties enough above the zero-sum such that each party can overcome its transaction costs.

Like I said…
All the Best,
Miss America Rich Hartmann

p.s. Deb, no worries here, just having fun. Still value the smile more then the dollar. Regardless of my bondage, my disposition remains good despite the clarity that forces me to wear rose colored glasses. I just hope to share the knowledge of how unfortunately bonded reality and ponzi are. It’s sad it’s cliché.

@ Thai… I’m not looking to win. Nobody won. …a few years ago, everybody won. Now we have to pay the price of zero-sum. Now we all lose. How you choose to lose is also relative.

Anonymous said...

In trying to simplify I went to my most hated source… Wiki! (Hate it) In hopes there was a clearer def I actually found a simple statement that I hope you find useful:
Economics
Many economic situations are not zero-sum, since valuable goods and services can be created, destroyed, or badly allocated, and any of these will create a net gain or loss. Assuming the counterparties are acting rationally, any commercial exchange is a non-zero-sum activity, because each party must consider the goods it is receiving as being at least fractionally more valuable than the goods it is delivering. Economic exchanges must benefit both parties enough above the zero-sum such that each party can overcome its transaction costs.

Like I said…
All the Best,
Miss America Rich Hartmann

p.s. Deb, no worries here, just having fun. Still value the smile more then the dollar. Regardless of my bondage, my disposition remains good despite the clarity that forces me to wear rose colored glasses. I just hope to share the knowledge of how unfortunately bonded reality and ponzi are. It’s sad it’s cliché.

@ Thai… I’m not looking to win. Nobody won. …a few years ago, everybody won. Now we have to pay the price of zero-sum. Now we all lose. How you choose to lose is also relative.

Tiago said...

For people with a vague interest in reality I would recommend

http://www.zerohedge.com/article/willem-buiter-issues-his-most-dire-prediction-yet-sees-unprecedented-fiscal-crises-rampant-u

(William Buiter. All the text, but page 4 for a summary).

On the other hand, private debt would be an interesting discussion... And, I suppose a completely different game.

As with trade deficits (especially energy)...

Thai said...

Well well well, it seems the collective is not so collected after all!

Me thinks we should all beware of Greeks bearing gifts. ;-)

Hell, your love of monetary union is creating some rather interesting permutations in your kin boundaries and what you are willing to sacrifice in order to achieve it.

I might remind you that leadershi also means personal sacrifice...

Were your Greek compatriots so willing to assist their northern brethren prevent genocide in Kosovo? Or did religious solidarity lead them to accuse the rest of us as war criminals and when they were later forced to swallow their pride and actually get their hands dirty as peacekeepers, suddenly the dirt caused cancer to Greek physiology?

Sacrifice is always at so many levels

Using your "no more war" argument, why don't we let Africa in as well?

Debra said...

Greece STILL remains one of the cornerstones of our civilzation.
HOW MUCH IS THAT WORTH TO US ??
Even if the country looks nothing like what it looked like when Aeschylus wrote the Oresteia and poetically examined the relationship between the "old" religious forces and the "new" democratic ones. (The more things change, the more they stay the same.)
Even if the country bottomed itself out in an ecological catastrophe that it is still paying for now.
Thanks for your references, and your interesting comments, Rich. (Agree with you about Wiki, obviously...)
Your "idealism" is refreshing, Hell. Noble, in my book.

Anonymous said...

I live in Finland. Our government is going to give Greece some huge loan to cover their asses. This is extremely preposterous in my opinion.

Our glorious goverment obviously thinks that Greece is "too big to fail" and therefore they have no choice. They may also realize that Greece is not going to pay the loan back, but this is something they absolutely can't say in public.

However, it has become very clear on today's news that the people of Finland are not buying this bullshit and will not approve of this decision. Maybe we have still some hope despite our spineless and clueless leaders.

The european nations should help Greece only if the greeks immediately balance their budget. Like, yesterday. This would give everyone the proper signal about euro as a currency and EU as a political union. Hmm, but if EU is going to do this they would require some major support from Spain and Britain - just how likely is that?

Thai said...

Rich, buddy, I have been waiting for an example of where I can actually disagree with Wiki (or at least catch an error) so thanks for sharing.

Re: How can it possibly be that non-zero sum economics are still simultaneously zero-sum when we just said they are non-zero sum? E.g it doesn't make sense?

... Or does it????

I'll let you read about the wave/particle duality of

matter/energy yourself. I'll simply add that Hell knows darn well what I'm talking about. But let me add that you and
Lord Blagger can both simultaneously be correct.

If it is not zero-sum, then the conservation of energy is not true. If it is, then it is.

It simply matters how you define your boundaries and how you want to perceive things.

Think about it

PS- go back and re-read many of Hell's posts, he has been saying this since day 1.

Are we individuals? E.g the particle like nature of
matter/energy?

Are we a collective? E.g. the wave-like property of enervy/matter?

Are we both?

So I ask you, and it is simply a question of faith: "do you believe in the conservation of energy?"

Be well my friend

Anonymous said...

@ Thai... We are fiat.

My faith is in me alone. The rest is "hope".

I'm not saying I'm right and he's wrong. I'm saying... I'm right.

With zero sum, as you state, it comes to boundries. In the financial game, there are no boundries. Especially not when anything can be priced against an unknown future.

Up needs down to be "up". Good needs bad, to be "good".

In finance, the math has been "corrected" so that gain no longer needs "loss" to be a "gain".

I guess we'll have to agree and disagree. ...and my right won't need wrong, to be "right"

All the best,
MA - RH

Anonymous said...

"who's going to buy your products? Surely, not the chinese"

There is not much growth in the EU block.

And why wouldn't the chinese buy since the germans can really only offer high end products to begin with.

Anonymous said...

p.p.s. What I love (and hate) about the blog community is that I get such satisfaction and frustration at the same time. It’s such a Mind F.

Thai, yours and Debs waxing philosophical can sometimes stretch my brain too far. I’m decent with theory. My stronger points are abstract & logic. (it’s what help me with variable so few seem to see)

My true knowledge of history, science, arts, human nature, etc… are all severely lacking.
For these, I’ve created my own version of reality. So my “faith” is unfortunately abstract.
I am an individual, part of a collective no matter what, who does not conserve energy because energy is what I am. When my flesh has finished rotting and giving back… that is when I conserve energy.

Without getting too wacko here… and without going too philosophical which I am not good at, and have cooky versions of reality for… We were talking CDS.

And quite simply. Lord B said: CDS are zero sum.

In theory, and in every spindoctors playbook that’s the case!!!

I am here to tell you that is in fact 100% wrong. Zero sum leads you nowhere. It’s antiprogressive. It’s spinning wheels. …and our financial mechanism wouldn’t have wanted this. It was created with progress in mind.

My logic and abstract is strong here.

MA -RH

Greenie said...

So Germans need to bail everyone out, because they lived prudently, right Hell? Is that the best you finance people can come up with?

Anonymous said...

"The EU vision is a Europe free of continuous, ruinous wars..."

Lol...what nonsense. The real purpose of the EU was to ease the pain of German unification. Now thats accomplished, its time to ditch the bloodsuckers.

Debra said...

To that last Anonymous...
Careful of that terminal case of cynicism.
The real purpose of the EU WAS to preserve Europe from yet another World War. (And still is, by the way...)
A quick look at WW1, which left NO French family untouched, and presumably many other European families in a bad way, will show you just how vital it was for our grandfathers to put war on the back burner.
Nationalism induced war, of course...
Nationalism is a crucible for intolerance, which leads to war.
We've figured this out by now, I think.

Anonymous said...

I guess we should ask "is Greece too big to fail"? Personally, I believe LOSING Greece would be a bonus for the Euro. Then again, as long as this dance continues and the Euro weakens, exports increase as they become more competitive. this game is presently well to the bene fit of Germany for exports sake. I imagine they can play it a good long while at the expense of Greece.

Edwardo said...

Italians are no more charming (and certainly no more capable of leadership) than anyone else. Berlusconi anyone? Not me.

As for this:

"Greece STILL remains one of the cornerstones of our civilzation."

How so? I see them more as a pebble than a cornerstone despite the ruins-and that is the key word- of the Parthenon.

Debra said...

Aw, Edwardo, you really have NO IDEA just how important Plato STILL IS to how you think, right ?
It's not because 8 Americans out of 10 (and lots of French people too, while we're at it...) have no idea that Plato even existed that his thought doesn't continue to influence them.
So... I say... you make your choice.
You wanna be AS FREE AS POSSIBLE in the way you lead your life, you LEARN SOMETHING about where you come from.
No knowledge, no freedom.
Not for me.