Self-Righteous Germany Must Accept A Euro-Debt Union Or Leave Emu

[LiveAndLetBuy]

Sweeping generalisation it may be but its still essentially true.

Still its not surprising that someone who believes individuals should have the right to live off those more hardworking should extend the principle to the national level.

Any evidence for this?

Don't tell me ... you went to the Costa del Sol once and saw some Spanish people lying on the beach! Lazy no good spics, eh? Not like zee Germanz at all!

[madpenguin]

Talking to my German friends, if it did look likely that Germany split they say they would immediately try to get their money back in German banks just to get the increase from whatever currency would be adopted which would likely go through the roof in exchange rate terms (BBC's Stephanie Flanders reckons 20% increase), which presumably would not be good for their industries exports in the long term,

I think it was Der Spiegel that recently covered what would happen if Germany left the Euro and the conclusion was financial ruin.

[indirectapproach]

"The other false assumption is that devaluation cures a country's international competitiveness problems."

I don't think that's the point.

I think the point is the Latins have been devaluing for a very long time and despite that things seemed to bumble along a bit better than they are looking now.

And the Latins are not going to change centuries old, engrained behaviour patterns no matter how much the Jermans want them to or how much they think they want to themselves.

[alexw]

What a big pile of poo

The implication being that Germany relies solely on a weak euro for its international competitiveness

Germany doesn't even sell price elastic products.

The other false assumption is that devaluation cures a country's international competitiveness problems.

Devaluation doesn't cure anything - in fact it makes matters worse in the longer term by creating inflation.

The painful medicine that is being resisted: wage cuts; changes in working practices that boost productivity; higher levels of saving and investment (at the expense of consumption); and balanced budgets - Is what is needed to boost international competitiveness

Changing the exchange rate does not magic away a competitiveness problem in the long term.

However, the banksters prefer devaluation and inflation to falling asset prices and bank failures, hence the propoganda

No this is a big pile of poo.

Germany is highly dependant on having a euro which is much weaker than its economy reflects. What happens if germany leaves and its currency appreciates by 30%? Yes the precision engineered high value goods will still sell though some customers will opt for lower quality comparables, but the commodity chemicals, mass produced vw cars, mass produced electrical goods, etc, etc, will take a great big wopping hit. German industrials such as siemens have said so themselves -

http://www.spiegel.de/international/europe/0,1518,731798-4,00.html

[R K]

Of course they must!

[Arbitrage]

No this is a big pile of poo.

Germany is highly dependant on having a euro which is much weaker than its economy reflects. What happens if germany leaves and its currency appreciates by 30%? Yes the precision engineered high value goods will still sell though some customers will opt for lower quality comparables, but the commodity chemicals, mass produced vw cars, mass produced electrical goods, etc, etc, will take a great big wopping hit. German industrials such as siemens have said so themselves -

http://www.spiegel.de/international/europe/0,1518,731798-4,00.html

Wrong

Yeh, like when you buy something, you ALWAYS buy the cheapest don't you

Depreciating currencies create imported cost-push inflation, which quickly errodes nany price advantage created by a weaker currency

Do me a favour and learn somthing about Economics before you start posting. You should start by Googling the following:

1. The Marshall-Lerner condition

2. The J curve

3. The Ratchett effect

Edited December 20, 2010 by Arbitrage

[getdoon_weebobby]

germany will go for a fiscal union - euro bonds issued in frankfurt , greeks retiring at the same age as germans etc etc etc - before they go down the route of pulling the plug on the euro. the eurozone has a lot of short term problems in 2011. in the medium term it might actually make the eurozone closer if a fiscal union is adopted. in the long term , well all the fiat currencies will probably collapse at some stage in the long run.......

[alexw]

Wrong

Yeh, like when you buy something, you ALWAYS buy the cheapest don't you

Depreciating currencies create imported cost-push inflation, which quickly errodes nany price advantage created by a weaker currency

Do me a favour and learn somthing about Economics before you start posting. You should start by Googling the following:

1. The Marshall-Lerner condition

2. The J curve

3. The Ratchett effect

Again your posting rubbish. Collectively people do buy goods that are cheap. Why do you think china sells so much in the UK? Is it because of the high quality of their goods perhaps? No its all about cost.

And i know all about cost push inflation that you very much, but what your ignoring is that while input prices increase with a currency peg it becomes much much easier to manipulate salary levels to screw over your workers. i.e. the difference between input prices and output prices, the labour cost of your value added is decreased. This is why german workers havnt had an inflation+ pay increase for 20 odd years. The price advantage of a weaker currency has NOT been erroded, as you erroneously suggested.

Without a currency peg currencies automatically rise when a country increases its productivity/exports. Thus even if german wages had been held down to inflation, their currency would have increased in value to compensate making german wages 30%+ greater than currently. But of course that can't happen in a peg.

If the peg breaks, then german workers get their pay rises via currency appreciation. The follow on to that is that the cost of their goods will be much greater, and consumers will reevaluate the cost vs quality balance. Undoubtably significant numbers will choose an alternative.

[oracle]

Again your posting rubbish. Collectively people do buy goods that are cheap. Why do you think china sells so much in the UK? Is it because of the high quality of their goods perhaps? No its all about cost.

And i know all about cost push inflation that you very much, but what your ignoring is that while input prices increase with a currency peg it becomes much much easier to manipulate salary levels to screw over your workers. i.e. the difference between input prices and output prices, the labour cost of your value added is decreased. This is why german workers havnt had an inflation+ pay increase for 20 odd years. The price advantage of a weaker currency has NOT been erroded, as you erroneously suggested.

Without a currency peg currencies automatically rise when a country increases its productivity/exports. Thus even if german wages had been held down to inflation, their currency would have increased in value to compensate making german wages 30%+ greater than currently. But of course that can't happen in a peg.

If the peg breaks, then german workers get their pay rises via currency appreciation. The follow on to that is that the cost of their goods will be much greater, and consumers will reevaluate the cost vs quality balance. Undoubtably significant numbers will choose an alternative.

germany is still a high taxation/high regulation economy....and it doesn't fit with the anglo saxon style of governance.

we can still be good mates(or sibling rivals) and squabble over the football from time to time,but the fact remains true.

germany likes being regimented,british do not.....and even the french moan about it.

I think if germany does try to wear the trousers too much in the EU. it is going to meet its match in regimentation with a very very angry china....and there may not be too many on board the EU project if they push too hard.

Don't get me wrong,euro(and NATO) cooperaion on a closer scale is very much needed and actually a good thing,but there are 3 parties(US,UK and germany) that all need to stop squabbling and comprimise a bit,problem is none really wish to,because they see each other as a threat to total dominance(well I'd say that's more US v Germany,and will be for the duration...stil a few bad memories...even though the US pretty much got the baton of technology passed onto them from the reich)

[silver panda]

Any evidence for this?

Don't tell me ... you went to the Costa del Sol once and saw some Spanish people lying on the beach! Lazy no good spics, eh? Not like zee Germanz at all!

The evidence is in the economic statistics.

Its also available in your nearest shopping centre where the label 'Made in Germany' is a sign of quality.

[indirectapproach]

Pimco speaks, well their Bosomworth" does

"Whether now or later, there is no way around a euro bond."

(Last sentence of this article.)

http://www.spiegel.de/international/business/0,1518,735657,00.html

And the funny thing is Pimco is owned by Allianz SE, which is German, with its HQ at Munich.

Edited December 21, 2010 by indirectapproach