One of several major challenges that faces the Western nations, especially those within the EU, is the changing demographic. Western nations everywhere are aging, this combines adversely with the increasing number of foreigners, who are much less assimilated than those who come to the US. The tention results from fundemental cultural differences, but I see economics being the spark, as dwingling money is divided among the retired and those leaving off wealfare, including a disproportiane number of immigrats, or their unassimilated descendants.
According to this logic, as EU runs into financial trouble due to disparaties between consumption and exports of individual countries, we should expect to see less tolerance, including towards culturally segregated communities, such as the Banlieues in France, where neither the police nor ambulances dare to go.
Angela Mekel has said earlier this year that 'Multi-culti' (multiculturalism) has failed. Nicolas Sarcozy made a similar statement even earlier. Both of these leaders are (belatedly) stating the obvious.
The timing of this piece was motivated by the release of a 10-year long study study of prevaling attitudes in Germany and a recent shooting in Florence that both support my regrettable conclusion above.
Social scientist Wilhelm Heitmeyer has been publishing studies on German attitudes for a decade. In a SPIEGEL interview, he discusses his latest results, which show that says 'German society is poisioned''German society is poisioned': relationship of natives has become increasingly hostile to immigrants.
Heitmeyer says that status-based thinking is particularly widespread in utilitarian Germany.
An Italian gunman with fascist sympathies went on a Rampage in Florence on Tuesday, killing two African street vendors and wounding three others in broad day light before shooting himself dead. To make the racist, anti-immigrant nature of his hatred clear the gunman shot several Senegalese vendors in one town in an open-air market, got in his car drove to another town in Florence and shot several more Senegalese, before taking his own life.
Thursday, December 15, 2011
Wednesday, December 14, 2011
The shrinking EU core and PIIGS (US)
Bloomberg news recently commented on convergence of Netherlands and Germany. Curiously, Netherlands has almost three times as much trade (90 billion euro) with Germany than with France (32 billion euro).
A breakup of the euro bloc would cut exports of Dutch products by 25 percent next year, ING Groep NV (INGA) economists Teunis Brosens and Dimitry Fleming said in a Dec. 6 note to clients. “As a trading nation with large pension funds and an international financial sector, we’re closely tied to the euro zone” and may be the country with the biggest interest in maintaining the currency, they wrote.
The imports, exports and 2010 estimates, while populations are estimates from 2011, but the newborns will not seriously jeopardize this argument. I grouped PIIGS in red. Clearly, Irelands' fiscal difficulties are of temporary nature, while for Portugal and Greece problem are more fundamental. Of course, the per capita annual deficits do not show outstanding debt, which makes even Italy's relatively modest deficits unsustainable. Italy's bond rates about 7-7.5% while comparable German bonds are about 2-2.5%.
My initial purpose was to show similarity between Netherlands and Germany: they are both major net exporters, with a huge market in the EU. The net trade deficits in the rightmost column mean that net importers would need to subsidize their imports through debt, because allowing currencies to adjust to market conditions would make exports very expensive. What benefits the Northern Europe hurts the South, when they are tied by a common monetary policy. Not surprisingly the northerners would like to simply ignore this difficulty, or to overcome it by speaking about fiscal responsibility. There has been vast overspending by the politicians; however, there is a bigger fundamental issue.
The suicide pact is what happens when the desperate North and South try to band together for short-term gains despite the likelihood of long-term pain. The alternative proposed by the North: severe cuts in social services and government jobs, called 'austerity' to address accumulated deficits together with a cultural and economic revolution that puts the entire union on par with the core, such as Germany and the Netherlands.
The leaders in Brussels will be the last to admit the reality of differences between the North and South of Europe. Economically weaker nations are likely to be pushed off the new band-wagon, until the entire periphery (South) is stripped from the core (North). The pressure for this separation will be great. After this separation, the benefit of common currency will no longer benefit the Germans and the Dutch by making their exports more affordable in Greece and Portugal. I was very impressed by the 25% reduction in trade mentioned in the article above, because it appeared to contradict my point about the detrimental economic consequences of the euro. Following up on this revealed that the benefit occurs at someone else's expense. The win-lose is a fundamental characteristic of a common currency: it helps some and hurts others making the system unsustainable.
One last point, the PIIGs are us(US). Look at the plot of the per capita trade deficit (E-I)/capita in the table:
The numbers above reflect the amount of borrowing, per capita, in dollars. US is bleeding far more red ink that Italy, for example. Is US trying to replicate Greece? How do you explain US following down the same path, but expecting a different result - Insanity or Arrogance? Because it cannot be Ignorance.
Dutch Finance Minister Jan Kees de Jage said: "Trade between Germany and the Netherlands isn’t only extensive, it is enormous. It is flourishing today thanks to the internal market and the euro. If there are two EMU countries that should logically stand together, they are Germany and the Netherlands.”
A breakup of the euro bloc would cut exports of Dutch products by 25 percent next year, ING Groep NV (INGA) economists Teunis Brosens and Dimitry Fleming said in a Dec. 6 note to clients. “As a trading nation with large pension funds and an international financial sector, we’re closely tied to the euro zone” and may be the country with the biggest interest in maintaining the currency, they wrote.
Is this a counter-example of the badness of EU, which I describe as a suicide pact?
No, it supports that unfortunate thesis. I wanted to find out why Netherlands in particular stands to lose so much from breakup. Netherlands is the 6th largest exporter worldwide, and the 3rd in Europe, just a hair behind a much more populous France. I put together a little table from publically available data to illustrate what I'm always referring to in writing.
| Country | Exports (M) | Population (M) | Per capita | Imports (M) | Exp - Imp (M) | (E-I)/capita |
| Germany | 1337 | 81.729 | 16.4 | 1099 | 238 | 2.9 |
| Netherlands | 485.9 | 16.847 | 28.8 | 429 | 56.9 | 3.4 |
| France | 517.3 | 65.027 | 8 | 590.5 | -73.2 | -1.1 |
| Portugal | 46.27 | 10.561 | 4.4 | 68.22 | -21.95 | -2.1 |
| Italy | 448.4 | 60.706 | 7.4 | 473.1 | -24.7 | -0.4 |
| Ireland | 115.7 | 4.581 | 25.3 | 70.36 | 45.34 | 9.9 |
| Greece | 21.14 | 10.787 | 2 | 44.9 | -23.76 | -2.2 |
| China | 1506 | 1339.7 | 1.1 | 1327 | 179 | 0.1 |
| US | 1289 | 312.7 | 4.1 | 1936 | -647 | -2.1 |
| 2010 est. | 2011 est. | 2010 est. | 2011 est. |
The imports, exports and 2010 estimates, while populations are estimates from 2011, but the newborns will not seriously jeopardize this argument. I grouped PIIGS in red. Clearly, Irelands' fiscal difficulties are of temporary nature, while for Portugal and Greece problem are more fundamental. Of course, the per capita annual deficits do not show outstanding debt, which makes even Italy's relatively modest deficits unsustainable. Italy's bond rates about 7-7.5% while comparable German bonds are about 2-2.5%.
My initial purpose was to show similarity between Netherlands and Germany: they are both major net exporters, with a huge market in the EU. The net trade deficits in the rightmost column mean that net importers would need to subsidize their imports through debt, because allowing currencies to adjust to market conditions would make exports very expensive. What benefits the Northern Europe hurts the South, when they are tied by a common monetary policy. Not surprisingly the northerners would like to simply ignore this difficulty, or to overcome it by speaking about fiscal responsibility. There has been vast overspending by the politicians; however, there is a bigger fundamental issue.
The suicide pact is what happens when the desperate North and South try to band together for short-term gains despite the likelihood of long-term pain. The alternative proposed by the North: severe cuts in social services and government jobs, called 'austerity' to address accumulated deficits together with a cultural and economic revolution that puts the entire union on par with the core, such as Germany and the Netherlands.
The leaders in Brussels will be the last to admit the reality of differences between the North and South of Europe. Economically weaker nations are likely to be pushed off the new band-wagon, until the entire periphery (South) is stripped from the core (North). The pressure for this separation will be great. After this separation, the benefit of common currency will no longer benefit the Germans and the Dutch by making their exports more affordable in Greece and Portugal. I was very impressed by the 25% reduction in trade mentioned in the article above, because it appeared to contradict my point about the detrimental economic consequences of the euro. Following up on this revealed that the benefit occurs at someone else's expense. The win-lose is a fundamental characteristic of a common currency: it helps some and hurts others making the system unsustainable.
One last point, the PIIGs are us(US). Look at the plot of the per capita trade deficit (E-I)/capita in the table:
Democrats for Newt Gingrich
Still hoping for my blog to be properly indexed by Google, I came across an article on Tampa Bay website that echoes my blog about Gingrich's suitability for the VP, but not the presidency.
The author of the article described the potential nomination of Gingrich for the presidency by the GOP as a 'suicide pact':
"Democrats laugh, as if the GOP has lost its collective mind and entered a political suicide pact. The GOP establishment is having a conniption."
The same article quoted the former Florida congressman Joe Scarborough from last week on his Morning Joe when he said of Gingrich: "He will destroy our party. He will re-elect Barack Obama and we'll be ruined." I agree. What makes it difficult, is that I like Newt Gingrich a lot, but not for a GOP nominee in 2012. Liking Newt Gingrich is not inconsistent with rejecting him for the top of the GOP ticket - that's why I wrote the blog 'Center is the new Right' - to analyze and ultimately to reject emotional response to the coming decisive election.
The euro plunges faster than its support in EU
Below are comments from three analysts indicating the outlook for the Euro is totally negative:
That means only 1 in 8 Europeans on average are in favor of action to get out from under a falling brick. The rest, minus the totally ignorant ones (5%), are evenly split between being content with status quo despite the warning signs, and another half want to think about it. Do they seriously think the bureaucrats in Brussels are going to review the raison d'etre in an honest way, which may result in conclusion that ideas behind the euro are fundamentally flawed? That the experiment is in danger unless underlying agreements can be re-negotiated? The only answer they can produce is the solution of doubling down on all the initial bets, and hoping that the magic of public ceremonies of commitment to fiscal discipline will by themselves cure unrelated, fundamental problems resulting from trade imbalances?
It's a sad spectacle there, across the pond from the US, but for me realizing the motivations of the players makes it more of a farce than a tragedy. After all what can be a more reliable than bad consequence from continuous self-delusion?
“It’s hard to see a positive scenario for the euro,” said Kumiko Gervaise, an analyst in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest online currency margin-trading company.
"Absent any commitment from the European Central Bank to buy more sovereign debt, I think the outlook remains weak for the euro," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. "The euro is unlikely to rebound in a clear manner unless the European Central Bank lowers its interest rate further and takes quantitative easing measures," said Yuji Kameoka, managing director of the investment strategy and research department at Daiwa Securities Co.
Don Surber cites the following averages for the support of euro:
41% want are content the way things are
42% want ideas behind the euro reviewed
12 % want to get out immediately
5% don't know
That means only 1 in 8 Europeans on average are in favor of action to get out from under a falling brick. The rest, minus the totally ignorant ones (5%), are evenly split between being content with status quo despite the warning signs, and another half want to think about it. Do they seriously think the bureaucrats in Brussels are going to review the raison d'etre in an honest way, which may result in conclusion that ideas behind the euro are fundamentally flawed? That the experiment is in danger unless underlying agreements can be re-negotiated? The only answer they can produce is the solution of doubling down on all the initial bets, and hoping that the magic of public ceremonies of commitment to fiscal discipline will by themselves cure unrelated, fundamental problems resulting from trade imbalances?
It's a sad spectacle there, across the pond from the US, but for me realizing the motivations of the players makes it more of a farce than a tragedy. After all what can be a more reliable than bad consequence from continuous self-delusion?
British benefit from selfishness
The British are beginning to break with EU. The benefits of their leaving what is increasingly becoming a suicide pact should not be long in coming. Europe's financial future looks bleak. There British are explicitly modeling themselves after the independent Swiss, rather than partaking in the common problems of EU.
A suicide pact is like Jamestown at the end its road; you drink the poisoned cool-aid willingly, or you're helped to overcome the weakness. Attempts to leave the club at such a time are resented.
Below: Mercozy (Angela Merkel + Nicolas Sarkozy) were all smiles about their tighter union last week.
Leadership of a cult that has lost a member, directs full fury on the traitor, but also tightens the bonds that bind its remaining members. It both ways the response of EU to individualistic, selfish concerns of UK mirrors the attitude found in Jamestown, after several members escaped.
A suicide pact is like Jamestown at the end its road; you drink the poisoned cool-aid willingly, or you're helped to overcome the weakness. Attempts to leave the club at such a time are resented.
Predictably, many European commentators took out their frustration on David Cameroon, after he vetoed changes to EU regulations last week. As I mentioned in an earlier post, the British were seeking unique protections for the financial activities in London, and can be legitimately criticized for that, however, that's not the main issue take up by critics like the German magazine 'Der Spiegel' sugguests that Cameroon's decision would backfire at home and abroad.
Indeed, EU is moving to sideline and even to punish UK for its independence, and in UK there is strong polarization between Euro-philes and Euro-spectics/Euro-phobes. However, a poll taken in UK after the veto shows conservatives have benefited from standing up to EU, despite taking their stance over selfish financial reasons.
The prediction for domestic unpopularity resulting from Cameroon's distancing UK from EU appears to have been wishful thinking on the continent. What about the reality in EU? EU ratified a new union, based on stronger set of rules by 26 nations; everyone besides the UK.
Below: Mercozy (Angela Merkel + Nicolas Sarkozy) were all smiles about their tighter union last week.
'Der Spiegel' hurried to proclaim the formation of a 2-speed Europe, implying no doubt that the new, stronger union would move at a faster speed, and outdistance UK. The rest of the article seems to belie this hope; it admits political costs of the fracture, as well as the fact that additional regulations don't help the immediate problem - dramatic escalation of borrowing costs in the EU. There have already been wealth transfers to Ireland, Portugal and Greece that were never imagined by the Germans and the French when they ratified EU treaties. That's the point - the rules needed to be amended, on the fly. The initial rules, in fact, the union itself, were not very well thought out. Who has the confidence that European leaders came up with a sound resolution under this time pressure, one that will not backfire?
According to the reasoning that I've been laying out on this blog, the European Union is deeply, fundamentally flawed, and should be abandoned. The loss of face for the bureaucrats is one of the reasons preventing that from consideration until all other options are explored, including running the risk of a messy joint bankruptcy.
Leadership of a cult that has lost a member, directs full fury on the traitor, but also tightens the bonds that bind its remaining members. It both ways the response of EU to individualistic, selfish concerns of UK mirrors the attitude found in Jamestown, after several members escaped.
Not only is new regulation not dealing with the immediate underlying financial crisis, it seeks to resolve imbalances in trade between members of EU through the most unlikely method of expecting the Italians and Greeks to produce like the Germans, they present the newly-forged chains that bind the collective more tightly together as evidence of its impending success.
The markets appear to know better, than the delusional EU leaders, and the euro has plunged again today to multi-month lows.
Suicide Pact Blogs
I hoped that by this point searching Google, which hosts this blog for 'suicide pact blog' would bring up my blog. Maybe on page 20?
I came across a couple individual articles which lament some examples of a union can turn from a boon into a suicide pact:
Outpost-of-freedom article and the blog on the weekly standard.
I've tried doing basic promotion of this website on Dugg.com and other forums, but one can't over-do this. So, if you are familiar with promoting online content, such as this blog, I would appreciate your suggestions.
I came across a couple individual articles which lament some examples of a union can turn from a boon into a suicide pact:
Outpost-of-freedom article and the blog on the weekly standard.
I've tried doing basic promotion of this website on Dugg.com and other forums, but one can't over-do this. So, if you are familiar with promoting online content, such as this blog, I would appreciate your suggestions.
Tuesday, December 13, 2011
David Axelrod reveals his quality once again
At briefing for reporters, Axelrod said regarding Gingrich: "The higher a monkey climbs on the pole the more you can see his butt."
Read more: http://thepage.time.com/2011/12/13/axelrod-sets-sights-on-gingrich/#ixzz1gUcNnTOc
This reinforces several characteristics of my image of Axelrod: he is vulgar and hateful deep down, as well as a man who has bought into his own hubris. Axelrod is known for being 'on message', a political disciplinarian, but he should have held his tongue.
Can you imagine the outcry if somebody has said those exact words about Obama?!
No amount of evidence of Obama's failures or misrepresentations would suffice to choke off the liberal outcry of indignation. Reversing this criticism reveals the hypocrisy of Axelrod, who doesn't seem to realize he is casting stones from inside a glass house. The main-stream media is to blame; it has not challenged these double-standards.
Read more: http://thepage.time.com/2011/12/13/axelrod-sets-sights-on-gingrich/#ixzz1gUcNnTOc
This reinforces several characteristics of my image of Axelrod: he is vulgar and hateful deep down, as well as a man who has bought into his own hubris. Axelrod is known for being 'on message', a political disciplinarian, but he should have held his tongue.
Can you imagine the outcry if somebody has said those exact words about Obama?!
No amount of evidence of Obama's failures or misrepresentations would suffice to choke off the liberal outcry of indignation. Reversing this criticism reveals the hypocrisy of Axelrod, who doesn't seem to realize he is casting stones from inside a glass house. The main-stream media is to blame; it has not challenged these double-standards.
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