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Yesterday evening Spiegel Online posted a quite balanced article about the current monetary discussion at the ECB.

But it used one of my favored switch and bait tactics: Now that the situation is going radically down hill, ECB action will probably change nothing (which is most likely true, we need fiscal action). Ergo: Why do anything!

by rz on Thu Jun 5th, 2014 at 03:37:15 AM EST
For Gods sake:

Erstmals könnte ab diesem Donnerstag ein Minus vor einem EZB-Zinssatz stehen - ein sichtbares Symbol für die Krise des Kapitalismus. Wer Geld sicher anlegen will, wird nicht mehr belohnt, sondern bestraft.
by rz on Thu Jun 5th, 2014 at 04:05:49 AM EST
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This is from the currently Leading article on Spiegel online titled " Das Ende des Kapitalismus, wie wir ihn kennen".
by rz on Thu Jun 5th, 2014 at 04:06:46 AM EST
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From Wolfgang Münchau on Eurointelligence:
In Germany, opposition to today's expected rate cut is running high. Spiegel Online is announcing "the end of capitalism as we know it". Germany's savings banks association warns that the low returns would force German banks to invest in riskier securities (and we all know where that ends. This statement is the equivalent of: "Hands up, or I shoot myself!").


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 04:36:38 AM EST
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At least at "Die Zeit" there is a reasonable article:


Deutsche Sparer fühlen sich um ihre Zinsen betrogen. Aber ist dafür tatsächlich EZB-Präsident Mario Draghi verantwortlich? Die Geschichte einer Zinslüge
by rz on Thu Jun 5th, 2014 at 04:33:48 AM EST
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Die Zeit: Das Geld tut nix (5 June 2014)
Sie beginnt in München, bei BMW. Der Autobauer hat im vergangenen Jahr kräftig investiert: in neue Maschinen für die Produktionsstätten in Leipzig und Landshut etwa, in ein Motorenwerk in China. Weltweit hat der Konzern fast sieben Milliarden Euro ausgegeben, fast 20 Prozent mehr als im Vorjahr. Die Geschäfte gehen gut, neue Modelle gelangen auf den Markt. Trotzdem kommt BMW praktisch ohne neue Kredite aus, das Unternehmen finanziert die Investitionen weitgehend aus eigener Kraft.

Die meisten deutschen Unternehmen geben deutlich weniger aus, als sie einnehmen. Im Jahr 2012 belief sich der Überschuss des Unternehmenssektors nach Angaben der Bundesbank auf 13,2 Milliarden Euro. Ganz ähnlich ist die Lage in den anderen großen Industrieländern. In den USA etwa haben Technologiegiganten wie Microsoft oder Google riesige Barreserven angehäuft. Allein Apple kann Schätzungen zufolge über rund 150 Milliarden Dollar verfügen - das entspricht in etwa dem jährlichen deutschen Sozialetat. "Die Unternehmen sitzen auf Bergen von Geld", sagt David Milleker, Chefvolkswirt der Frankfurter Fondsgesellschaft Union Investment.

Für die Sparer ist das keine gute Nachricht. Denn in normalen Zeiten leben Privathaushalte und Unternehmen in einer Art symbiotischen Beziehung. Die Haushalte geben weniger aus, als sie einnehmen, und deponieren ihr überschüssiges Geld bei der Bank. Die Unternehmen leihen es sich aus, um Maschinen anzuschaffen oder neue Produkte zu entwickeln. Aus den Erträgen bezahlen sie den Kredit mit Zinsen zurück.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 05:30:52 AM EST
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The article is by Mark Schieritz, who is one of the exceptions in the German media. He is the author of a quite good antidote to inflation fears. The book contains nothing that would surprise one of us, but one can recommend it (or give as a birthday present) to people who believe in the danger of inflation. It is easy to understand for non-economists.
by Katrin on Thu Jun 5th, 2014 at 06:11:33 AM EST
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It's a very good article on the role of investment in determining growth and inflation.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 06:43:06 AM EST
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Yes. Schieritz's articles usually are good.
by Katrin on Thu Jun 5th, 2014 at 07:17:10 AM EST
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rz: "we need fiscal action" ...but, but...good German common sense tells people that the last thing they should do is spend money in such a crisis. And, of course, Keynes was wrong. The only fallacy of composition was in his mind.</snark>  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jun 5th, 2014 at 09:23:07 AM EST
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the clt of the balanced budget is second only to the cult of the low inflation.
by IM on Thu Jun 5th, 2014 at 10:18:30 AM EST
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The cult of balanced budgets is strong. But not insurmountable. But if there is fiscal action it is probably going to be rather small.
by rz on Fri Jun 6th, 2014 at 03:37:14 AM EST
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I support balanced budgets. The only problem is that we seem to insist that our modern industrial society should balance its budget according to the pace set by the old pre-industrial agricultural economy, that is, over the course of the growing year. For obvious reasons, balancing the annual budget makes perfect sense when your output is basically entirely agricultural, and your consumption almost entirely is food.

It makes less sense when agriculture constitutes 1 percent of our national economies. Modern firms report results to their owners every quarter. Why not balance the state budget every quarter as well? Why not indeed balance it every month, or every week? Why not every day, every hour or every minute?

If you've managed to get this far when discussing this issue with a friend or co-worker, the absurdity of arbitrarily focusing on balancing the annual budget should be patently clear to all involved.

So what's the alternative? Well, the modern equivalent of the old growing year is the business cycle. Hence, the state budget should balance over the business cycle. Clear as crystal, right?

If your friend seems to be of the clever kind, you can add that actually, you don't really need to balance the budget at all. Indeed, you can run a permanent fiscal deficit, as long as the national debt is not growing at a faster pace than the economy is. As long as that is the case, the size of the national debt as a fraction of GDP will stabilize, despite the budget being in permanent deficit.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Jun 24th, 2014 at 11:06:12 PM EST
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And actually, changing portfolio preferences (e.g. as a result of an aging population shifting its portfolio increasingly into sovereign bonds) means that the correct level of sovereign debt is not even constant after you smooth out the business cycle.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jun 25th, 2014 at 03:35:18 AM EST
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One of the great tragedies of our time is the fact that in the media the correct response to the aging Population is lower levels of debt. When in fact it should be the other way round.
by rz on Tue Jul 1st, 2014 at 08:47:50 AM EST
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For obvious reasons, balancing the annual budget makes perfect sense when your output is basically entirely agricultural, and your consumption almost entirely is food.
You should still use fiscal policy to balance out years of good and bad crops, so the balanced budget is a myth even fot the agricultural economy.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Jul 1st, 2014 at 09:24:13 AM EST
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Well, I was thinking of a very simplified model where the surplus of the summer months (the "boom") is saved to "finance" the "deficits" of the winter "bust".

It's not a perfect analogy, but it is first and foremost meant to be pedagogic and super-simple.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Jul 7th, 2014 at 02:22:16 PM EST
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