Germany’s Central Bank against the World of unlimited money printing

jens-weidmann-bundesbankGermany has, tacitly and automatically, already loaned € 547 Billions to Southern European countries.  Add to this the hundreds of Billions in bonds the European Central Bank already bought, in violation of their charter. Germany is responsible for 27% of all these. For more if other guarantors fail to pay. In addition to Germany being a net payer for the EC budget, year by year, to aid moneys to weaker countries. Plus German  guarantees for Greek and other bonds that probably will never be paid.back. 

    Most significantly for German public opinion, Weidmann’s message spoke about possible losses for the Eurosystem of member-country central banks caused by growing internal imbalances among European central banks generated by capital flight from southern EMU members. Weidmann’s letter, which found its way into the columns of the conservative Frankfurter Allgemeine Zeitung newspaper, appeared to suggest more secure collateralization for the overall ECB credits to weaker EMU central banks, which now amount to more than €800 billion under the ECB’s Target-2 electronic payment system.

    The latest Bundesbank figures show that the Bundesbank’s share of these credits rose from €498 billion to €547 billion in February, pointing to continued capital flight from the southern to the northern members of EMU. Weidmann reawakens debate on Bundesbank’s power

The German Bundesbank is owed  € 547 Billion in target claims the European Central Bank. This is € 13,000 Euro per employed German.

Our life insurance policies and savings accounts now are owed more than 13,000 € per German worker from open target claims against the other central banks in the euro zone. These demands can not be made due, get an interest rate below inflation, and will prove to be wholly or partially worthless, if the Euro breaks or if Euro countries go bankrupt. 2

Germany is still haunted by the memory of the hyperinflation of the 1920s. That's one reason why many Germans are so opposed to printing money to solve the euro crisis.The world blames Germany for attaching conditions to loaning or rather giving away money they legally should never give in the first place. The world wants Germany to bail out all of Europe, to give enormous guarantees that some day might become due as true financial liabilities for Germany. Risk Germany’s bankruptcy to bail out Europe.

Saving the Euro

Germany’s Central Bank against the World

Jens Weidmann, the new president of Germany’s Bundesbank, is strongly opposed to making the European Central Bank the lender of last resort in efforts to prop up the common currency. It’s a lonely fight, however, and the pressure from Germany’s European partners is intense. Some warn that Weidmann’s course could end up destroying the euro. By SPIEGEL Staff.

Hasn’t the Euro already been destroyed by insane spending and borrowing?  World wide, governments borrow money with no intent to ever pay it back. Rather they pay it with the next loan.

And then they are unable to afford the new loan because the interest increased. This is not unexpected, it has caused insolvency in Latin America 20 years ago.

Wait, there is more! This article continues! Continue reading “Germany’s Central Bank against the World of unlimited money printing” »
Germany’s Central Bank against the World of unlimited money … » continues here »

Share

No bailout! European differences in work ethic and culture can not be overcome by transfer union

Different work ethics and morals cause different monetary politics, and make Northern and Southern European economic policies incompatible. Transfer Unions between West and East Germany, Northern and Southern Italy have only wasted money. Bailout attempts will spread bankruptcy to healthy countries. Germany would be the last to fail under the debt of all of Europe. USA and Switzerland function perfectly with clear no-bailout policies towards their states and cities.

 

Greek-CrisisThe European Divide

In Northern Europe, culture, quite aside from the law, supplies a sin and guilt control mechanism. We have set rules for moral and ethical behaviour which we expect everyone to adhere to. The core value of a need to achieve is a stimulus for entrepreneurship and economic development. It is our psychological mainspring. Governments build their policies around this fundamental core value which affects the entire socio-cultural system. The Swedes ‘carry Luther on their shoulders’ and believe they need to do a good day’s work before they can partake in any reward – as do all the Nordic countries.  Success equals personal achievement, the drive to get things done, and accumulating capital to gain status and wealth.

In Southern Europe, shame tends to be the control mechanism, with one’s relationship to other people and to the group determining acceptable behaviour.  Ethics is more related to the situation and who is involved, so ‘rules’ as we perceive them are often ‘broken’. Style is everything; manliness (machismo) counts and should be displayed; dignity and honour must be maintained.  The Cultural Value of “The Public Man” is the desire to be someone rather than do something.Success equals social power; being someone personally important, being surrounded by people who look up to you and are dependent on you.

Just across the Channel and beyond, being who you are counts for more than what you have achieved; security comes not from individual effort but from reciprocal relationships which mould your expectations of lifestyle and your place in society.  Friendships are formal and a great amount of time is given to nurturing these.   Large, extended families, including distant blood relatives and close family friends, are the norm which have strong emotional ties, giving a powerful commitment to family rather than the rest of the world. Taxi drivers and hotel receptionists often try and impress upon us, the foreigner, how well connected they are to give themselves status.

In cultures like these, WORK per sé holds little value and is to be avoided if possible.Developing friends and connections is THE form of capital investment – not ‘personal development’ as we know it in the UK.  The genteel pursuit of leisure gives status – not the image of industriousness and efficiency as in the North.  3

Different Ethics, incompatible financial and economic attitudes

flags-germany-europe2The Southern European countries have a different pay and work ethic then Northern European countries. Southern Europeans strike more for wage increases, for lower work hours and earlier retirement. They use more borrowed money, like there is no tomorrow, for instant gratification.  Maybe it makes the Southerners  happier and more humane then the Northern European work animals. The northern countries have more self discipline, work ethic, self sacrifice.

Historically, before the Euro, the southern European currencies regularly suffered devaluations to re-instate an equilibrium.  Now putting these countries into one currency simply leads to Southern Europe having too high salaries, too high cost, and being too uncompetitive. These are not the countries where all citizens voluntarily lower salaries, and happily increase work hours and retirement age.

Spain Labor Market Incompatible With Euro

Well, reading thru Op-Ed pieces in the New York Times I came across a short piece by U Maryland economist Gayle Allard who explains a core problem with Spain’s economy as a member of the Euro: The country needs periodic bouts of inflation to undo the distortions caused by very powerful unions. This makes Spain’s entry into the euro zone an act of enormous political folly for all involved.

While it was doing its fiscal homework, however, Spain overlooked a key requirement for the currency area: staying competitive without a national exchange rate. Spanish labor costs chronically rise much faster than productivity.

Spain needs bouts of inflation as long as collective bargaining remains highly politicized. A country that needs periodic bouts of inflation should not share a currency with Germany. One doesn’t need to be a rocket scientist running complex computer models to figure that out.

No state and city bailout in USA and Switzerland. No major transfer Unions

Wait, there is more! This article continues! Continue reading “No bailout! European differences in work ethic and culture can not be overcome by transfer union” »
No bailout! European differences in work ethic and culture can not… » continues here »

Share

Trillions to save the Euro? World currencies, a house of cards!

The Euro, the common European currency, was bound to fail. One can not bind together nations with totally different economic system, with totally different citizen’s attitudes into one Union. While Germany kept fiscal discipline (well, relatively), German Unions and German workers kept moderation, while other countries took advantage of cheap credit and stable currency and incurred huge debts and huge salary increases like there is no tomorrow. The salaries in the crisis countries are much higher than, for example, in Germany. So underpaid German workers now will bail out the highly paid Greek workers, that have more vacation and retire earlier?

The bail out favors banks, who earn high risk premiums on interest, while the government assumes risk and buys bad credit. All this in violation of the EU no bailout clause. And giving financial incentive for risky behavior by banks.

Greece should have been allowed to go bankrupt. That is market economy. Let someone else buy the failed banks and continue running them. Let the bank managers be arrested for doing unsound business. The bank must not loan money that can not be repaid.

  • Additionally, every nation in the world, including Germany and the USA, have too high a debt.
  • And that a system based on compounded interest can not work in the long run ( 1 cent with 4% interest yield in 2000 years  $0.01 * 1.04^2000=  1.16594643150219980412675240849 e+32=  $ 1165946431502199804126752408490
One should start asking questions why countries can not be run without resorting to debt.

Human-Stupidity is just giving food for thoughts. We are just pointing to the stupidity that might ruin entire populations.

World currencies, country finances, world economy is seriously stupid, based on stupid belief, based on greed of banks, politicians, and yes, the normal citizen who wants his benefits now, on loaned money.

Countries should repay loaned money in times of strong economy. Not increase loans more and more. That is Keynesian economics.

Spiegel Online International: Top Economist on the Euro Crisis; ‘
The German Government Will Pay Up’, June 27, 2011

In a SPIEGEL interview, leading German economist Stefan Homburg argues that euro-zone members should not bail out Greece, discusses who is making a profit from the crisis and explains why he himself is buying Greek bonds. "I believe in the boundless stupidity of the German government," he says.

More related articles

 
All quotes from :
Spiegel Online International: Top Economist on the Euro Crisis; ‘The German Government Will Pay Up’, June 27, 2011

In a market economy, even in the case of a plumber whose customers don’t pay their bills, it’s never a question of getting creditors "involved" (in helping to deal with a bankruptcy). Instead, when push comes to shove, it is creditors, and creditors alone, who have to write off their loans. Only then do they have an incentive to carefully choose who they lend money to. A market economy with no personal liability cannot function. The government bailout initiatives create misdirected incentives that continuously exacerbate the problems on the financial markets.

Wait, there is more! This article continues! Continue reading “Trillions to save the Euro? World currencies, a house of cards!” »
Trillions to save the Euro? World currencies, a house of cards! » continues here »

Share