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Bundesbank warns of Coming Pension Crisis

The Bundesbank has come out warning that there is a German pension crisis. They have proposed that states raise the pension tax and that they should gradually increase the retirement age because the life expectancy in the future has risen. Central Bank President, Jens Weidmann, has stated that he is generally in favor of raising the statutory retirement age beyond 67 years.

We must understand that the ECB policy of “stimulating” the economy with negative interest rates has bankrupted state pension plans. This theory that lowering interest rates to get people to borrow and thus manipulate demand higher has NEVER been proven to have ever worked. The consequence of what we now face is a major pension crisis that is undermining the future of Western economies.

Hitler’s Economics

Hitler’s Economics

hitler.PNG

For today’s generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, recently praised Hitler’s economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.

The issue of the newsletter (July 2003) is not online, but the content can be discerned via the letter of protest from the Anti-Defamation League. “Regardless of the economic arguments” the letter said, “Hitler’s economic policies cannot be divorced from his great policies of virulent anti-Semitism, racism and genocide.… Analyzing his actions through any other lens severely misses the point.”

The same could be said about all forms of central planning. It is wrong to attempt to examine the economic policies of any leviathan state apart from the political violence that characterizes all central planning, whether in Germany, the Soviet Union, or the United States. The controversy highlights the ways in which the connection between violence and central planning is still not understood, not even by the ADL. The tendency of economists to admire Hitler’s economic program is a case in point.

In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that “Hitler found a cure against unemployment before Keynes was finished explaining it.”

What were those economic policies?

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – 29 Oct 2018

“We are not now that strength which in old days, moved earth and heaven, that which we are, we are;”

I’m up in Edinburgh for a few days, so Porridge might be a bit sporadic this week. Will try to keep it updated.

UK will be distracted by UK Budget. Loads of stuff in the papers – so I won’t bore you further…

Instead, I’m adding a new list to my list of Blain’s Market Mantras: “The deeper you delve into a problem you perceive to be the next crisis, the more certain you can be it will erupt somewhere else.”*

Politics are a major driver of market sentiment. As the US is front and centre of global growth, the market is fixated on the looming US mid-terms. This morning there are plenty of headlines about Germany.. concluding Merkel had a narrow escape in the Hesse elections. The CDU got a spanking, but it was the SDP that suffered the usual fate of Merkel’s coalition partners – a complete shoeing. Analysis and commentary seems somewhat relaxed about it.

I reckon there is more to come. Despite some reassuring post result comments from the SPD, the sustainability of the coalition in doubt as the CDU wakes up to the reality of Merkel past her sell-by date, and Europe heads into a very dangerous 2019.

I did joke earlier this month – who gets chopped first? May or Merkel?

I suspect the noise we heard from the East last night was the prelude to Merkel’s Gotterdamerung. A slow motion crisis as German politics unravels could prove a massive distraction for Europe. It’s certainly worth keeping a close eye upon.

…click on the above link to read the rest of the article…

Germany Admits it Needs More from Russia than Nordstream 2

Germany Admits it Needs More from Russia than Nordstream 2

During the years the U.S. and its satraps in Poland and the Baltics fought the Nordstream 2 pipeline it was always apparent Germany was in the driver’s seat.  It was also apparent that this would be the wedge issue that would ultimately force Germany to pursue independent policy from the U.S.

Nordstream 2 is and was always a reaction to the U.S.’s meddling in Europe’s energy policy which this cycle of began with the scuttling of the South Stream pipeline in 2013.

From the EU’s perspective changing the rules under which South Stream would operate after the contracts for it were signed was a way of gaining leverage over Russia and Gazprom.  So too was the help protesters in Kiev received to overthrow the Yanukovich government from the U.S. and the EU.

That operation was meant to put the Ukrainian pipelines under EU control where they could dictate terms to Gazprom and choke the profit out of its gas deliveries.  It would also advance NATO and the EU to Russia’s western border and there was to be nothing Putin could do to stop the U.S. from putting nukes targeting Moscow there.

Too bad for them it didn’t work out that way.

This is one of the reasons why the U.S. is so incensed with Russia and Putin over Ukraine.  It’s why his chickenhawks in his cabinet and John McCain pushed so hard for sanctions and weapons support to Ukraine before the dearly-departed Brain Tumor killed him.

Obviously, the other was being stymied in taking over Crimea and forever losing the opportunity to grab the port at Sevastopol.

So, why the history lesson?

…click on the above link to read the rest of the article…

“One Size Fits Germany” Math Impossibility, Get Your Money Out of Italy Now!

Italy, on the Euro, has a currency that is 9% too high. Germany, on the Euro, has a currency that is 11% too low.

There was much discussion yesterday about the US Treasury report that determined China was not a currency manipulator.

However, there are six countries on the manipulation watch list: China, Japan, Korea, India, Germany, and Switzerland.

  • Japan, Germany, and Korea have met two of the three criteria in every Report since the April 2016 Report having material current account surpluses combined with significant bilateral trade surpluses with the United States.
  • Germany has the world’s largest current account surplus in nominal dollar terms, $329 billion over the four quarters through June 2018, which represented its highest nominal level on record. Germany also maintains a sizable bilateral goods trade surplus with the United States, at $67 billion over the four quarters through June 2018. There has been essentially no progress in reducing either the massive current account surplus or the large bilateral trade imbalance with the United States in recent years, in part because domestic demand in Germany has not been sufficiently strong to facilitate external rebalancing and because Germany’s low inflation rate has contributed to a weak real effective exchange rate.

Try Fixing This

  1. The Euro is 11% undervalued in Germany, the largest Eurozone economy.
  2. The Euro is 9% overvalued in Italy, the third largest Eurozone economy.

The normal way central banks make adjustments to fix over-valued or undervalued situation is through interest rate policy or direct currency intervention.

No matter which the ECB does, it will impact Italy and Germany in opposite directions.

Meanwhile, interest rates are on the verge of spiraling out of control in Italy.

Italy vs Germany 10-Year Bond Spread

…click on the above link to read the rest of the article…

Germany Clashes With The U.S. Over Energy Geopolitics

Germany Clashes With The U.S. Over Energy Geopolitics

Nord Stream 2

The United States and the European Union (EU) are at odds over more than just the Iran nuclear deal – tensions surrounding energy policy have also become a flashpoint for the two global powerhouses.

In energy policy, the U.S. has been opposing the Gazprom-led and highly controversial Nord Stream 2 pipeline project, which will follow the existing Nord Stream natural gas pipeline between Russia and Germany via the Baltic Sea. EU institutions and some EU members such as Poland and Lithuania are also against it, but one of the leaders of the EU and the end-point of the planned project—Germany— supports Nord Stream 2 and sees the project as a private commercial venture that will help it to meet rising natural gas demand.

While the U.S. has been hinting this year that it could sanction the project and the companies involved in it—which include not only Gazprom but also major European firms Shell, Engie, OMV, Uniper, and Wintershall—Germany has just said that Washington shouldn’t interfere with Europe’s energy choices and policies.

“I don’t want European energy policy to be defined in Washington,” Germany’s Foreign Ministry State Secretary Andreas Michaelis said at a conference on trans-Atlantic ties in Berlin this week.

Germany has to consult with its European partners regarding the project, Michaelis said, and noted, as quoted by Reuters, that he was “certainly not willing to accept that Washington is deciding at the end of the day that we should not rely on Russian gas and that we should not complete this pipeline project.”

In July this year, U.S. President Donald Trump said at a meeting with NATO Secretary General Jens Stoltenberg that “Germany is a captive of Russia because they supply.”

…click on the above link to read the rest of the article…

Blain: “Liquidity Will Be The Murder Weapon”

“Slain, after all man’s devices had failed, by the humblest things that God, in his wisdom, has put upon this earth””

After last week’s stock market ructions, my market spidey senses are tingling… https://morningporridge.com/stuff-im-watching

In the headlights this morning:

  • Saudi Arabia: forget the IPO and worry about MbS threating an oil war if the West doesn’t let him murder whomever he doesn’t like. $100 by year end?
  • Brexit: The next millennium bug? Very good interview on Andrew Marr show with head of Next outlined a no-deal will be less than optimal, but it won’t be a disaster. Lets get on with it.
  • Germany: Merkel’s affiliate party takes a pasting in Bavaria. Who is out a job first? Merkel or May?
  • Trumpland: It’s the Fed’s fault. “I know more about markets than anyone else..” Blahbity blah blah blah.. That man never ceases to amuse us.

Thought for the day: “It’s always about politics..”

Market Psychology

I’ve never met a stupid chief investment officer*, but market moves never cease to bemuse me. Market perceptions seldom reflect economic reality. The “group-think” that is the market’s collective mind doesn’t have the time to ponder the deeper implications of news and events – it spontaneously reacts to headlines. The group psychology of markets swings from profoundly fearful to over-exuberant in a heartbeat.

At the moment the mood remains profoundly negative – reflecting very scared traders. The stock market’s crash, the news flow, the IMF and others predicting a slowing global economy, Italy vs Brussels, Brexit – and its doom’n’gloom all round. A few bright spots of news, like Brazil, aren’t improving sentiment. The market believed we were doomed on Thursday and saved by Friday. This morning the coin flip says: “we’re all dead by Wednesday.” Risk-off then?

…click on the above link to read the rest of the article…

The World Is Quietly Decoupling From the U.S. – And No One Is Paying Attention

 

Blind faith in the U.S. dollar is perhaps one of the most crippling disabilities economists have in gauging our economic future. Historically speaking, fiat currencies are essentially animals with very short lives, and world reserve currencies are even more prone to an early death. But, for some reason, the notion that the dollar is vulnerable at all to the same fate is deemed ridiculous by the mainstream.

This delusion has also recently bled into parts of the alternative economic movement, with some analysts hoping that the Trump Administration will somehow reverse several decades of central bank sabotage in only four to eight years. However, this thinking requires a person to completely ignore the prevailing trend.

Years before there was ever an inkling of a trade war, multiple nations were establishing bilateral agreements that would cut the dollar out of trade. China has been a leader in this effort, despite it being one of the largest buyers of U.S. Treasury debt and dollar reserves since the 2008 crash. In the past few years, these bilateral deals have been growing in scope, starting small and then expanding into massive agreements on raw commodities. China and Russia are a perfect example of the de-dollarization trend, with the two nations forming a trade alliance on natural gas as far back as 2014. That agreement, which is expected to start boosting imports to China this year, removes the need for dollars as a reserve mechanism for international purchases.

Russia and parts of Europe, including Germany, are also growing closer in terms of trade ties. With Germany and Russia entering into the Nordstream 2 gas pipeline deal despite condemnations from the Trump Administration, we can see a clear progression of nations moving away from the U.S. and the dollar, and into a “basket of currencies”.

…click on the above link to read the rest of the article…

US Hints At Naval Blockade Of Russian Energy Exports Which Moscow Warns Would Be “An Act Of War”

In a interview about fracking and the implications of making the United States less dependent on foreign sources of energy, Interior Secretary Ryan Zinke told the Washington Examiner that the US Navy has the ability to blockade Russia from controlling energy supplies in the Middle East.

“The United States has that ability, with our Navy, to make sure the sea lanes are open, and, if necessary, to blockade… to make sure that their energy does not go to market,” Zinke said on Friday at a Consumer Energy Alliance event in Pittsburg.

The comments came as Russia, Germany and other European partners move forward on the Nord Stream II pipeline — something President Trump has vehemently opposed because of the leverage it gives Russia over Europe, and something which US officials have discussed sanctions over if Russia decides to play dirty with the pipeline.

Interior Secretary Ryan Zinke speaking at an industry event on Friday. Image source: State Impact Pennsylvania

Zinke continued, “Russia is a one trick pony,” and explained Russia’s ability to sell energy is paramount to its economic survival: “I believe the reason they are in the Middle East is they want to broker energy just like they do in eastern Europe, the southern belly of Europe,” he said.

While Russia has been engaged in military action in Syria since 2015 at the request of the Syrian government, the West has long accused Moscow of seeking a permanent presence in the Middle East to ensure oil and gas access.

In the process, Moscow and Tehran have grown closer as the two come under aggressive US sanctions and gained international pariah status. Secretary of the Interior Zinke explained of the Iran situation: “National security-wise, how are you going to deal with Iran?” Zinke asked. “Well, there are two ways.”

…click on the above link to read the rest of the article…

New WikiLeaks Release Exposes Corruption in UAE Arms Deal Fueling War on Yemen

New WikiLeaks Release Exposes Corruption in UAE Arms Deal Fueling War on Yemen

Though the corruption detailed in the newly leaked document took place decades ago, it highlights how lucrative arms deals are often enough incentive for governments to bend the rules in order to keep weapons and cash flowing, no matter the consequences.

Macron Says “France Won’t Deal with Countries that Don’t Respect Climate Accord”

French President Emmanuel gave a blistering speech at the UN pointed at Trump. I suggest Macron should look at Germany.

Hoot of the Day

French president Emmanuel Macron is calling on other countries to join him in refusing to sign new deals with ‘powers that do not respect’ the Paris Accord

Emmanuel Macron has announced France will no longer accept “commercial agreements” with countries that do not “respect” the Paris Climate Accord during a fiery speech at the United Nations General Assembly.

The French president called for the upholding of trade rules that “guarantee fair competition on equal footing” during his Tuesday speech, following a Monday afternoon meeting with Donald Trump and the US president’s speech on Monday morning. Mr Macron appeared defiant towards Mr Trump, suggesting he’d no longer negotiate trade deals with the US after its withdrawal from the climate agreement last year.

“We will no longer sign commercial agreements with powers that do not respect the Paris accord,” Mr Macron said without directly referencing Mr Trump or the US.

What a Hoot

I suggest France start with Germany.

German Parties Agree to Drop 2020 Climate Goal

Angela Merkel’s conservatives and the center-left Social Democrats (SPD) agreed during preliminary coalition talks to give up the country’s climate goal for 2020, according to media reports.

The two blocs decided that reaching the goal — to cut carbon dioxide emissions by 40 percent from 1990 levels by 2020 — is unrealistic.

Germany Fails Paris Climate Accord Test

…click on the above link to read the rest of the article…

Europe Unveils “Special Purpose Vehicle” To Bypass SWIFT, Jeopardizing Dollar’s Reserve Status

In a stunning vote of “no confidence” in the US monopoly over global payment infrastructure, one month ago Germany’s foreign minister Heiko Maas called for the creation of a new payments system independent of the US that would allow Brussels to be independent in its financial operations from Washington and as a means of rescuing the nuclear deal between Iran and the west.

Writing in the German daily Handelsblatt, Maas said “Europe should not allow the US to act over our heads and at our expense. For that reason it’s essential that we strengthen European autonomy by establishing payment channels that are independent of the US, creating a European Monetary Fund and building up an independent Swift system,” he wrote.

Maas said it was vital for Europe to stick with the Iran deal. “Every day the agreement continues to exist is better than the highly explosive crisis that otherwise threatens the Middle East,” he said, with the unspoken message was even clearer: Europe no longer wants to be a vassal state to US monopoly over global payments, and will now aggressively pursue its own “SWIFT” network that is not subservient to Washington’s every whim.

Many discounted the proposal as being far too aggressive: after all, a direct assault on SWIFT, and Washington, would be seen by the rest of the world as clear mutiny against a US-dominated global regime, and could potentially spark a crisis of confidence in the reserve status of the dollar, resulting in unpredictable, and dire, consequences.

However, despite the diplomatic consequences, Europe was intent on creating some loophole to the US ability to weaponize the global currency of account at will, something observed most recently as part of Trump’s latest sanctions on Iran, and as a result, late on Monday, the European Union said that it would establish a special payment channel to allow European and other companies to legally continue financial transactions with Iran while avoiding exposure to U.S. sanctions.

…click on the above link to read the rest of the article…

Why We’re Ungovernable, Part 15: Germany’s Merkel Demoted To Figurehead

Why We’re Ungovernable, Part 15: Germany’s Merkel Demoted To Figurehead

You don’t see “Germany” and “ungovernable” in the same headline very often. But that might be about to change, as Chancellor Angela Merkel, for the past decade the central pillar of Europe’s Establishment, loses influence both at home and abroad.

First came a wave of populist (read anti-euro, anti-austerity, anti-immigration) gains across Europe, culminating with an actual victory in Italy’s most recent election. Then came the rise of Germany’s own populist movement, Alternative for Germany, or AfD, which has become a legitimate power in some parts of the country.

And now Mekel has apparently lost control of her cabinet. From yesterday’s New York Times:

As the Far Right Gains in Germany, Merkel Weakens

BERLIN — For nearly two weeks Chancellor Angela Merkel tried to find a way to fire her own domestic intelligence chief, a man who had publicly contradicted her and become the darling of the far right for questioning the authenticity of a video showing angry white men chasing an immigrant.

But she couldn’t — not without risking the collapse of her fragile government.

Hans-Georg Maassen, the rebellious spy, has powerful friends, among them his immediate boss, Interior Minister Horst Seehofer, the leader of the Bavarian conservatives and one of Ms. Merkel’s pricklier coalition partners.

Instead of firing Mr. Maassen, Ms. Merkel had to allow Mr. Seehofer to promote him. Mr. Maassen will get a pay raise of about 2,500 euros a month.

“You couldn’t make it up,” said Andrea Römmele, a professor of political science at the Hertie School of Governance in Berlin.

If the episode shows anything, analysts said in the aftermath, it is that Ms. Merkel is growing more feeble even as the far right — in Parliament, online and on the streets — is getting stronger.

…click on the above link to read the rest of the article…

9/11 In Context

9/11 In Context

Only with context can we gain insight and perspective into the horrible, barbaric 9/11 attack.

Presidents, Prime Ministers, Congressmen, Generals, Spooks, Soldiers and Police ADMIT to False Flag Terror

Scores of government officials throughout the world have admitted (either orally, in writing, or through photographs or videos) to carrying out – or seriously proposing – false flag attacks:

(1) Japanese troops set off a small explosion on a train track in 1931, and falsely blamed it on China in order to justify an invasion of Manchuria. This is known as the “Mukden Incident” or the “Manchurian Incident”. The Tokyo International Military Tribunal found: “Several of the participators in the plan, including Hashimoto [a high-ranking Japanese army officer], have on various occasions admitted their part in the plot and have stated that the object of the ‘Incident’ was to afford an excuse for the occupation of Manchuria by the Kwantung Army ….” And see this, this and this.

(2) A major with the Nazi SS admitted at the Nuremberg trials that – under orders from the chief of the Gestapo – he and some other Nazi operatives faked several attacks on their own people and resources which they blamed on the Poles, to justify the invasion of Poland. The staged attacks included:

  • The German radio station at Gleiwitz [details below]
  • The strategic railway at Jabłonków Pass, located on the border between Poland and Czechoslovakia
  • The German customs station at Hochlinden
  • The forest service station in Pitschen
  • The communications station at Neubersteich
  • The railroad station in Alt-Eiche
  • A woman and her companion in Katowice

The details of the Gleiwitz radio station incident include:

On the night of 31 August 1939, a small group of German operatives dressed in Polish uniforms and led by Naujocks seized the Gleiwitz station and broadcast a short anti-German message in Polish (sources vary on the content of the message). The Germans’ goal was to make the attack and the broadcast look like the work of anti-German Polish saboteurs.

…click on the above link to read the rest of the article…

Is Germany Moving SWIFT-ly To CIPS?

Is Germany Moving SWIFT-ly To CIPS?

We have detailed how Russia and China have developed independent global payment systems that run parallel to the dollar based SWIFT system. We recently discussed how sanctions against Russia were actually “crushing the American empire“. The dollar based system is now obsolete and the entire world is questioning why the current system is the only way to conduct global trade. Well, it’s not.

The Federal Reserve Note (FRN), U.S. dollar is under attack in a variety of ways. We have been documenting the astronomical growth of the yuan backed futures oil contract and how this is going to impact the FRN and the American economy. We have also pointed out that Russia has dumped approximately 82% of their entire U.S. treasuries and Turkey recently announced they will be offloading approximately 50% of their treasury holdings.

At the most recent BRICS Summit, held in July, one of biggest take-aways was the fact the BRICS alliance was in talks with Turkey and the possibility of Turkey, which is a NATO “partner”, could join BRICS! This is to say nothing of China, which heads the BRICS alliance, is also in talks with Argentina and Venezuela.

Now we learn that Germany is on board with moving away from SWIFT and the “trade wars”, sanctions against Russia and President Trump forcing NATO “partners” to pay up. President Trump’s actions have pushed Germany away from their alliance with the U.S.. The German / Russian partnership is very important to the overall German economy and Trump’s recent demand that Germany stop doing oil business with Russia seems to have pushed them over the edge. There may be more at play here, but most all geopolitical issues in the 21st century boil down to oil, oil production and how to get the cheapest oil possible.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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