The Gap between the economies of Greece and Germany has widened by 10% in 2011. Currency union anyone?

Yesterday gave us a new development in the ongoing farce which of course is also a tragedy that is the Euro zones so-called rescue of Greece. In the early afternoon we had Commissioner Rehn telling us this.

To my knowledge there is a eurogroup meeting tomorrow, to my mind it is essential that we have this meeting

The very same meeting which ended up being cancelled and may even have been cancelled before he spoke! The Greek Prime Minister was caught out in a similar embarrassing position suggesting he would be in Brussels tomorrow at the Euro-Group meeting although  in these desperate times Greece does now save the airfare unless he bought the wrong ticket.

The problem with such delays is that Greece has a government bond maturing on March 20th and if a deal is to be struck to allow this to be paid time is getting short. Whilst time is passing there appears to be no progress at all on a new bail out package and even less on the debt haircut or private-sector involvement deal.

The impact of this a bond yield of 560%

Looking back in time on this blog I can see that not so long ago it seemed remarkable that the Greek one-year government bond yield passed 100%. Actually there was concrete reasons for thinking that as such a relatively short-term bond has the backing of not only the Greek government but the European Commission, the European Central Bank and the International Monetary Fund. However over time we have passed 200%,300%,400% and more recently 500% and hit a new peak this morning of 560%. The situation is extraordinarily volatile and quotes of 537% and 507% have also been seen. Frankly this sort of thing is not far off a complete breakdown.

Added to this we see a two year yield that has risen to 208%. In the disarray a question arises in my mind.

Where is the European Central Bank?

If we look at the definition of the Securities Markets Programme on the ECB website we see this.

Interventions by the Eurosystem in public and private debt securities markets in the euro area to ensure depth and liquidity in those market segments that are dysfunctional.

Now we see a Greek government bond market that is plainly dysfunctional (can 500%+ yields be anything else?) and has no depth and liquidity. So where is the ECB? It is hoist by its own petard here in my view.

If the ECB had any faith in what was going on it could be buying what Euro zone rhetoric tells us are very cheap bonds. It could also do quite a lot of averaging of its position as it was happy to buy some of these bonds at 90,80,70 and so on but is apparently less happy at 20 and 30. It could of course buy the bond which expires on March 20th and if investors were willing to sell it might solve an upcoming train crash and by solve I am using the Euro zone definition which is anything that buys time! There is enormous moral hazard in such a move but it is not me and such moral hazards do not seem to bother it like they do me.

The fundamental Euro problem

Data over the past twenty-fours hours has highlighted the scope of the problem which is tearing the Euro zone apart and on the theme of the day let us look at the major factor that has driven German and Greek one-year bond yields some 560% apart.

German economic growth

If we look below the headline of a 0.2% contraction in the German economy in the last quarter of 2011 we see this.

As further reported by the Federal Statistical Office (Destatis), the German economy grew by 3.0% (in calendar-adjusted terms: 3.1%) over the entire year of 2011. This is in line with the first calculation of January this year. 

I added the second sentence as it added a rather Germanic theme and perhaps stereotype. But as we look we see more of interest I think.

When compared with a year earlier, the gross domestic product also rose in the fourth quarter of 2011: the price-adjusted GDP was 1.5% higher than in the fourth quarter of 2010.

If we use 2005 as 100 then seasonally adjusted German economic output was running at 109.77 in the last quarter of 2011.

Tucked away in the numbers was another sign of German economic strength in 2011.

The economic performance in the fourth quarter of 2011 was achieved by 41.6 million persons in employment, which was an increase of 560,000 persons or 1.4% on a year earlier. 

Price Movements

On the German statistics website there is an interesting graph of the biggest price moves in 2011 and what caught my eye was that foodstuffs were on both sides of the coin. So it was a bad year for those who like coffee with sugar and use flour but a good year for those using leeks,onions and cauliflower. A reminder of the theme which was one which I opened this blog with which was what is a price these days? And a reminder that behind headline inflation there are many relative price moves.


Here we received a very different picture from her statistics office.

Available non-seasonally-adjusted data indicate that, in the 4 th quarter of 2011, the Gross Domestic Product (GDP) at constant prices  of year 2005 decreased by 7.0% in comparison with the 4th quarter of 2010.

Unfortunately the Greek statistics office is unable to provide us with seasonally adjusted numbers at this time so the numbers are not exact comparisons. However the gap in performance is enormous and is reinforced by this. Also if we look at the first quarter of 2005 we see that Greek economic output in the first quarter was 44.7 billion Euros and in the last quarter of 2011 it was 44.2 billion Euros at 2005 prices. And that is worse than it looks as the last quarter of the year has tended to be much stronger than the first looking at the data. On that basis I fear for the first quarter of 2012.

As for employment I cannot give you full year figures as Greece has not published them yet but here are the ones up to the end of November.

The number of employed decreased by 405,785 persons compared with November 2010 (a 9.4% rate of decrease) and by 164,506 persons compared with October 2011


By looking at relative economic performance in 2011 we see the underlying force which is tearing the Euro apart. The German economic locomotive has powered ahead again and increased employment whilst Greece has plunged into an economic depression and has seen employment shrink. Actually this is much worse than such a comparison indicates because Greece has a much smaller population which I would imagine is shrinking itself due to net migration.

The European Commission published a report yesterday which begins to get the idea.

Large and persistent macroeconomic imbalances – reflected in large and persistent external deficits and surpluses, sustained losses in competitiveness, the build up of indebtedness and housing market bubbles – accumulated over the past decade and were part of the root causes of the current economic crisis.

As ever it proposes a very bureaucratic solution which ignores that fact that its bureaucratic “solutions” have all failed so far.

In fact there are two choices now. For Greece or indeed Germany to leave the Euro or for regional policy to be deployed on a hitherto unprecedented scale to help Greece reform and modernise her economy. I suggested that it was better for Greece to leave the Euro on Monday because I see no evidence at all that the Euro zone is willing to provide help on the scale needed. Even if they were considering it I give a sobering thought below.

Portugal is next

I have written several articles recently given evidence as to why I think that Portugal is a Greece waiting to happen. Her latest economic growth figures give further reinforcement to this argument.

The Portuguese Gross Domestic Product (GDP) registered a year-on-year change rate of -2.7% in volume in the 4 th quarter 2011 (-1.8% in the previous quarter), accordingly with the flash estimate of the Quarterly National Accounts.

And it is getting worse

Comparing with the previous quarter, the Portuguese GDP diminished 1.3%.The more intense year-on-year GDP reduction in the 4th quarter 2011 reflected a significant decline in the negative contribution of Domestic Demand,

The last five quarter on quarter growth figures for the Portuguese economy have gone as follows -0.4%, -0.6%,-0.2%,-0.6% and -1.3%. Can anybody see a flaw in putting extra austerity on top of that? The graph of annualised economic growth on the Portuguese statistics website looks particularly chilling as the columns accelerate downwards.

Accordingly the regional policy option may as well factor in Portugal too and I do not think she will be the last. Does anybody think that Northern European taxpayers are willing to shoulder such a burden?

This entry was posted in Euro zone Crisis, GDP, General Economics, Greek Financial Crisis, Quantitative Easing and Extraordinary Monetary Measures. Bookmark the permalink.
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  • Andy Zarse

    Hi Shaun, nobody can possibly think Nothern European taxpayers are willing to shoulder this burden… with the exception of those in European Commission! Not shouldering burdens is likely to be seen by them as “not being communitaire”. I can see an almighty argument on the horizon over this topic.

    Looking at Portugal, do you know how her employment figures are doing? It always seems such a tightly regulated labour market in Portgual, and also one where to get a decent job you have to know the right people.

    Finally, where would a Greek default – which looks odds on given the current hardening German attitudes – leave the ECB given that it refuses to accept any losses/haircut on it’s holdings? Surely Mr Draghi must be up in arms at the prospect, if nothing else it makes him and his colleagues look very foolish. But surely not foolish enough to buy the bond expiring in March just to save face?

  • The_forbin_project

    it wasn’t long ago the tax payers paid out to rescue the banks.
    Now we’ll do it again – but nobody’s asking us – we’re not involved here!

    I asked a while back a small but important question

    how much is this going to take  to fix ?

    when it gets down to it – this is the pertinant question

    how much ??

    Forbin ( in penuary by the looks of it )

  • Anonymous

    Another fine post, Shaun. Concerning Portugal, Olli Rehn spoke thus in Strasbourg: “We are working together with Portugal in the context of the EU-IMF program, which Portugal is implementing effectively and which is on track,”  “I know that Portugal and the Portuguese people are facing major challenges, but it’s important that the country is showing political unity and resilience in order to overcome these challenges. The Portuguese people can trust that Europe stands by the Portuguese people.” My eye focused on the final few words…..”the Portuguese people can TRUST that Europe……” 
    Trust? From whom?
    This is pure mouth-music!

  • Robert Silver


    Here’s a link to a Reuters article of today, which says that the ECB is not going to book a profit on Greece’s bonds:

    It’s something that I believe was one of Shaun’s predictions, I think, last week.


  • JW

    Hi Shaun
    There was an overheard whisper from the German to the Portugese representative at the last EZ meeting to the effect that ‘ we will help more if you keep quiet while we screw these dastardly Greeks’.  Moral hazard, setting an example etc etc.
    If I as Portugese ( or Spanish or Irish) and not one of the ruling elite, I don’t think I would believe a word of it. To make France ‘more like Germany’ , Sarkozy’s vision, is hard enough; to do this to some of the southern countries is impossible. Its getting hard not to see a future of the workforce of some countries becoming semi-slave workers in German factories. And this is not a criticism of the vast majority of ordinary Germans who will also suffer by the continuing depression of their wages and conditions as a consequence.


  • Anonymous

    This is a very good point. I know very well the conditions in Germany, they are not that great. The underlying reason that German public opinion, especially working class, is so anti-Greek etc. is the constant diet of lazy Greeks getting benefits stories on top (and this is crucial) of their not very good financial standing despite the ‘rich and perfect’ Germany myth (riches based on poor salaries, pensions and erosion of social benefits). These people are not getting a good deal and they have to work for the filthy Greeks also. Even worse deal. Eject Greece from Earth please now! It is a mirage that will end in tears for them also. And I am very happy in my Greek village living on fresh vegetable, cultivating the land and enjoying the sun…. All the best to German people also.

  • Space Man

    Shaun I’m sure I read somewhere that Greece managed to sell €2 billion of 3 month debt this week at under 5%. How did they manage to do this, and who bought it?

  • Space Man

    “Germans who will also suffer by the continuing depression of their wages and conditions as a consequence.”

    The depression of German wages and conditions over the last decade is the reason they are now in such a strong position – which explains why they are against sending money to their Southern European ‘friends’, who are unwilling to do the same.

    We have known about globalisation for a long time now, and Germany (and crucially the German Unions) saw what they needed to do to remain competitive. Most of Europe dodged these hard decisions by borrowing instead. If that borrowing had been spent on modernisation, then they would probably have been OK, but instead it was spent on propping up their very generous social systems and state owned businesses.

  • Anonymous

    Hi Shaun
    Re your ‘hoisted by its petard point’ on the ECB, wouldnt it be fairer to say that it has a legal issue. Art 123 of the treaty on the functioning of the EU prevents monetary financing by ECB of member states and restricts individual member states having privileged access to credit. Legally, the ECB is not a lender of last resort. The legal eggshell of its SMP programme ( where the claim is that the ECB buys assets to smooth liquidity in markets where the issuers are solvent to aid price stability) would smash completely if they overtly bought Greek bonds now. The issuer ( as you have said ) is insolvent and Troika loans are not yet confimed and purchases now would be overt monetary financing, in their book.German constitutional lawyers would be lining up to issue legal writs. I think the debate is better informed when these constraints are dealt with.

  • Sovjohn

    Well frankly, the amount of strategically broadcasted information on a global scale is alarming sometimes. I mean, facts like Shaun is pointing out here seldom get any “mainstream coverage”. What’s worse, I’ve seen a persistence in major media of referring to the Greek package as “a rescue” and “a bailout” while it cannot tangibly be either of the two.

    And to add insult to injury, actual details about what might this package include are even scarcer. Some “cuts” are mentioned, and the majority are not covered at all. There are many aspects of the IMF “programmes” which are horrific.

    The brutal reality is this:

    Greece is caught for sometime now between a rock and a hard place. Its two options are:

    Stay in the Euro and attempt to wait until some future event changes the European policy towards the crisis (do note, Greek politicians want this route followed, and partially the populace, depending on their understanding of financial and political matters), or

    Go back to a national currency and default massively on debts.

    Both options offer no hope for a future to any Greek citizen, from my generation of 25-30 year olds to anyone else. Pensioners are afraid their (already slashed) pensions will be slashed further; social security gets weaker by the day, unemployment is soaring constantly, liquidity is non-existent, even good businesses find themselves bankrupt because they are “not trusted” suddenly, and to top this off with the icing of the cake, the recent slashing of national minimum wage will provide a foothold to slash net monthly earnings to below 500 EUR for “youth employees”.

    This is not a country setup anyone envisages to live in. A bachelor employee with no family cannot cover (bare) monthly living costs with 500 EUR, and you can take that to the bank, since among others, costs of heating oil, petrol, and other “necessities” has skyrocketed in the IMF era, with Greece having perhaps the most expensive petrol prices in Europe.

    The “grand scheme” of living in a country with Portuguese (or even Bulgarian) wages and London pricing, cannot take off.

    The young will try to get out of this country (we already do, and I don’t suppose anyone blames us), the old will descend in poverty even more, and soon enough debates like “which currency should we have” will become meaningless to a vast percentage of the population.

    Sadly, the propaganda has probably led too many fellow Europeans to believe that the average Greek is having a 12-hour siesta and gets paid anyway, while the reality has been very different for years, with even the private sector of Greece being much more brutal than equivalent sectors in EU.

    A final note: The unemployment benefit (paid under conditions for up to 12-months to newly unemployed) was supposed by law to be 67% of the national minimum wage. It is 55% instead. Unless this law is enforced, this benefit will drop to ~360 EUR / month. This sum, according to official data, is below the poverty line. Food for thought for something that may affect 20+% of the population.

  • Space Man

    “A final note: The unemployment benefit (paid under conditions for up to 12-months to newly unemployed) was supposed by law to be 67% of the national minimum wage. It is 55% instead. Unless this law is enforced, this benefit will drop to ~360 EUR / month. This sum, according to official data, is below the poverty line. Food for thought for something that may affect 20+% of the population.”

    Considering that unemployment benefit in the UK is around 310 EUR/month then maybe you understand your fellow Europeans belief in the ‘propaganda’

    You need to cut your coat according to your cloth. Joining the EU was not an instant ticket to Northern European standards of living  - but it was an opportunity to get there through hard work and by electing the political parties that could help you achieve it. It’s easy to blame others for Greece’s present situation but the bottom line is that it’s Greece’s fault. 

    Living standards are going to drop massively but the harsh truth is that they shouldn’t have been so high in the first place. Nobody owes Greece anything –  in fact quite the opposite is true.

  • Sovjohn

    I agree, the Jobseekers allowance in UK is quite low on its own, but then again there are not such high contributions to the State from monthly wages (when someone is working) to receive no services at all.

    At least Jobcentres and equivalent organizations in UK *are* able to direct people to vocational training, or actual job opportunities. Here, the equivalent organization can direct people to… nothing. Do not attempt to make meaningful comparisons of the UK and the GR market, even pre-crisis they were lightyears apart, and I’m speaking from experience, having experienced things first hand as a student in one of UK’s top 10 universities, and seen the working ethics and climate existent there.

    I don’t expect this country to have a Swedish level of unemployment benefits, of course, let’s not be unreasonable – The state gets 5% of gross wages per month as an unemployment contribution, from all employees eligible to receive a benefit. Do note that this 5% is not the only contribution made towards NI, of course, but is clearly marked “for unemployment benefits”.

    Lastly, I don’t think I wrote anywhere in my post that anyone “owes Greece anything”, so please refrain from putting words in my mouth. I am just describing the destruction of a social fabric as it takes place. Do ponder, would you live in London, with its cost of living, with 500 GBP while in “full employment” often breaching 10 hours per day? No? Then you get the idea.

  • JW

     Hi Space Man
    Who exactly is the ‘they’ who are now in such a strong position?
    I would contend that it certainly is not the average German. Wages have been depressed for a decade , part of the reason for the imbalance in the EZ is that German’s do not have more money to spend. Yes, economic indicators look good, productivity has improved; but labour has received a declining share of the wealth compared to capital.
    If this is the ‘best’ model for the new century then we truely have turned the clock back 150 years. I have stated on here many times that the combination of globalisation, demographics and automation will produce a decline in western living standards of 30%. However I do not believe this should be made worse by deliberately engineering labour declines on top of what is inevitable. Germany has quite deliberately employed a planned process which increases their capital advantages at the cost not just of their labour but increasingly that of much of Europe. This is not just.

  • Andy Zarse

    Hi Robert, as Shaun has explained in several posts including last week; what profits?

    If Germany gets it’s way and the supposed “bailout” criteria aren’t met, then Greece will default. A whole column in the ECB balance sheet will turn red with the heading changing from Emergency Loans (book at face value) to Capital (mark to market) followed by a whole bunch of zeros cascading down… I expect some flashing lights and warning hooters will go off in Frankfurt, and smoke will pour out of the ECB’s big reel-to-reel computers which you used to see in 1970′s films. The computer room will look like the one in Turin in the Italian Job after the traffic chaos starts, the operators furiously pushing buttons to no avail and Mr Draghi shouting at everyone.

    The ECB have assumed that no country will default, so Mr Draghi must be up in arms about this. But surely even the ECB aren’t daft enough to buy the Greek bonds which expire on 20 March just to save face? Are they?

  • Space Man

    ”They’ are the German people as a whole. It’s nothing to do with what is ‘just’ – it is accepting the reality of the situation. Globalisation has meant that the Germans either kept the high wages, but then went out of business meaning that there would be NO wages – or adjust their labour costs to remain competitive which at least keeps people in jobs. Which would you choose? Sustainable lower wage jobs or higher wage jobs which then lead to the end of the industry and therefore no jobs? Are you saying that Germany has taken the wrong decisions and should be more like Southern Europe? 

    Also bear in mind that Germany  has the very helpful system of Landesbanks to give long term finance to their industry, and also what was a poor Eastern Germany which has helped them keep wages low. In fact Eastern Germany is a perfect example of what you can do with a decimated economy if the government invests wisely – theres no reason that Southern Europe couldn’t have done the same a decade ago.

  • Critic Al Rick

    Whichever way, the annihilation of the middle classes, I would think.

  • Space Man

    No I wouldn’t do that for £500 a month  - but I’m British – I’m lucky enough to have been born in one of the richest countries in the world. Greeks are not so lucky. 

    Out of the world population, the vast majority would give their right arm to earn £500pm and that is what the Greeks need to realise. Like I said you cut your coat according to your cloth. 

    And I wasn’t putting words in your mouth regarding Greece being owed nothing – it was simply a statement of fact. If Greece wants a high standard of living, then it has to do what is needed to achieve that. A little late now, but whose fault is that?

  • Zak

    Electing politicians?

    Last time I looked they stopped doing that in EZ countries that didn’t play the Merkozy way.

  • Zak

    “The depression of German wages and conditions over the last decade is the reason they are now in such a strong position”

    By “they” I’m sure you mean the ruling elite?

    Well that’s alright then. We can all just bend over and take it like good little slaves then eh? Sure as hell glad youre not my boss.

  • Anonymous

    Hi Andy

    I can only offer the change between the second and third quarters in Portugal in 2011 where employment fell by 0.8%. I am sure they are somewhere just not where I am looking right now…..

    I can add a little more info now as Excel has unfrozen a little and the fall was from 4,893,000 to 4,853,700.

  • Zak

    The answer you’re looking for is 42.

    Oh hang on… No sorry that was a different question.

  • Anonymous

    Hi Ray

    Way before we get to the word “trust” I have issues with Commissioner Rehn’s use of the phrase “on track”. If he means on track to replicate Greece’s experience then I agre with him but I think we both believe that he means getting better.

  • Anonymous

    Hi JW

    I did know about that and it sounder very much an attempt to play one against the other to me ( I was going to put divide and conquer……) and accordingly if I was Portuguese I would wonder where I stand,let alone what the Greeks must think.

    On another tack did I notice that your anti-trader Mr.Stolper has gone 9 for 9?

  • Zak

    I’m also British and I was born in this country that has also borrowed well beyond its means and now finds that it’s third biggest expenditure each year is on debt interest alone.

    In my opinion the UK population will very shortly find out exactly just how poor we are when our interest rates also start to rise.

    “We” are no richer than any Greek, Portuguese or American citizen.
    “We” are up to our eyeballs in debt!

  • Anonymous

    Hi Space Man

    There is a big difference in the way Treasury Bills which are short-term lending and Bonds are treated. I did read that it was considered that Greece could not default on the 3 or 6 month Treasury Bills but have never found the outright documentation. But the risk is lower.

    It used to be considered that T-Bills were the preserve of the central bank and Bonds the preserve of the government meaning that the T-Bills could always be paid by printing some money.

    Somewhere in there is the view that the risk and hence the yield is lower although I do not consider it to be a zero risk.

  • Anonymous

    Hi Shire

    In theory you are entirely correct. But the same theory has ended up with the ECB and its accountants still persisting with a system where they will be repaid and the bonds accordingly are priced at 100. In that (admittedly delusional world) Greece is treated as if it is solvent.

    In the real world things are very different and the ECB is coming to a nexus I think where further hard decisions will be necessary. For example the moment that Portugal is perceived to be outside the remit of the ECB’s SMP her government bonds will collapse and another EU rescue vehicle will turn out to be a volatility enhancer when it was badged as the reverse!

  • Sovjohn

    First of all, as Zak pointed out, and as Shaun has pointed out several times, Britain is not exactly debt-free, and while I hold the country to my heart (I really like it, and when I studied there I had experienced “civilization” as opposed to “jungle” of Greece, especially in the educational system), it’s too reliant to financial services for my liking in terms of GDP.

    Now, one can never generalize when referring to populations. You may have met crafty and entrepreneurial Britons and Greeks alike, and when you are faced with a rotten system (read: Greece) you can consciously opt to disassociate from it.

    When me and some friends launched our own start-up company 2 years ago, we registered it in Netherlands (decent corporate forming system, similar to UK) and not in Greece (chaotic system, too many charges to be paid to the state, too much bureaucracy).

    You can have citizens of the world who would gladly work for £500, and others who would pursue 2,000 / 3,000 / 10,000 / you name it. It’s a matter of skills vs personal ambition vs circumstances.

    There are good professionals, especially young ones, to be found in Greece, exploited for basically peanuts compared to what they could be earning elsewhere. Same thing goes if you compare China to Greece, say, and even North Korea to China. It’s an endless loop.

    Whoever considers himself a European (or a global) citizen, will have no “problems” migrating to wherever he feels happy to live, provided he has the skills and can contribute positively to the society he will be associated with.

    This is only reasonable – And if you have met southern Europeans working / living permanently in UK and central / north Europe, you will have seen this with your own eyes – They don’t “behave” like “lazy bums”.

    That is all :) It’s not a country issue, but a mindset issue, keep this in mind to avoid needless generalizations.

  • Space Man

    John I never called the Greeks Lazy – in fact I suspect that they work just as hard as any British worker. But the point that I was making is perfectly illustrated by the fact that you registered your start up in the Netherlands…. 

    Very poor countries can become rich countries fast if they follow the correct economic policies. Greece has not done this, and yet the Greeks expect the standard of living of countries that have done so. It doesn’t work like that.

  • Space Man

    Zak you are right that we have far too much debt (we went a bit ‘Greek’ for the last decade) – but we also have strong industries  and valuable assets,
    despite the impression you get from most of the press. 

    If we really needed to, we are capable of paying off our debts entirely in a (very austere) generation - that is the difference between the UK and Greece.

  • JW

     He certainly has. Looks like 1.50 Eur/USD once the Fed start QE3 next month.

  • JW

     Nothing to do with ‘just’? So our lives are run to maximise economic indicators? They are run to enrich a few ( capital) ? German reunification has very few parallels to the EZ situation, it was a common country with common language, history etc etc. It also happened in a different decade with world growth stimulated by debt.
    Germany should give more of its wealth to labour so it can spend on domestic consumption, this would go a long way to resolving EZ differentials.
    You make a good point about the different banking philosphy of the local German banks compared with their internstional banking sector which mimics the ‘anglo’ banks. German industry has always raised money primarily from local banks looking long term, UK/US have tended to have banks that look to make profit short term for their own benefit, leaving industry to raise long term money from other sources. This different philosphy if adopted by UK banks would go a long way to solving some of the UK funding industrial/commercial problems. Unfortunately it means overtturning centuries of mindset, not too likely I suspect.

  • Anonymous

    Actually, I agree with your criticism of Greece. However, I disagree on your assessment of UK. I think you will also feel a rude awakening soon. QE has given a sense of comfort but cannot be continued, financial industry could easily collapse due to some certain EU countries defaulting, UK is largely disindustialised and the private debt is huge (Greece does not have this prob at least). I have been reading that a remote cottage in Scotland and investment in some serious armaments could be a good tactical move.

  • Space Man

    British manufacturing is a shadow of its former self and it needs improving, but remember that this tiny island is still well inside the top 10.

    Private debt is huge and it was out of control, but it is now falling and it is affordable. 

    In Britain we love to  criticise ourselves, which I actually think is a good thing, but sometimes people lose sight of where we are in the world.

  • theyenguy

    Hello, I thought I would relate to you that the monthly chart of S&P, $SPX, traded by SPY, communicates that we are at the crest of an Elliott Wave 2 high, and are going to enter an Elliott Wave 3 Down, as is seen in Daneric’s Elliott Wave article 15 February 2012. These are the most destructive of all economic waves as they destroy practically all of the wealth accumulated on the way up. The Great Deleveraging, that is Great Depression 2, is about to commence.’
    Dow Theory holds that Industrials, IYJ, and Transports, IYT, make market turns together. In as much as these both traded lower today, the Great Deleveraging, likely commenced. The chart of Transportation, IYT, shows a rounded top, and a fall lower out of an ascending triangle, suggesting that transportation stocks are headed irretrievably lower. Jack D. Stevison writes in article Dow Theory, this looks like a “non-confirmation” to me. It’s the like the Dow Transports are saying, “We’re not as strong as you industrials are. We’re just not able to move the stuff that you’re producing. So whomever is buying your stocks, well, they’re getting ahead of themselves.
    Confirmation of the start of the Great Deleveraging comes from Steel, SLX, and Metal Manufacturing, XME, trading lower, on a likely exhaustion of growth, that comes from the failure of the global debt trade, which is seen in World Government Bonds, BWX, having turned lower, and from the exhaustion of neo liberal finance and fears of Greece Default. 
    Other confirmation of the start of the Great Deleveraging, is that base metals, DBB, traded lower, with  JJC, JJT, JJU, JJA, and LD, trading lower.
    The fiat wealth system known as Neoliberalism, that has governed the world for the last forty years is now passing away. The diktat system known as Neoauthoritarianism, is rising in its place. 
    You ask: Does anybody think that Northern European taxpayers are willing to shoulder such a burden.
    I’ve been convinced for years that a One Euro Government, that is a Euro zone superstate is coming. In my article, What If? …. What If Banks Are Regionalized?, I present lots of evidence that a Federal Europe is imminent.