Free Markets, Free People

Germany


Germany’s Chancellor Merkel has criminal complaint filed against her for bin Laden comments

The world is officially nuts.  I’m not sure how else you classify what follows.  Chancellor Angela Merkel of Germany recently remarked on the death of mass murderer Osama bin Laden saying was “glad” he’d been killed.  That prompted the following from a German judge:

But Hamburg judge Heinz Uthmann went even further. He alleges that the chancellor’s statement was nothing short of illegal, and filed a criminal complaint against Merkel midweek, the daily Hamburger Morgenpost reported Friday.

"I am a law-abiding citizen and as a judge, sworn to justice and law," the 54-year-old told the paper, adding that Merkel’s words were "tacky and undignified."

In his two-page document, Uthmann, a judge for 21 years, cites section 140 of the German Criminal Code, which forbids the "rewarding and approving" of crimes. In this case, Merkel endorsed a "homicide," Uthmann claimed. The violation is punishable by up to three years’ imprisonment or a fine.

"For the daughter of a Christian pastor, the comment is astonishing and at odds with the values of human dignity, charity and the rule of law," Uthmann told the newspaper.

Of course the judge is assuming it’s a “homicide” (certainly no proof exists that’s the case) and thus a criminal act.  In fact, the Geneva Conventions will clearly show otherwise.  Obviously he files his complaint with nothing more than his opinion as a basis.

So you say, it’s one extremist view, why get excited about it?

While the judge’s reaction may seem extreme, his sentiments are apparently shared by 64 percent of the German population. That was the proportion of Germans who said bin Laden’s death was "no reason to rejoice" in a poll published by broadcaster ARD on Friday.

Germany – never a bastion of human rights or individual freedoms –  continues to live up to its past with a new extremist but pacifist twist.  This is an example of absurdity masquerading as reason, extremism as normalcy and stupidity as compassion. 

Everyone who loves freedom and hates mass murderers should be “glad” Osama bin Laden has been killed.  He was a monster, just like one which once ruled the land this puffed up pratt Uthman lives in.  As much as Germans claim to have been “disgusted” with the “jubilation” over OBL’s death, nonsense like this does them no favor.  The disgust on this side of the Atlantic for a country that assaults free speech and protects the memory of a mass murderer by going after those who express satisfaction at his demise isn’t one that I or most anyone here would ever care to live in.

~McQ

Twitter: @McQandO


German austerity v. US profligacy – guess which one is working out best?

While the US remains mired in recession (despite the claim its over) and the usual suspects are claiming we need to spend even more money we don’t have, Germany has managed a minor miracle. Eschewing a large stimulus package and instead opting for austerity and pro-business legislation, it has seen almost the opposite of US results:

"Although October’s decline in unemployment turned out weaker than expected, the underlying trend in the German labor market clearly remains one of rapid improvement on the back of strong economic growth," said Aline Schuiling from ABN Amro.

Data on Europe’s biggest economy over the past week has been bullish, signaling its unexpectedly strong recovery could hold up in the face of signs of fragility in the global economy.

Consumer morale remains at its highest level since May 2008 going into November on expectations for a further rebound, a survey by GfK market research group showed on Tuesday.

Business sentiment hit its highest level in 3-1/2 years in October and firms’ expectations also improved, a survey showed last week, and the corporate outlook continued to improve on Thursday.

As I’ve pointed out in many other posts, this isn’t rocket science. People respond to incentives. People respond positively to positive incentives. That’s what is happening in Germany which has economically battled back first from the absorption of East Germany and now a deep recession to a position of prosperity and growing economic stability.

Meanwhile here we’re about to go into QE2 all while popinjays like Paul Krugman encourage us to go more deeply in debt as a country because everyone knows that government spends money much more wisely and well than do individuals.

~McQ


German recovery, part II

I discussed this earlier with a post about Paul Krugman and Gary Becker, explaining why the German approach – essentially getting government out of the way while providing incentives to businesses for expansion and hiring – was superior to the tried and consistently failed tactic of huge amounts of government deficit spending as a "stimulus". Krugman and others waved away the German recovery as simply an upsurge in exports, nothing more.

E21 has an excellent article out today in which it takes exception to the Krugman claims (note too that E21 refuses to call Krugman and economist but instead refers to him as a “commentator”):

U.S. commentators, like Jonathan Chait and Paul Krugman, have taken issue with holding out Germany’s economic recovery as a success story – one that contains lessons for U.S. policymakers. Contrary to their claims, Germany’s recovery does not appear to just be about trade flows and global demand for their manufactured goods. 50% of their second quarter GDP came from private sector consumption and investment growth.

Private sector growth – what a concept, no?

Here is an extended excerpt which is probably one of the best explanations I’ve seen. The last line is so irony laden that it almost makes you wince.  Also, as you read this carefully you will again note the obvious – “this ain’t rocket science”:

The contractionary effects of deficit-financed stimulus were highlighted by European Central Bank (ECB) President Jean-Claude Trichet at the Jackson Hole conclave. While many commentators in the U.S. still depict the debate over stimulus as pitting sagacious “pure” economists that favor more deficit spending against the politically astute economic illiterates, Mr. Trichet explains that the Franco-German technocrats in Frankfurt view the economic literature as counseling steep budget cuts in the current environment. Many U.S. economists speak of the need to increase deficit-financed public expenditure to avoid a Japanese-style “lost decade”, yet it is precisely the exploding public debt ratios that Mr. Trichet identifies as the real cause of Japan’s malaise and the greatest risk to Western economies today. To those who believe sharp reductions in public expenditure are too risky, given overall economic weakness, Mr. Trichet responds that deficit-financed stimulus is unlikely to provide any measureable boost to demand in the current environment because the government purchases are offset by reduced private expenditure. And on this point, Mr. Trichet even goes even further:

“There is the additional argument positing that credible fiscal deficit reductions through expenditure cuts lead the private sector to expect a lower future tax burden, especially when the nature of the cuts make future tax reductions more likely. This can generate higher consumption expenditures and more investment.”

Lest anyone believe Mr. Trichet was talking about modest cuts to public expenditure to assuage irrational markets, he went on to suggest that cuts to government spending should be sufficient to reduce debt-to-GDP ratios by 30 percentage points over the medium term. Mr. Trichet cites numerous examples where cuts of this magnitude have resulted in improved short-run economic performance. That it takes a French lifetime bureaucrat to travel to the American West for these words to be spoken at a U.S. policy symposium says something fairly profound about the current state of policymaking in the U.S.

Again, as I mentioned in the first post I’ve cited, the proof is in the pudding.  Germany is back to pre-recession unemployment rates and excellent GDP growth.   And where, again, is the US during “recovery summer”?

Perhaps now you can understand the reason Mort Zuckerman has referred to the economic policies of this administration as our “economic Katrina”.  At this point we’d better hope the worst we suffer is a lost decade like Japan’s.

~McQ


Observations: The Qando Podcast for 16 May 10

In this podcast, Bruce, Michael, and Dale discuss DADT, The Euro, and the spiraling cost of ObamaCare…even before we’ve gotten any of it.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.


Observations: The Qando Podcast for 09 May 10

In this podcast, Bruce, Michael, and Dale discuss unemployment, Greece, and the BP offshore drilling leak.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.


Musings, Rants and Links over the 18th Fairway:03/16/2010

The French Finance Minister has noticed that the disparities within the European economy are causing a number of issues, and fingers the….Germans!

“Clearly Germany has done an awfully good job in the last 10 years or so, improving competitiveness, putting very high pressure on its labour costs. When you look at unit labour costs to Germany, they have done a tremendous job in that respect. I’m not sure it is a sustainable model for the long term and for the whole of the group. Clearly we need better convergence.”

You see, having an economy so efficient that you can be more competitive than your neighbors with high wages and a high standard of living means you need to change so that the French, Greeks and other assorted PIIGS can continue down the path they have chosen. The Germans are just too darned efficient for the greater good.

In the interest of being helpful I have identified several important initiative’s that the Germans should adopt to align themselves more fully with their neighbors.

  1. Do not keep your debt levels below 3% of GDP…ever.
  2. Encourage massive strikes at the drop of a hat.
  3. Make public services far more attractive than working in the private sector, with massive  strikes and riots to keep it that way.
  4. Make it almost impossible to layoff anyone for any reason.
  5. Mandate at least six weeks paid vacation for every employee.

That should make sure your economy is not too efficient.

Is China’s economy about to rollover?

I won’t explain this, just let it sink in:

I don’t think it will be as bad as Japan, but the evidence isn’t giving me any great comfort either.

I love Apple, and I love my iPhone. Still, is Apple really worth more than Walmart? Or these various baskets:

  • 4x the global smartphone market
  • 5x the global music market
  • 100x the global smartphone app market
  • Enough to buy HP, Dell and Hitachi, with mad money left over for Xerox or Seagate

Yep, that whole efficient markets hypothesis may take a beating again.

Did any of you see Michael Lewis on 60 Minutes Sunday? If you didn’t, I highly recommend it.


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Cross posted at The View From the Bluff


“Green” UK – A Cautionary Tale

A bit of ego, a little dab of moral vanity, a smidge of hubris all driven by an agenda and you have the perfect definition of the political class worldwide.  Of course I understate the smidges, bits and dabs by quite a bit. But that class has a problem.  Other than boring economic stuff they are apparently lacking a great moral cause.   So, it appears, they’ve decided to make one up with predicable results.

Dominic Lawson brings us up to date with the goings on in the UK beginning with helping us understand where the “green” movement has gotten them:

I was irresistibly reminded of this by Ed Miliband, the energy secretary, in his launch of plans to cut carbon emissions by switching to “renewables” for more than 30% of our energy use. This, he claimed, would “rise to the moral challenge of climate change”.

Miliband is of the generation of politicians struggling to find a great moral cause. Earlier in the Labour administration Tony Blair thought he had found it with wars of choice far from home, but that has, to put it mildly, lost its lustre. Now it is the “war against climate change”, given additional moral potency by the notion that the greatest concentration of sufferers from global rising temperatures would be among the world’s poorest.

Given the mostly positive press the fulminations of one Al Gore has received, what pol worth his salt could resist the call to save the world. “Go Green” young man and don’t dally because the earth has a fever!

And so Britain has tried to lead the effort. With high flying rhetoric and an aim to save Africa (really? Yup, so says Lawson), British politicans have bravely decided to throttle back their emissions and, apparently, kill their steel industry. Of course other than see the last vestiges of that industry leave forever, Lawson wonders, in the big scheme of things, if it’s worth it:

The UK is responsible for less than 2% of global carbon emissions – a figure set to fall sharply, regardless of what we do, as a result of the startlingly rapid industrial-isation of countries such as China and India: each year the increase in Chinese CO2 emissions alone is greater than those produced by the entire British economy. On the fashionable assumption that climate change is entirely driven by CO2 emissions, the effect on global temperatures of Britain closing every fossil fuel power station would be much smaller than the statistical margin of error: in effect, zero.

You see, Lawson, like many, has figured out the unfashionable truth – unless the big 3rd world emitters play ball, whatever dinky emitters like the UK do won’t amount to any net change. Whether or not you believe in AGW or not, running your economy on the shoals for no net gain seems something only a politican would do. And you’re right.

But those great moral crusades are beckoning and the political flesh is weak. Who wants to show up and serve their time in the spotlight with nothing but mundane governing to do. Politicians are driven to make a difference:

Gordon Brown claims: “Britain is leading the world in the battle against climate change.” Such remarks are regarded as absurd in the chancelleries of Europe: if you do take as a measure of such commitment the proportion of domestic energy already supplied by renewables, the UK occupies 25th place in the European Union league table, above only Malta and Luxembourg.

Never the less, “leading” certainly has had an effect, at least domestically. With a yawning energy gap promising huge problems in he very near future, the UK is leading by committing itself to 7,000 offshore wind generators.

Two problems with that. One they should have learned from Germany:

Indeed, Paul Golby, who runs the British operations of E.ON, Europe’s biggest wind-power producer, has told the government that a 90% fossil fuel or nuclear back-up will be needed for any of the National Grid’s future wind-power capacity. As Martin Fuchs, his German boss, pointed out: “The wind, sadly, does not blow where large quantities of power are required . . . on September 12 last year wind power contributed 38% of our grid power requirements at all times, but on September 30 the figure went down to 0.2%.”

Yes that’s right – wind is so unreliable that it must be backed up with more conventional methods of power generation up to the 90% mark. And:

The powerful wind-turbine lobby in Germany constantly harps on about the number of jobs “created” by its subsidised investment, quite ignoring the number of jobs destroyed by high-cost energy, or indeed the greater number of jobs that could be created if the same amounts were invested in more profitable activities. This is why the Bremen Energy Institute argues that “wind energy macro-economically has a negative employment impact”.

Peachy. Germany isn’t the only one that has learned “green” means fewer jobs, not more. Spain has also learned that lesson. A study of what has happened in Spain since it took essentially the same path as the UK in 2000 yielded these results:

* For every green job financed by Spanish taxpayers, 2.2 real jobs were lost as an opportunity cost;
* 9 out of 10 green jobs created by Spain over the past 10 years are no longer in existence today;
* Since 2000, Spain has spent €571,138 ($753,778) to create each “green job,” including subsidies of more than €1 million ($1,319,783) per wind industry job;
* Those programs resulted in the destruction of nearly 113,000 jobs elsewhere in the economy and;
* Each “green” megawatt installed destroyed 5.39 jobs in non-energy sectors of the Spanish economy.”

And what about all that wonderful green energy promised by the UK wind machines? Well, unfortunately it’s very expensive:

Miliband claimed last week that the result of his proposals would be an increase in costs to energy users of about 17%. However, the business and enterprise department admitted last year that Britain’s existing “climate policies” – even before Miliband’s latest Big New Idea – would add an extra 55% to energy bills. It’s obvious where this will lead: to the exit from Britain (and, indeed, Europe) of much of what remains of energy-intensive manufacturing industry – the euphemistic jargon term is “carbon leakage”.

Sure enough, that’s precisely what is happening:

Jeremy Nicholson, the director of the Energy Intensive Users Group, which represents such industries as steel and aluminium, is exasperated beyond measure: “A future administration will have to say in public what ministers and their officials already admit in private, that the renewables target is neither practical nor affordable. Outsourcing our emissions is not a solution to a global problem. Politicians need to understand that unilateral action will come at a terrible cost in terms of UK manufacturing jobs, investment and export revenue, for no discernible environmental gain – is that really what they want?”

Apparently so, since that is precisely the road the US and UK, without either China, India or the rest of the 3rd world, is headed.

What about the “exasperated” steel and aluminum industuries in Britain?

Well their demise has already begun:

Thousands of British steelworkers and their families are holding a protest march Saturday in a town in northeast England where the looming closure of a Corus steel plant threatens to throw families into poverty.

[...]

Closure is expected to result in the loss of 2,000 jobs at the plant, and another 1,000 elsewhere.

But others say the status of the plant, known as Teesside Cast Products, as one of the main regional employers means its closure will result in a loss of local high street spending that could balloon into nearly 10,000 job losses.

Aluminum too:

On the day Nicholson said this to me, last Thursday, Anglesey Aluminium, the biggest consumer of electricity in Wales, announced that it would cease production, precisely because it could see no prospect of signing up to a long-term supply of electricity at a rate at which it could make a profit. And on the day of Miliband’s announcement, a group of Labour MPs presented a “Save Our Steel” petition, saying: “We need to make sure we act before the light goes out.”

It may well be that the English steel mills will become unable to compete globally, even at current domestic energy prices; but deliberately to make them uncompetitive is industrial vandalism – and even madness when the consequence of Miliband’s Martin Luther King moment may be the lights going out not just for producers but for all of us in our homes. This is worse than a futile gesture: it is immoral.

Indeed. But the moral vanity and hubris involved in the belief one is “saving the world” apparently trumps any concern for the lives of others and the reality such policy brings in its execution.

The immoral part, as it pertains to the US, is we know this from watching what has happened in Europe and elsewhere. Yet apparently, if the administration has its way, we’re going to see the same immorality visited on us here shortly.

~McQ


Questions and Observations #3

For new readers, the title is what the shortened “QandO” means.

  • Whether you love her, hate her or really don’t care, it is hard too argue against the assertion that  Sarah Palin effectively ended any national aspirations she might have had by announcing her pending resignation (assuming there isn’t some extremely compelling private family reason for doing so). The first thing any political opponent is going to say is “she quit on the citizens of Alaska, will she quit on you?”
  • The story about the Washington Post selling access to the Obama administration isn’t just about the WaPo. Seems to me there had to be some a) knowledge of the plan and b) cooperation from the White House for it to have been as far along as it was. After all, the first “salon” was scheduled to be held at the publisher’s home in 2 weeks. Is anyone exploring that angle?
  • How concerned is Saudi Arabia with the probability of Iran acquiring nuclear weapons? Apparently enough to make it known they’ll turn a blind eye to any Israeli incursion which crosses the kingdom in order to strike Iran.
  • Apparently the scales have finally fallen from Colin Powell’s eyes concerning Obama and the direction he’s taking this country. Formerly Powell’s message was that American’s wanted more government and were willing to pay for it. He now says he’s concerned with the number of programs, the legislation associated with them and the cost of the additional government they’ll entail. “We can’t pay for it,” he’s now saying? Better late than never, I suppose, but this just underscores my disaffection with Powell politically.
  • Speaking of Sarah Palin, apparently the federal investigation rumors (FBI looking into irregularities concerning the sports complex in Wasilla, etc.) and pending indictment are false. An FBI spokesman in Alaska has said there is no pending indictment or ongoing investigations of her. Concerning the ongoing rumor he says, “it’s just not true”.
  • The after effects of the recent “election” in Iran continue to eat away at the foundation of the “Islamic Republic”. The Association of Researchers and Teachers of Qum split with Ayotallah Khamenei declaring both the election and the new govenrment “illegitimate”. That is a very public and unprecedented challenge to Khamenei’s power. Additionally Moussavi’s campaign has released a report that outlines the election violations in detail. These are very serious challenges to the regime’s legitimacy.
  • Speaking of Iran, it appears that while the world is ready to ratchet up the pressure on the regime in light of its brutal put down of pro-democracy protesters, the Obama administration is apparently prepared to block any sanctions agreed upon at the G8 summit. I swear I can’t figure that bunch out – support the dictator in Iran and mischaracterize a legal use of constitutional power in Honduras in support of another would-be dictator there.
  • The law of unintended consequences continues to operate unabated. Governments, desperate for revenue, have raised property taxes all across the country. Homeowners, knowing their home values have plummeted, are filing an unprecedented number of appeals. Those appeals are costing the governments huge amounts of money in refunds and attorney’s fees. However, homeowners should note that if they don’t appeal, the government will gladly screw them to the wall with an unjustified tax increase. Makes you feel all warm and fuzzy inside, doesn’t it?

~McQ


How Bad Is It? Check Out Europe

It is certainly worse abroad than here. As Dale pointed out, if this is a failure of the “free market” why is Europe, which is very tightly regulated, having a worse time than we are? Ambrose Evans-Pritchard has a blog post outlining the woes of Europe. First, the real possibility of repudiation of debt:euro

Ex-Bundesbank chief Karl Otto Pohl has just said that Ireland and Greece are in danger of defaulting on their sovereign debts and/or may be forced out of the Euro, for those who may not be aware of his Sky interview by my colleague Jeff Randall.

“I think there are countries considering the possibility. It would be very expensive,” he said. “The exchange rate would go down, 50 or 60% and then interest rates would go sky high because the markets would lose all confidence.”

Then we have the possible abandonment of the Euro in order to “re-establish economic competitiveness quickly”:

Laurence Chieze-Devivier from AXA Investment Managers — in “Leaving the Euro?” — says that the rocketing debt costs of Ireland, Greece, Spain, and Italy are taking on a life of their own. (Italy has just revised is public debt forecast from 2010 from 101pc to 111pc. That is a frightening jump. While the CDS default swaps on Irish debt is are at 376 basis pouints. Austria is at 240. This is getting serious).

It is far for clear whether all these countries will accept the sort of drastic retrenchment required to stay in EMU. “By leaving the euro, internal adjustments would become less `painful’. An independent currency would re-establish economic competitiveness quickly, not achieved by a sharp drop in employment or wage cuts”.

 

euronations

The possible death of the “European nation”:

Carsten Brzeski for ING in Brussels said the eurozone laggards were more likely to default than pay the punishing costs of leaving EMU.

“It is difficult to believe that Portugal, Italy, Ireland, Greece, and Spain, would be better off outside the eurozone. While a government could possibly get away with a redenomination of its debt, the private sector would still have to service its foreign debt. We believe any attempts to leave monetary union would lead to the mother of all crises, and total isolation in any future European integration”

Mr Brzeski said the bigger danger is that countries will face a buyers’ strike for their debt as a flood of bond issues across the world saturates the markets.

“A further worsening of the crisis could lead to (partial) sovereign defaults in one or several countries.”

How is that likely to happen?

The country’s parliament could pass a law redenominating debt into the new Lira, Drachma, or whatever. But there would be a pre-emptive run on bank deposits long before then. “Anyone not desirous of losing money would presumably see the writing on the wall and transfer any funds beyond the reach of the state. In other words, close down that account with Monte dei Paschi di Siena and open a new one with Commerzbank in Germany”.

Such a wholesale shift would lead to a collapse in the money supply, perhaps equal to the 38pc contraction in M3 from October 1929 to April 1933 in the US — but concentrated in a much shorter period. “Banks would be forced to call in outstanding loans, bring about a collapse in the country’s business.”

Certainly a bit of a doomsday scenario, but, unfortunately, not at all outside the realm of possibility. In fact, as they are, some are arguing it will happen in the near future. Almost every bit of it the result of market distortions implemented or enabled by government.

~McQ

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