Deutschland Uber Alles Grasshoppers

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It has been 65 years since Europe’s last major war. Still, when Germany gets up off its knees, the continent trembles.

Last week, the Berlin government announced the best results since the wall fell in ’89. From the first quarter to the second one the republic’s GDP rose 2.2%. At that rate – about 9% a year if it continues – Germany is running neck and neck with China. Compared to France and the US, Germany is flying nearly 4 times as fast. Greece meanwhile is backing up. Its economy shrank 1.5% last quarter.

The Teuton tribes are an aggressive lot. The Usipetes, Tenchteri, Batavi, Cherusci, Chatti, Vandals, Goths, Franks, Alans, Suebians – all jostled each other for centuries. They must have gotten a taste for competition. And when Rome wheezed her last gasps they fell on her like French tax collectors on a widow’s estate. The Vandals pushed all the way across Gaul and Iberia, crossed to North Africa, and from their new base in Carthage, continued to tickle the old Empire until it rolled over on them. Everybody has his elbows out. But competition takes many forms. Better to build Audis and Mercedes than Tigers and Messerschmitts. Better to race for market share than for the Champs Élysée. Whatever form it takes, competition isn’t likely to stop. Happily, most of the time, it is a boon to everyone – even to the losers. That’s why Germany’s current success is only a threat to the economists and commentarists who’ve been giving her advice. The rest of us hold our breath and hope for more.

It was only a month ago that Martin Wolf led a “great debate” on how governments should react to the financial crisis. Of all the ideas to come out of financial crisis of ’07, Wolf proposed one of the most remarkable. He illustrated it with the fable of the ant and the grasshopper. He saw two types of economies. There were those that produced and those that consumed. The trouble, according to Wolf, was that the two didn’t compete at all. Instead, they lived in a kind of symbiotic parasitism. The grasshoppers lived off the labors of the ants. Not only did the grasshoppers make the things that the ants used, the ants took the grasshoppers’ money and lent it back to them, so they could buy more. The grasshoppers were ruining themselves. But the ants were making a mistake too. They were building up capital, but what could they do with it? There was no point in expanding output capacity; arguably, they already produced too much. And what could they buy? The grasshoppers had nothing to sell.

That was not the worst of it. When the grasshoppers had spent too much, said Wolf, both bugs were trapped. If the grasshoppers in Spain and Greece were forced to spend less, the ants in Düsseldorf were condemned to sell less. Their economies were doomed to go down together, like galley slaves chained to a sinking ship.

In any case, it looked like the sort of thing the fixers could fix. Germany is all make. Greece is all take. The system was out of whack. Trade flows must balance out to zero, so Wolf et al concluded that the problem could be corrected on either side. Germany could stop working so hard and exporting so much stuff it didn’t want. Or, Greece could stop spending so much money it didn’t have. Since any slowdown in spending threatens the “recovery,” it would be better for Germans to do more spending themselves. They should raise wages and encourage their own people to buy more Audis…more ouzo…and more pointy shoes with curled up toes. This was no time for austerity.

They misunderstood the problem. Imagine two men marooned on an island. They barely survive. One works hard, hunting, gathering, and planting. The other dances on the beach like Zorba, depending on the kindness of his companion for his daily rations. The problem is not the lack of balance. The problem is the slacker. You could redress the balance between them by getting the productive one to slack off too. But then, they’d both starve.

The euro was seen as part of the problem, too. It was either too low for Germany or too high for Greece, said analysts. In the good old days, Greece could have pulled a fast one, devaluing its currency to make its citizens poorer, and their labor and exports cheaper. But now, there is no cheap and easy solution.

Which set us to a-wondering about how the world possibly got to where it is. For the hundred years from the end of the Napoleonic Wars to the beginning of WWII, Europe was rarely happier, more prosperous…or more at peace. Yet during that time, money was even more inflexible than the euro. Governments did not commit premeditated murder of their own currencies. Instead, the value of paper money was protected by gold. People competed by working harder, saving more, and figuring out how to produce more with less – just as the Germans are doing now.

This week, the Merkel team followed up. “The lady’s not for turning,” Ms. Merkel might have said, taking a line from Margaret Thatcher’s 1980 Brighton speech. With the pressure off its budget, the commentators thought the Germans might be tempted to ease up on their austerity program. Instead, the German government will continue to pursue cuts to military and social spending, she said. Success will not distract Germany from its austerity program. Whether failure will send it off the rails is a question to be answered later.

Regards,

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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Comments

  1. two people on two nearby Islands, both smaller versions of Easter Island when it had trees.
    one person feverishly chops down all the trees until there are none left. another takes it a bit easier, savoring the day and getting into culture (Zorba worshipping if needed) chops down no trees and lives frugally off the dropping coconuts as nature would sporadically provide.
    first person starts to starve then considers invading the second island and chopping down all those trees too.
    of course, the first person could be more rational and plan his resrouce depletion, and use his hard working nature to plant more trees, leaving the half starved second guy to pray for manna from heaven.
    Note: no breeding allowed in this experiment.
    Note: what applies for the individual does not necessarily translate to a complex and technical society.
    Note: the first guy could wear his body out as evolution did not require 80 years of 12 hour hard laboring.

    Reply
  2. It’s even more complex than that, 6peterg. In trying to invade his neighbour’s island, the tree-cutter was taken by a large tiger shark.
    Had he actually reached the other island, he’d have found the skeleton of his neighbour, below a coconut tree:

    “Falling coconuts kill 150 people worldwide each year, 15 times the number of fatalities attributable to sharks,” said George Burgess, Director of the University of Florida’s International Shark Attack File and a noted shark researcher.”

    The Ant and the Grasshopper is in interesting fable, but if you’ve ever watched a half-dozen ants cooperating to drag an immensely-larger insect down an ant-nest, you know the ants are gonna win, every time.

    Rock on, Ants…. . :D

    Reply
  3. I woulda dived for crays and made surboards from compressed coco fibre to kill time. Its obvious when ya think about it.

    Reply
  4. BP, so the ants are the chinese and they will win by cooperating at levels we cannot achieve? or I am I reading too much into it.

    on the side note, I love the name of the invention (on the ‘inventors’ a decade ago) , a net that got installed beneath the coconut tree to catch the nuts, called it the coconet. it worked well too apparently, though i suspect its expense would be more suitable to tourist destinations, and rich bankster’s resorts away from all the trouble (until the seas rise that is). then its off to the alps to ski … oh, its melted, rock climbing then.

    also I wouldnt gloat too much at hung parliaments not getting much new legilsatiOn, they are unlikely by that order to undue much of the previous bad legilsation either. Katter wants tarrifs and rural socialism, the dork from WA wants all the mineral wealth to go to WA (hah, WA can start up its own defence force then), most of them want fibre to every farm house (yeh!) subsidised by the city folk, we cant mention the Greens on these pages can we? we might just get more order from the chaos though, I am happy enough for now with it.

    Reply
  5. Hey, Pete… I’m one of the ants!~ Getting ready for more (denis) hopper daze, tho’… . :D

    But you’re also correct about the Chinese. They probably face a century of dominance after a century of imperialism.

    “…we might just get more order from the chaos..”

    I just can’t see it all hangin’ together. You’ve summed it up pretty well, though. I guess one of the real issues must be the _hatred and contempt_ many of the players have for each other. Add to that their totally unalignable policies and it will be a zoo!~

    I figure the Nats may actually emerge the winners from all this. As you know, Royalties for Regions is the only thing holding together the NatLib alliance in WA. The Nats are pretty quick to remind us that “It’s NOT a coalition!”

    Ned’s reminder about the Confucian curse seems highly appropriate… ;)

    Reply
  6. BP “Ned’s reminder about the Confucian curse seems highly appropriate… ;)”

    ..very

    Reply
  7. It is a great saying, I also like the ancient one re-iterated in the Kung Fu series:

    “Expect the unexpected.”

    Reply
  8. Well, I hadn’t expected one of our most expensive rentals to be occupied so quickly, Don. Vacant six days. We had feared we might need to drop the rent.

    Y’know, our boyscout culture has probably over-prepared us for the worst.
    So many times great things we _hadn’t expected_ happen instead.

    Maybe my optimism is some kinda disease. Hope it’s not catching!~ :D

    Biker Pete
    August 26, 2010
    Reply
  9. “History repeats itself until it doesn’t” is another favourite of mine as well. This doesn’t mean I have trouble tying my laces in the morning though, Biker. I just find them comforting in rolling with the punches and what not that come my way, not that there have been many lately :)

    For my part I am extremely optimistic about the future, it just wont be the one we think we are going to have if that makes sense.

    Reply
  10. No, in your industry it’s probably realistic to expect a few hiccups, Don.
    I’ve worked in thriving WA towns which mining companies have suddenly and _entirely_ mothballed over the years. Population: 1 … a caretaker.

    The west is littered with little ghost towns (well, until the high price of gold dusted them off, anyway). ;)

    Our amygdala got us through the primitive phase of development. Couldn’t have got here without it… but we can overuse it in planning ahead. Neither fight nor flight are great long-term strategies in economics!~

    Rolling-with-the-punches (flexibility) is, however, a great strategy. :)

    Reply
  11. peterg: You might want to look at the tax & royalties takes before you go casting WA off. All the income tax collected in Australia gets spent back on welfare payments. All the other govt spending comes from business and other taxes.

    As for the alps and melted – well, Victorian resorts reporting highest springtime falls in 20 years. Guess I should know that Global Warming causes more snow and less snow at the same time, just like it causes both droughts and flooding rainsm, and both less polar ice and more polar ice. From what I’ve heard it also causes piles, runny noses and scratchy scalps, not to mention delusions of grandeur amongst minority parties with 1 seat. You just tell me what the optimum climate setting is and we’ll raise a lot of tax and twist the thermostat, yes?

    Reply
  12. “Guess I should know that Global Warming causes more snow and less snow at the same time”

    Yeah right….makes sense to me NOT. I’m also sceptical of Global Warming” too, brc. You know, as the (in)famous G.W Bush said:”The Globe…..is Warming”.

    What a load of rubbish, yet another gravy train for scientists/pollies…

    bearamundi
    August 26, 2010
    Reply
  13. Well, the earth is experiencing climate change, fellas. The argument is really about whether that’s part of a ‘natural’ multi-millennial cycle; or whether man is a major part of the problem.

    Funnily enough, I find myself adopting Katter’s view on all this. (Who’d have thunk it?!~ ;) ) Regardless of whether man is, or isn’t the reason for global warming, we need to initiate new technologies which are cheaper and cleaner. Alternative energies are best when ‘cheap meets clean’. Recycling? Well, that has _always_ made sense, particularly where we don’t _waste_ resources saving them. :)

    Reply
  14. “Katter’s view”…YAWN

    It’s a load of cr*p Biker, as you say, cyclical. Everytime I see that prophet (Al Gore), whose pained trepidation certainly hasn’t curbed his gargantuan appetite, I want to vomit.

    bearamundi
    August 26, 2010
    Reply
  15. Gored to death, hey, Bear? That’s what ya get messin’ with the bulls… ;)

    Reply
  16. You’re right about the bull.

    These Prophets always need cash for some reason. Sometimes they’ll tell you about their cosmology, and shrug: “Look, nobodies perfect. Our Supreme Being, creator of the Universe, can’t handle money, he just needs a bit every week to balance the books, you know how it is.”
    Sorry, I don’t know how it is…. :roll:

    bearamundi
    August 26, 2010
    Reply
  17. “Look, nobodies perfect.”

    Now from a learned fella who cites Illich, this is a surprise!~

    Didn’t he say that: “…some missionaries, notwithstanding their efforts, never come to speak properly… ”

    He may not have been discussing the difference between plurals and contractions, but your confusion about the two is a little surprising.
    Having trained you to capitalise your tag, we _may_ now be able to help you with apostrophes and plurals, Bear.

    Our Supreme Being, creator of the Universe, will be much impressed! ;)

    Reply
  18. Well, that didn’t last long, did it? Look, we showed you the capital B, you applied your new learning… and now you’re backsliding:

    “Comment by Bearamundi :D on 24 August 2010: Thank God for Homer Simpson, now there is a slow(er) learner… .”

    Just two days later: “Comment by bearamundi :roll: on 26 August 2010: “Look, nobodies perfect.”

    But you know all the holistic stuff, cosmology, Illich, the whole bagful.
    What _are_ they teaching in schools these days?!~

    Reply
  19. “Well, that didn’t last long, did it?”

    Your ‘sensitive’ phase didn’t last much longer did it, BP?

    Who do you think you are, Mr Rabbit?
    (Show us the money, Tony!)

    Reply
  20. err,just testing?

    You are exactly right Biker. :roll:

    bearamundi
    August 26, 2010
    Reply
  21. Jeez, you sound just like my missus, mate!

    Biker Pete
    August 26, 2010
    Reply
  22. Sorry if I am being a ‘big head’.

    My point is simply that you should be wary of the man who offers you a reward, in this world or the next. Al Gore and the climate crowd offer a reward in this world, while the religiously inclined offer a big reward in the afterlife as well. I am not offering any reward, not so many virgins, or a vacation with Jesus, or this much money etc. Nothing.

    bearamundi
    August 26, 2010
    Reply
  23. “My point is simply that you should be wary of the man who offers you a reward”

    M-a-a-a-t-e, you’ve got me paranoid about blokes in fluoro vests. Never mind about the greenies, Muslims or JWs; that glowing, impoverished b*gger in the Nissan Patrol is the one I’m worried about. ;)

    Biker Pete
    August 26, 2010
    Reply
  24. It’s not a Patrol, he’s not cool enough for that. You know Biker, some people just don’t like the way I roll, and I get afraid they’ll try to ding my ride.

    bearamundi
    August 26, 2010
    Reply
  25. “…some people just don’t like the way I roll…”

    Trust me, your suspicions are NOT paranoid… this hi-viz fella is on your case, Bear. Next time you see him ahead, accelerate and give him a real whack on his left rear fender with your front bicycle wheel, forcing him into oncoming traffic.

    We large land mammals have to co-operate. I’ll stay right here in my trench… and you get out there on the highway and take him down!~

    Reply
  26. I’m on it Biker!! Rope-a-Dope baby!! ;)

    bearamundi
    August 26, 2010
    Reply
  27. Climate science/fraud makes me vomit too. Esp to see my kids being brainwashed by these zealots using schools system. Reading through CRU emails you see there is no room to question outside of the CO2 = warming parameter. The goal is to find and even fabricate evidence to fit the hypothesis. What happened to formulating hypothesis in response to evidence/observations? The hockey stick..a fraud debunked by Steve McIntyre and others and yet the charade continues. Twenty years ago I see on TV graphic illustrations depicting rapid rising sea levels flooding our local areas by 2001. Looks no different there even now. Its not science but alarmism…preying on peoples natural fearfullness. The Dutch National Institute of Coastal and Marine Management should know with so much to lose if sea levels rise…they coduct measurements there. But their data suggests “The water level measurements show no acceleration in sea level rise”. There is only the minute increase in levels over long time frames as per a post Little Ice Age anomaly. The same as whappened in the Medievil warm period which was hotter than the current day. Oops cant have that.. better delete MWP from history books….how dishonest. Last ten years have been cooling..oops delete the colder temp figures. Reading through CRU emails we also see the biggest oil companies funding the fraud/research. Interesting considering how AGWarmers until then consistently accused skeptics of being oil backed propagandists.
    AGW is without a doubt the greatest fraud ever commited.

    You got me started Bear ;)

    Reply
  28. Hey Lachlan, tag-team!!
    Glad someone else questions this too. And it is sickening to see little aussie’s in the newspapers/media proudly committed to Climate Change. We are supposed to be freeing their minds, not filling their heads with more conditioning. Hitler must have been dumb-founded at how easy it was.
    I’ve got a link to the Jackass’s latest, on silver;

    http://www.marketoracle.co.uk/Article22197.html

    If you get the time have a look, pretty (Shhhhh) negative though

    bearamundi
    August 27, 2010
    Reply
  29. This climate subject does things to me I dont feel comfy with Bear….body mass expanding….shirt tearing…green skin appearing..GRRRRRRRRRRRRRRR. I just cant afford all this new clothing time Bear ;)

    Reply
  30. The Incredible Lachlan!!

    At work though, with the aussie politics you keep your mouth shut though, don’t ya? Otherwise, you’d lose your job if you weren’t careful… :roll:

    Bearamundi
    August 27, 2010
    Reply
  31. “Otherwise, you’d lose your job if you weren’t careful… :roll: ”

    Apparently one can do just about anything one wants, at work, Bear.

    Reply
  32. No way Biker!! I hope I haven’t given that impression, but it wouldn’t surprise me if I had boasted something in an effort to look ‘good’ on DR. No, at work there is a lot of politics, you feel like you are waging a war on all fronts at times. And it is not just me, as an email from a colleague also mused about the same thing this morning. You have to figure out the PC drill and play the game accordingly. ie keep your mouth shut. But it is pathetic.

    Bearamundi
    August 27, 2010
    Reply
  33. Good chance those emails are being logged, Bear! It’s a simple matter, so you should be careful. One of our staff was ‘outed’ a few years ago, chatting to her BF. Apart from her husband’s concerns about that, the office gossip, etc., it wasn’t a happy situation… .

    I’d like to think she learned from that experience, but I see she’s shifted twice since then.

    Reply
  34. Thanks for the heads-up Biker, I’ll moderate my computer use accordingly. I know a guy who flies planes. On flights most of the time the plane is on auto-pilot so he plays games on his phone. Really, what is he doing wrong? I mean, apart from risking getting caught(which he won’t)?
    O,H&S is another example of the huge stressors on working people. A lot of it is silly, self-imposed(by that I mean the Company) stress.
    As I’ve said before, look at the best country in the world, as per Newsweek: Finland. Ground up, number 1 in education. Then they build on that. On the other extreme, we stuff around at school, basically pillage the land, and then try to mix-it. Don’t stand a chance!!

    Bearamundi
    August 27, 2010
    Reply
  35. And least it’s good he’s got the games to keep him alert Bear. I strongly suspect that if he didn’t, he’d be ‘resting his eyes’??? Pilots and chefs – Best we don’t spend too much time thinking about what one lot get up to in the cockpit and the other lot in the kitchen perhaps?

    Reply
  36. My mate, a pilot, has a deal with me in which he cellphones me, flying over our property, a signal that we should drive out to the airport to pick him up.

    The other day we got the call. “Go outside and look up!” he shouted.

    OK, we went out on the patio and were looking up, staring for a sign of his twin-engined plane… when the b*stard _drove_ around the corner of our house, with the cars’ occupants all screaming with laughter at us… .

    Best rule at work? Do what you’re paid for. Always worked for me!~ :D

    Reply

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