Germany is not Volkswagen, but the wake up call should not be ignored

Dalia Marin recently published a Project Syndicate column titled “Germany is not Volkswagen”, which basically tries to portray the fraud by Volkswagen that was recently uncovered by the US authorities as an isolated case and stress the strength of the German manufacturing culture. Germany is not Volkswagen, indeed. BMW, for example, passed the very same […]

What Ever Happened to the Misery Index?

Remember the 1960s? The 1970s? Back then, inflation surged from one peak to another but failed to deliver the low unemployment rates promised by the Phillips curve. In fit of frustration, economist Arthur Okun invented what he called the misery index—the sum of the inflation and unemployment rates. As the following chart shows, those were […]

Five Reasons Not to Fear Deflation: Which Ones Make Sense?

In a post earlier this week, I explained why a majority of economists fear deflation. They argue that deflation disrupts the operation of financial markets and labor markets in a way that risks touching off a downward spiral. At the same time, they say, deflation weakens the power of monetary policy to reverse the downward […]

Germany: It Ain’t Your Father’s Locomotive

This Great Graphic comes from Markit’s Chris Williamson.   It illustrates that the German good producing sector has fallen on hard times again.  The economy contracted by 0.2% in Q2.  Another decline in Q3 cannot be entirely ruled out, though it may just escape with something just above stagnation. The main cause that most politicians and economists will focus on […]

Stuck in the Middle With Merkel? Upcoming German State Elections

German politics will become more interesting starting this weekend.  On Sunday, the largest state in the former East Germany, Saxony will hold its local election.  The key issue is how does the anti-euro Alternative for Germany (AfD) do. In May, much to the chagrin of Chancellor Merkel, the AfD garnered enough vote to secure representation in […]

European Doldrums

European economies are faltering.  The German economy contracted in the second quarter, as did those of France and Italy. Growth in Spain and the Netherlands was not enough to offset the slowdown in the Eurozone’s largest members.  An escalation in the confrontation with Russia would send shockwaves rippling from the Ukraine westwards that world worsen the situation. […]

Germans Happily Pay More For Renewable Energy, But Would Others?

By Chris Dalby: While Germany is breaking world records for the amount of sustainable energy it uses every year, German energy customers are breaking European records for the amount they pay in monthly bills. Surprisingly, they don’t seem to mind. In the first half of 2014, Germany drew 28 percent of its power generation from renewable energy […]

Bundesbank Says Nein and Ja on Further ECB Accommodation

Germany appears to have capitulated.  The Bundesbank has dropped its opposition to extraordinary measures, like ending the sterilization of the SMP bond purchases, and has even dropped its visceral opposition to QE, if it can be structured properly to keep within the ECB’s mandate. As Jurgen Stark’s recent op-ed piece in the Financial Times makes clear, this […]

Three PMI Surprises, but France Takes the Show

There have been three flash PMI reports today, and each was surprising.  China and Germany surprised on the downside while the French surprise was on the upside.   HSBC’s flash read on China’s manufacturing sector weakened for the fifth consecutive month.   The flash March reading of 48.1 compares   with the final February of 48.5.  The forward […]

Back to the Future: Euro, Sterling Bid, Dollar-Bloc Heavy

There has been a dominant theme in the foreign exchange market that had seemed to waver in recent days, but has returned in force today.  That theme is about the divergent performance of the dollar, which makes it difficult to discuss the greenback in general.  Essentially, that theme is for the euro and sterling to […]

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