CDS: Just Another Evanescent Bubble?

Sunday, February 21st, 2010

More on the Greek debt crisis from Naked Capitalism: German Paper Says AIG May Have Sold CDS on Greece. That German paper would be the excellent business-sheet Handelsblatt, and the full translation of the article into English which that blog’s proprietor requests in her post follows after the jump.

UPDATE: Correction! Looking at that original German piece, it clearly comes originally from the Frankfurter Allgemeine Zeitung or FAZ – often called Germany’s own New York Times. I have noticed before how the two papers clearly have an arrangement allowing Handelsblatt to reprint certain FAZ material. Credit where it is due . . .
(more…)

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Jean Quatremer, Goldman Sachs, and Greece

Thursday, February 18th, 2010

Over on the financial blog Naked Capitalism today there are some very interesting links concerning the seemingly nefarious role Goldman Sachs has played in the recent past with the Greek government, that government’s attempts to both hide its debt and to find ways to fund it, and with the Eurozone in general.

The headline link is to a very revealing blogpost by Jean Quatremer, Brussels/European correspondent for the French newspaper Libération – but the link is only to the French original. Herewith my translation of that, after the jump, complete with the links Quatremer uses within his piece (other than when they go to Wikipedia or to general homepage sites): (more…)

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Europe Now Richest

Wednesday, September 16th, 2009

Germany’s Die Zeit allowed itself yesterday a bit of gloating: Europe takes over from North America as richest region. It’s all due to the Great Recession: North American wealth is to a much greater proportion held in equities, whose values lately have plummeted, so that assets under managment (AuM) there fell by 21.8% in 2008 to $29.3 trillion, while in Europe AuM fell in the same period by merely 5.8%, to $32.7 trillion. Latin America was the only region where AuM increased despite the adverse economic conditions, by 3%.

All of this, and more, is information forthcoming from a new study by the Boston Consulting Group, which the BCG is kind enough to discuss at length here, in English, so you can consider those previous and the study’s other findings at your convenience. (For example, the US still has the most “millionaire households,” at almost 4 million, although they are thicker on the ground in Singapore, where a full 8.5% of all households own more than $1 million.) Indeed, not only is the BCG itself willing to state figures to one decimal place, while Die Zeit for whatever reason tends to round up to the nearest whole number, but the former also makes use of the American/British system of big numbers (thousands, millions, billions, trillions) that you are probably more used to (and whose differences with the continental European system I had occasion to discuss here previously).

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German Retail Giants Toppled

Monday, August 31st, 2009

“Eick is being rewarded for a task that he did not fulfill!” is the complaint from labor-council chairman Ernst Sindel featured prominently in a new article in Die Zeit by David C. Lerch over the bankruptcy of German retail-giant Arcandor. Welcome to the Anglo-American business culture, Herr Sindel! Isn’t that something that Germans have always been striving to emulate? Well, now you’ve arrived, complete with around 38,000 company employees about to lose their jobs and unsure about where their next paychecks will come from, while Arcandor’s CEO (one Karl-Gerhard Eick) also loses his job but receives a €15 million “golden handshake” to help ease his transition. At least that money will not come directly out of Arcandor’s empty coffers, but rather from those of the private bank Sal. Oppenheim, the bankrupt concern’s majority shareholder.

Money for nothin’ and your chicks for free: that peculiarity has now also reached Deutschland, although at least – thank Goodness – there it does not (yet) involve financial institutions or taxpayer monies. But Arcandor’s plight typifies the way the German economy has been hit hard by the Great Recession, since that business-speak, focus-grouped moniker dates back only to March, 2007, and encompasses two more-serious names, venerable pillars of (West) Germany’s post-war retail world, namely the ubiquitous department-store chain Karstadt and the mail-order house Quelle. Karstadt, in particular, is like Sears in America: every city and town has had one for decades on end, so that you could never even imagine life without it (although, for that matter, Sears has itself been suffering financially for rather a long time now). In another way it is like Macy’s: just like that department-store chain’s world-famous flagship store in New York City’s Herald Square, Karstadt itself boasts of the renowned KaDeWe (Kaufhaus des Westens) in the center of former West Berlin, a gigantic and opulent department store in its own right and the very symbol of Germany’s 1950s-60s era Wirtschaftswunder.

The exact occasion for Lerch’s article is not the sudden discovery of Eick’s generous “golden parachute,” but rather the fact that the three-month “freezing” period, mandated by German law, after Arcandor filed for bankruptcy on June 9 is shortly to come to an end. This means that it will soon be time to liquidate Arcandor, erase that particular business-speak, focus-grouped name from the official business-register, and find buyers for the firm’s component-pieces (or for pieces of those component-pieces, if necessary). Surely someone will be willing to purchase jewel-in-the-crown KaDeWe! It also seems that another big German retailer, Metro, is willing to take up most of Karstadt’s stores to fuse with its own Kaufhof chain. But the mail-order concern Quelle might have a harder time finding a buyer. No interested parties have stepped forward as of yet, and you’d be excused for suspecting that such a business-model might be somewhat outdated, unless it can re-make itself more along the lines of Amazon (which itself certainly already has a robust presence in Germany).

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Ding-Dong The Recession Is Dead!

Thursday, August 13th, 2009

Word is from over there on the West side of the pond we call the Atlantic Ocean that your Great Recession is coming to an end, to the point that the Federal Reserve is starting to move “back toward normal policy.” Well, it seems the same is true for Europe’s largest economy, Germany, as we learn today in the Frankfurter Rundschau: new data out from the Statistical Office there show that there was growth of 0.3% in the second quarter, even though 35 analysts surveyed by Reuters had earlier collectively counted on further GDP-shrinkage by about minus 0.3%.

In fact, that Office reports that there were signs that growth actually re-commenced already in this year’s first quarter, although the cumulative total for 2009 does stand now at minus 3.5% (and is still expected by the government and some leading economic institutes to come out at minus 6% for the year). Even better is the year-on-year comparison with 2008’s second quarter, which itself was minus 7.1%. (I’m assuming all these growth/shrinkage percentage figures are normalized to an annual basis.) Increased private and governmental consumption, as well as construction, get the main credit for the upturn – plus the singular fact that German imports have lately contracted even more than their exports, thus sharpening further the world-beating performance of that champion German export-surplus machine.

Still, you don’t have to be too much of a skeptic to ask “So what? What does this new, surprising, but small growth number really mean?” So the (uncredited) FR reporter turned to a handfull of economic analysts from leading banks and think-tanks to get their opinions. Analysts from Commerzbank and Unicredit (an international bank, Italian in origin) are very optimistic, stating for example that “The recession is over, and has reached its end earlier than everyone thought. . . . According to our calculations we will see a V-shaped recovery in the second half of this year.” Call me congenitally gloomy, but I find the remark from Jens-Oliver Niklasch, of the Landesbank Baden-Württemburg, to be rather more enlightening:

The question is, how enduring [this “end-of-recession”] is. Many problems we have not solved, the banking sector just like before is especially reliant upon the State’s debt-shield. As long as it is not clear that the banks’ capital base is robust, we cannot assume that the Crisis is past. Japan is a cautionary example here.

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A Simpler, Soberer . . . Las Vegas?!

Wednesday, August 5th, 2009

With a skewed, vertigo-inducing photo taken at the top of a Strip roller-coaster at the head of their piece, Julie Hjerl Hansen and Thomas Hebsgaard of the Danish commentary weekly Information recently presented an interesting profile of the recession travails of Sin City itself: Las Vegas, Nevada (An Amusement Park in Decline). Their lede here provides a good summary, here it is:

A bad hand. Las Vegas is used to pulling through even when the rest of the USA is in crisis. But it’s not like that anymore. The financial crisis has hit the casinos, while the housing market has collapsed – and these days Las Vegas is the city in the USA where the most people are put out on the street.

It’s easy to see why Hansen and Hebsgaard chose Las Vegas specifically for their “US metropolis in economic crisis” feature. Predominating above all must have been the way that city exerts a certain fascination upon most foreigners, in that it is literally impossible for them to find an analogue to it in their own countries (no matter where they may be from – the gambling paradise of Macao, off the southern coast of China, probably comes the closest), and therefore to easily understand the place. Like an unconquered peak to a mountaineer, Vegas must represent to the ambitious journalist the same sort of challenge, defying one to ever come to grips with it, to ever master what really makes the place tick. (more…)

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“Cash-for-Clunkers”: Made in Germany

Saturday, June 13th, 2009

One element in a new spending bill now agreed to by both the US House and Senate is a provision which would provide a US Government voucher of up to $4,500 to Americans to trade in their old automobile for a new one – preferably one more fuel-efficient. It does seem that, as things have proceeded through the legislative process, the motivation of stoking domestic demand for new automobiles has plainly won out over the initial environmental reasoning behind the measure, but at least it does seem pretty guaranteed that the former aim will be accomplished. That much we know from the experience in the country that implemented this idea in the first place, and Birgit Marschall and Martin Kaelble of the Financial Times Deutschland point out that this Abwrackprämie, or “scrapping premium,” is namely a German fiscal innovation. (more…)

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That’s It, Then: It’s All the Chinese’s Fault

Monday, May 11th, 2009

It looks like World Bank released an interesting publication a few weeks ago, the “Global Monitoring Report.” Jørgen Steen Nielsen of the Danish commentary newspaper Information has got it covered, albeit with a title for his review-article that the World Bank bureaucrats would never have dared to formulate themselves: The Chinese saved up for the American binge. Likewise, Nielsen’s lede would probably have not passed muster with the World Bank editors:

The large developing country [i.e. the PR of China] through its loans financed the overconsumption in the USA that launched the global recession and now forces millions in undeveloped countries into unemployment, hunger, and extreme poverty, said the World Bank.

How many millions exactly? The report does provide these numbers: 55-90 million more people in undeveloped countries driven into extreme poverty, 50 million in addition to that made unemployed, and the ranks of the world’s chronically hungry growing to over one billion. China did this (that’s the implication Nielsen draws out from the report) by recycling its dollar earnings from exports to the US through the amassing of incredible quantities of US Treasury debt – $696 billion by the end of last year, now grown to $744 (out of a total amount of foreign-owned US Government debt obligations of $3.1 trillion).

Again, this is probably not the slant that the writers of this report originally intended. It seems clear that their point was rather to warn how the UN’s Millenium Development Goals are in danger of not being achieved by the target date, which is 2015. You probably don’t remember this (I don’t either), but back in September, 2000, there was a “Millenium Summit” held at the UN’s headquarters in New York City, the largest gathering of world leaders in history as of that date, when those leaders committed their countries (192 states in all) to certain anti-poverty/anti-disease goals. But now, the report writes, “it is improbable that most of the eight global goals agreed to can be achieved – among these the goals having to do with hunger, child- and childbirth-mortality, education and progress in the fight against HIV/AIDS, malaria and other serious diseases.” In particular, the report writes off entirely sub-Saharan Africa’s chances of achieving these goals.

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Germany in EU Budget Doghouse Again

Monday, May 4th, 2009

Die Zeit today brings doleful news: Germany has a relapse! What the unnamed journalist (no by-line) is referring to here specifically is what he calls the “Maastricht Criteria,” according to which EU member-states are supposed to keep their government budget deficits to 3% of GDP or less. (That’s OK as a name, but it would be more accurate to call this requirement part of the Stability and Growth Pact that was agreed to as a pre-condition for the establishment of the euro.) Sure enough, the European Commission now calculates (in a report released today) that the German debt this year will amount to a full 3.9% of GDP – and next year even 5.9%! And all this, the Die Zeit article notes, just two years after Germany had managed to get itself out of the Commission’s bad graces (actually, out of a full-scale official EU “penalty process”) for violating this rule!

Well, to offer a quick bit of economic analysis: No sh–, Sherlock! (more…)

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Germany’s Dr. Doom Speaks!

Monday, April 27th, 2009

I hate to be a “downer” here at EuroSavant, but nonetheless feel an obligation (as explained below) to bring up recent alarming pronouncements about Germany’s immediate future made by a prominent economics professor there, Dr. Max Otte (full last name: “Otte van Ullstein”) of the University of Worms. The main coverage I found in Die Welt (Crash-guru demands vacation-ban for Germans, no by-line), although that article references and orients itself around a brief interview Prof. Otte recently gave to Berliner Kurier (The crash-professor prophesies: the crisis will hit us this hard), a Berlin-based tabloid. (more…)

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Doing Well in the Recession à la française

Tuesday, April 21st, 2009

“Make no mistake,” as Grégoire Biseau writes for the French left-leaning newspaper Libération, “the crisis continues to wreak devastation.” He cites only figures for France, but they still do not make for very reassuring reading: bankruptcies, for example, are up 21.3% in the first quarter of 2009 (presumably year-on-year), and profitability for non-financial firms is at its lowest level since 1985.

The question naturally arises: Surely there must be companies, somewhere, which are still doing well for themselves despite the tough times. Who are they? Perhaps more importantly – because of the clues that may be extractable for the rest of us – how are they managing to pull that off? As chief editor and team leader, Biseau enlists his colleagues at Libération to put together an article-collection addressing these questions, under the master-title of Seven aspects of getting around the crisis. (more…)

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Monopoly Meister

Monday, April 20th, 2009

monomansmlVarious American papers (such as the Washington Post) covered the recent 2009 Monopoly US National Championship, which was actually staged last week inside of Washington, DC’s Union Station. But people play Monopoly other places, too, as we are reminded by Matthias Wyssuwa of Germany’s Frankfurter Allgemeine Zeitung with his coverage of the eleventh annual German national Monopoly champion competition (Go to jail).

Granted, America was the original source, in the 1930s, of this ultimate free-market, real estate buying-and-selling competition (looked at it that way, where else could it have come from?), and Wyssuwa informs us that all of this world-wide Monopoly tournament activity is in preparation for the World Championship to take place later this year in Las Vegas. That’s also a fitting choice, except that Atlantic City – whose street-names are the ones you find used in the classic American edition of the game, you’ll recall – would have been even better. Of course, it’s German street-names that are used in the German edition; for example, Hans-Georg Schellinger, the ultimate winner of this 2009 German championship, is said by Wyssuwa in the final round to build up a real estate empire “from the Badstraße to the Opernplatz.” (more…)

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Taming Runaway Bonuses

Monday, March 30th, 2009

Here in the Netherlands we also have a prominent financial sector, dominated by a handfull of internationally-operating banks (e.g. ABN Amro, ING, even Rabobank) for which the value of the assets of any single one alone exceeds the national GDP. It follows that developments here over the past six months or so have more-or-less echoed the more-prominent financial travails in, say, the US or Great Britain: overindulgence in promising new asset-classes – often involving American real estate – which then turn out to be “toxic,” concerns over solvency, government injections of capital through one means or another, and in general some rather poor performance on the part of financial executives when it comes to sober risk analysis and maintaining their institutions’ very financial viability.

What is also not missing from the Dutch experience is the phenomenon that has gotten much of the American and British public exercised in recent weeks, namely that of financial executives walking away with huge monetary bonuses in the face of what is commonly understood as the meaning of “bonus” (“paid over and above base salary to reward extraordinary performance”) and the glaring absence of any merit that would justify them. (more…)

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Mega-Number Confusion

Saturday, March 21st, 2009

. . . and now back to our regularly-scheduled coverage of depressing news from the current economic crisis. The latest development is the Congressional Budget Office’s report, released yesterday, maintaining that the US Government actually faces budget deficits and total indebtedness amounting to even higher unbelievably-large numbers than the unbelievably-large numbers presented under President Obama’s budget proposals.

The respected German daily Die Welt promptly picked up on this news to come out with its own article: Congress expects highest deficit of all time. What we should look at first here is the German word for “deficit” itself, used in that headline: Fehlbetrag, derived from the verb fehlen, “to err, sin, blunder” – so a “blunder-amount,” if you will. That pretty much sets the tone, right there; even before the reader’s eye gets to the inserted photo of an earnest President Obama – i.e. while it is still reading the lede – it gets assaulted not only by enormous numbers ($1.8 trillion/€1.3 trillion deficit for 2009, $9.3 trillion debt by 2019) but also by the accompanying loaded descriptions (“record total,” “without precedent,” “a debt-mountain”). Then the remainder of the relatively short piece fills in the remaining horrific details, like that such deficits would amount to over 4% of US GDP – “a value that experts term untenable.” US Budget Director Peter Orszag is quoted as conceding that a 5% deficit (getting close!) would truly be unbearable, even as he also maintains that the CBO’s estimates are unduly more pessimistic than the administration’s proposals. (more…)

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Škoda Free-Trade Success

Thursday, March 19th, 2009

fabiaNeed a little bit of good recession-related news? Maybe even something with “rejoice” in the title? We get that from the mainstream Czech daily Lidové noviny, reporting on recent Škoda auto sales: Germans fall in love with the Fabia, Škoda rejoices. Yes, Škoda’s Fabia (pictured here) was the second-most-sold automobile in the German market in February, 2009, behind only that perennial favorite the VW Golf. At 9,190 units sold, Fabia sales were triple what they had been only the previous month, while sales of the Octavia also improved enough to push that sister Škoda model (more of a luxury auto, I believe) to 19th place on the auto-sales hit-parade of what is of course a very competitive German market. One important result of all of this is that Škoda has cancelled the plans it had to go to a four-day work-week until the end of June; the five-day work-week (meaning five-day pay for personnel) will stay. (more…)

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Ex-Soviet Club Presidents’ Summit Shows Russia’s Increasing Clout

Thursday, February 5th, 2009

Just as the Obama administration is getting prepared to ramp up US military strength in Afghanistan by about another 30,000 troops, a very real problem has arisen as to how to keep supplied the NATO troops already on the ground there, much less bring in brand new forces. The land supply-route from Pakistan via the Khyber Pass has lately become somewhat insecure and unreliable, but now the air route threatens to become much longer and more difficult due to the announced closure to NATO use, within six months, of the Manas airbase near the Kyrgyz capital Bishkek. The Washington Independent’s ace (US) national security reporter, Spencer Ackerman, now considers the Manas closing as inevitable, while Scott Horton over at Harper’s enlightens us as to the corrupt and high-handed (even deadly) American behavior there that caused relations with the Kyrgyz to sour to bring us to this point.

The world-renowned French daily Le Monde provides yet more context for that Kyrgyz government decision (Five countries of the ex-USSR create a fund for dealing with the crisis). Those five countries are Russia herself, Belarus, Kazakhstan, Tajikistan and, yes, Kyrgyzstan, and the article shows clearly how Russia has succeeded in re-extending it’s influence over the Central Asian countries both financially and militarily. Sure, there is that $2 billion loan and $150 million in an outright grant reported by the New York Times that Russia has offered to Kyrgyzstan. But that august newspaper failed to report that Kyrgyz president Kurmanbek Bakiev travelled to Moscow in the first place to take part in a summit with Russian president Medvedev and the presidents of five other ex-Soviet states. It was there that the subset named above established a collective $10 billion fund (with a disproportionate Russian contribution, one would expect) as an emergency and stabilization reserve for confronting the worldwide financial crisis.

But that same summit had an important military dimension as well. All seven of the presidents in attendance (i.e. the five listed above plus those of Armenia and Uzbekistan) agreed to create “collective armed forces” for responding to common external threats. And it was actually in connection with this summit meeting that Kyrgyz president Bakiev made his announcement that the Manas airbase would shortly be closed to the Americans.

Although it is true that “collective armed forces” is a vague phrase, and that one should wait and see what comes of it in operational practice (if anything – it’s highly unlikely to mean a fusion of all those nations’ armies, for example), it is nonetheless clear that Russia’s influence in Central Asia is waxing. But it’s also probably useful to remember that American access to airbases in the region, starting in 2001 (i.e. less than ten years after these states had gained a sort of “independence” from Soviet Russia) was extraordinary to begin with, and really only due to the world political climate in the wake of the 9-11 attacks, which among other effects brought about toleration for this extraordinary concept from the Russian government. If that attitude cooled soon thereafter, it did so somewhat less quickly in the states actually hosting American bases, namely Uzbekistan (with an airbase made available until 2005) and Kyrgyzstan, giving them for a while at least a veneer of policy “independence” from Moscow. The impending loss of the Manas base, however – although considerably helped along by American behavior, as Scott Horton reminds us – was in this geopolitical context something inevitable, so that one would rather hope and expect that contingency plans for what to do next are already in place at the Pentagon.

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Toy Train Has Left the Station

Thursday, February 5th, 2009

Sorry for the unrelenting bad news, but here’s a brand-new victim of the current financial crisis that you might be interested in. Märklin is bankrupt, Hasnain Kazim reports on Germany’s Spiegel Online. As his lede then continues:

. . . and millions of model-railroad friends grieve for the tradition-filled enterprise with cult-status. The majority-owner had announced a [financial] rescue not long ago. But now the firm has become a victim of the financial crisis, of management mistakes and of a societal shift.

I also looked at reports of Märklin’s recent demise from various other German on-line publications, but the Spiegel’s account is the best because of the interesting background information that it provides. Like how about this: the announcement that the firm would have to file for bankruptcy from Märklin’s chief executive Dietmar Mundil came yesterday, just prior to the opening of the annual International Toy Fair convention in Nürnberg. And this was only shortly after the company’s marketing head, already present in Nürnberg for the convention, had issued a statement for the benefit of his fellow convention-goers (i.e. worldwide toy industry professionals) that there was no bankruptcy on the horizon for Märklin. Embarrassing, that, but maybe top management should not be blamed too much here, since it seems the bankruptcy was also a surprise for them, something that suddenly became unavoidable after the recent unexpected refusal by the company’s banks to roll over the €50 million in credit it had outstanding.

Ah, but who was that management? Not the original families who had founded and built up this model-train manufacturing business over the course of 150 years (the Märklin family, yes, but also the Friz and Safft families); they sold out in 2006 to a consortium made up of Goldman Sachs and Kingsbridge Capital, a London-based private-equity firm. The company had been losing money since 2004, you see, and these new owners proceeded to do what such private-equity new owners do, namely make their new acquisition start producing profits again no matter what had to be broken in the process. Four hundred of the total 1,400 jobs were eliminated, along with two factories, toy retailers were instructed to pay their invoices more promptly, etc. But those new owners consortium also invested in developing the company and introduced imaginative new marketing wrinkles, such as model-train “starter sets” sold for €100 at the German low-cost supermarket chain Aldi, as well as the simple insistence that store-owners display the model trains more prominently. And indeed, turnover did rise through 2008, to €128 million by the end of the year, so that Kingsbridge head Matthias Hink could declare then that “Märklin is one of Germany’s best brands and has considerable potential,” and that they certainly never intended to sell it. From Kazim’s account, we probably need to take Hink at his word here; it does seem that the firm ultimately went under solely because it could not achieve a credit roll-over that would have been routine for it in normal times.

Out of Track in the Long Run?

On the other hand . . . maybe Märklin was actually doomed, sooner or later. Let’s face it: who plays with model trains these days? Kazim gets some interesting quotes on this subject from an expert, one Werner Lenzner, a toy-industry market researcher, who asserts that, starting in the 1980s, model trains were not for kids anymore but for adult collectors – typically male and between 40 and 60 years of age. The individual pieces were no longer relatively cheap toys meant to be kicked around; they had became expensive and were meant for display. This older cohort is now, in the first decade of the twenty-first century, to be found according to Lenzner “rather sit[ing] during their leisure time in front of the computer [ed. interjection: reading EuroSavant!] or at the fitness-center.” Lenzner is even willing to say for the record that those who still sit around building elaborate miniature train tableaus are now generally viewed as schräg – which my dictionary defines as “slanting, oblique” but I think we can figure out that term’s slang (and probably not so complimentary) meaning.

Then again, what Matthias Hink from Kingsbridge said about the staying-power of the Märklin brand remains true, I think, and no brand really ever has to die unless for some reason it is explicitly put to death. Someone else will surely buy up that brand and the company’s other assets and carry on. Lenzner again: the main mistake was “to make very costly [train] models, in extreme detail, which only a well-to-do collector could afford.” So the new Märklin probably should go back to manufacturing true trains for the kids. Or maybe expand further the product-line to which it can apply its powerful brand: Märklin “train engineer” sunglasses, anyone?

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The Faces of Economic Hardship

Thursday, January 15th, 2009

Now that the German government has finally ditched its initial stance of taking only perfunctory measures in reaction to the economic crisis and has instead launched its own expensive stimulus program (as we discussed in the very last post, just below), it’s understandable that there would be some new Teutonic curiosity about how other countries are coping – I mean, now that Angela Merkel’s government has ceased writing everyone else off as a bunch of free-spending Nervous Nellies. So Die Zeit takes up the comparative economics assignment in fine style with a captioned picture-series entitled “Ways out of the crisis,” and dealing with the approach to recession-relief taken by seven of the world’s main nations, one page per country (pages 8 & 9 just have supplementary content).

Those without a facility in German will of course only be able to fully savor each page’s accompanying photo, which in each case presents a scene out of a soup-kitchen or other poor-relief facility in the respective country. Oh, and if your eye should happen to catch sight of the various numbers mentioned in the texts to the right, you will need to remember that Billion (plural: Billionen) in German actually denotes what Americans would call trillion; it’s Milliard in German (plural: Milliarden) that is “billion.” Note that I will, as usual, use the American terminology.

Otherwise, you can be sure that each country discussed (in order: USA, Russia, Brazil, the UK, France, China, and Japan) is taking active, although varying, measures to counteract the economic crisis. The prize so far goes to China which, when central government outlays are added to additional monies released for provincial governments, has committed to around €1.5 trillion in spending, or 2/3 of current Chinese GDP. Then again, they started earlier (the first major stimulus plan was announced in November), and they can afford it more, holding around €1.4 trillion in foreign exchange reserves. And it does seem that conditions there – except for foreign trade volume – are already starting to turn up. The US, in stark contrast, at this point according to the article can still point only to Barack Obama’s still-inchoate plans for an stimulus package of around €600 billion (no mention is made of recent suggestions to devote some of that to tax-cuts, and yes, the article cites it in terms of euros), which still will raise the federal budget deficit to 11% of GDP. So the Die Zeit editors here are ignoring the $350 billion of the TARP program already spent, as well as that stimulus-money (remember that?) that Congress spread around to all tax-paying citizens last spring – but, come to think of it, there’s not much room to object to them doing that anyway.

Notable mentions elsewhere in this article include the unique aspect of Russia’s relief approach which, other than devoting reserves to support the value of the ruble, features direct money-grants in State assistance to an eligible list of over 300 businesses. (What’s Russian for “corruption” again? How about продажность – “prodazhnost.”) And the brief entry on France points out that the public debt there has now risen to around 4% of GDP, i.e. above the 3% level that all euro-zone members, including also Germany, are supposed to keep below.

UPDATE: Regarding China, others are not so sanguine: Chinese Economy Faces 2009 “Hard Landing,” from Bloomberg (noticed at naked capitalism).

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German Stimulus Plan: Too Little, Too Late?

Wednesday, January 14th, 2009

It’s over: they caved. Maybe some of us had been looking forward to a real-world macroeconomic experiment with Germany boldly carrying the banner for that strain of economic opinion – that is still out there, loud and boisterous – according to which massive government spending is the wrong way to counter the current economic crisis. But now, with the €50 billion Konjunkturpaket II it just announced, the German federal government has hopped on the mega-spending bandwagon with everybody else. It seems it’s just too hard, even for Germans, to be prudent and thrifty in front of the voters when you face a general election later in the year.

The FAZ gives a good summary of what is involved – as you would expect from the FAZ: The main points of the Konjunkturpaket: Car turn-in premium, debt-limitation, and rescue-shield – and at its core lies the usual combination of infrastructure investment and tax-cuts, just this time auf deutsch. Most of the infrastructure investment will go into schools; to help the auto industry, people will get a payment of €2,500 if, upon buying a new car, they turn in their old one; and there will be set up to assist small businesses finding it hard these days to get credit a counterpart to that “Soffin” we’ve discussed here so much lately, i.e. the government-run fund for bailing out troubled banks. (more…)

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Germans to Repeat US Banking Mistakes?

Saturday, January 10th, 2009

Ah yes, as I observed in a post a few days ago, when it comes to state funds made available to prop up failing banks, the German bank bailout demand is low. But “low” does not have to mean “non-existent,” and in fact on Thursday the German government made use of the Sonderfonds Finanzmarktstabilisierung (“Special Fund for Financial Market Stabilization,” or Soffin) it had established to provide Commerzbank with €10 billion in exchange for taking up a 25% ownership stake. More precisely, of that €10 billion €1.8 billion actually buys that equity quarter-stake while the remaining €8.2 billion goes to a “silent participation” that gains no voting rights. By the way, at roughly the same time Commerzbank also took advantage of that other facility offered by Soffin – namely State debt guarantees – to bring in another €5 billion in new capital via a guaranteed bond-issue.

If you were to use your imagination to put yourself in the German federal government’s place – say, if you were a German taxpayer in whose name all this money was being spent – you might very well wonder what those civil servants in charge of the Soffin were thinking by accepting in exchange for the lion’s share of that €10 billion amount a mere “silent participation.” After all, it’s clear that insisting on a 100% active participation would have resulted in the purchase of the entire bank, with money to spare. (Do the math: that €1.8 billion bought a 25% interest, yet constituted not even 25% of the €10 total spent.) Instead, the remainder of that money gains for the government the “silent participation” that is in effect a loan, charging 9% interest. (more…)

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German Bank Bailout Demand Low

Monday, January 5th, 2009

It’s a New Year, and now time for us all to head back to work. But I did want to call forth to the light an interesting article of 31 December 2008 from the Frankfurther Allgemeine Zeitung about the experience so far with the structures the German government put in place last fall to prop up its banks (Few banks seek State protection).

FAZ reporter Manfred Schäfers gives an interesting outline of the monetary amounts and structure involved there. First the former: the German government is ready to issue bank-guarantees in the amount of around €400 billion (the exact amount is unclear because Schäfers mentions two different figures even within the confines of this relatively-short article) and is making available an additional €80 billion in outright capital-injections. The program, run out of the federal Finance Ministry, is the Sonderfonds Finanzmarktstabilisierung (meaning “Special Fund for Financial Market Stabilization,” abbreviated as Soffin), headed by a three-person committee of banking worthies that includes Gerhard Stratthaus, former Finance Miniser for the state government of Baden-Württemberg and Schäfers’ main information source. Strangely, the participation on that committee of two other named individuals, who are supposed to be Stratthaus’ colleagues, is still up in the air.

I guess that’s OK, though, because the point of the article is that Soffin’s agenda is not really chock-full. “Up to now we’ve got 15 applications,” Stratthaus reveals, “and most [financial] institutions are interested in the guarantees.” Of those that are seeking a chunk of actual money – i.e. a piece of the €80 million budgeted for capital injections – their requests to this point add up only to less than €15 billion, and other indications point to Commerzbank as responsible for €8.2 billion out of that alone. (more…)

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Steinmeier in the German “No Worries” Camp

Thursday, December 18th, 2008

I wrote in this space almost a week ago about economic policy chaos in the German government, and a new piece in Berlin’s Der Tagesspiegel confirms that that bunch has become little more familiar with actual economic reality in the interval. Steinmeier warns EU-partners about turning away from the Stability Pact is the headline; the lede: “Germany’s Foreign Minister is worried about finances. Not in connection with the current crisis, but the stable euro. He takes the other EU-lands to task – they need to follow the euro-rules again soon.”

Don’t recall the Stability Pact (more properly, the EU Stability and Growth Pact)? That’s too bad, since it was a favorite topic of this weblog back in the day, especially in 2003. It’s the agreement that underpins the euro, and in fact preceded the formal establishment of the euro, by which all EU states (but especially those using the euro as their currency) pledge to keep their budget deficits to 3% of their GDP or less, and to either keep their national debt below 60% of GDP or – if it already is above that level – to make steady progress in getting it so that it’s below. The idea is to prevent euro-using states from taking advantage of the euro’s benefits (e.g. lower interest rates for their government debt) while at the same time undermining its stability through profligate government spending. All that commentary back in 2003 mostly had to do with the revelation of the ugly political reality that Germany and France – the Union’s heavyweight countries – could violate the Pact whenever they wanted, without facing adverse consequences, all while lesser states (Portugal, the Netherlands) were still forced to take it seriously. Ironically enough, this was a German initiative in the first place, required in exchange for their willingness to give up the deutsche mark, to keep those profligate Latin countries (like the Italians) from ruining the common euro-project. (more…)

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Economic Policy Chaos in the German Government

Friday, December 12th, 2008

Presidential or Parliamentary? The question of which system makes for a more effective and truly representative government has engaged political scientists for many years, but make no mistake: it also has some serious real-world consequences. Right now, with the Bush administration headed towards the history books stained by torture, illegal wiretapping, Katrina, Iraq, financial collapse, a corrupt Dept. of Justice, etc., etc., the presidential model is most assuredly under some disfavor. (Oh, and the presidential system also results in excruciatingly-long lame-duck periods waiting for the new chief executive to take power that are really inconsistent with the speed of events in the modern day. See this recent New York Times article for a solution to that that was contemplated in the past, but which Bush has nowhere near the intelligence nor love-of-country to implement now.) But a recent article in the authoritative German daily Die Welt by Jan Dams (Financial crisis: Glos provokes Merkel and Steinbrück) reminds us of many of the defects of the parliamentary system, especially during economically perilous times. (more…)

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Headed Swiftly for a Crash

Sunday, November 9th, 2008

For all the deluge of advice that the Obama transition team is receiving from every quarter, publicly and privately, about what the goals should be for his new administration, it’s obvious to all that addressing the precarious state of America’s economy has to be priority #1. (Yes, even over puppy selection.) The President-elect made that clear himself in his radio address yesterday, stating “I want to ensure that we hit the ground running on Jan. 20, because we don’t have a moment to lose.” Actually, maybe not even that: waiting all the way until next January 20 increasingly seems some sort of quaint constitutional anachronism in the face of what seems to be the accelerating decline in the American economy.

(As in, for example, Paul Krugman here: “Any way we can get current management at Treasury to take early retirement, and get the new guys in right away?” But remember that, until Franklin Delano Roosevelt’s second term in office, American presidents were in fact inaugurated on March 4 of the year following that in which they were elected. That four-month delay proved to be very dangerous a couple of times, most notably in 1861, when seven Southern states had seceded from the Union before Abraham Lincoln could take office, and in 1933, when FDR ascended to the presidency following a series of catastrophic bank-runs.)

For one thing, if they wait until next January 20 to do anything, General Motors may already be gone. That at least is the message from Jens Nymark in Denmark’s business newspaper Børsen: General Motors can be finished this year. (more…)

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Barack! Give Pacifism a Chance!

Thursday, November 6th, 2008

One of the occupational hazards of having just won the presidency, I suppose, is the tidal wave of advice, from parties near and far, that immediately crashes over you. Here’s a counselor who might make Barack Obama sit up and take notice, if he could ever hear word of what he has to say: yes, Mahmoud Ahmadinejad, president of Iran. We learn about Mahmoud’s suggestions to Barack courtesy of the French press agency AFP, as published in an article in the French conservative newspaper Le Figaro: Iran: Obama should opt for pacifism.

These words of wisdom, obviously issued in reaction to Obama’s election, were actually conveyed through Ahmadinejad’s press spokesman, Ali-Akbar Javanfekr, speaking on al-Alam, an Iranian TV station. (Which is why Obama will never hear of them. By the way, in the article AFP incorrectly calls the TV station “Arabic”; if you’re curious, you can peruse its English-language website.) (more…)

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Putin for Obama

Thursday, October 23rd, 2008

The US presidential election is coming up soon, less than two weeks away. That means, among other things, that it’s endorsement season now, and lately those have taken somewhat of an international flavor. You might have already heard about al-Qaeda’s “endorsement” of McCain – perhaps I’ll have the opportunity to write more about that soon. As such, that nod of terroristic approval goes counter to pretty much the whole rest of the world, which prefers Obama as next US president by about a four-to-one margin. (But you’d sort of expect that Osama bin Laden and his henchmen would be inclined to go against the grain, now, wouldn’t you?) More conventional is Russia’s choice, or at least Russia’s seeming choice, as reported by Per Dalgård in the Danish opinion weekly Information (McCain asks Russia for help). (more…)

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Outside, Looking In, Amid a Financial Storm

Tuesday, October 21st, 2008

It was heartening to read, from this European vantage-point, the article about Suddenly, Europe Looks Pretty Smart in the New York Times last Saturday, mainly describing the European “bailout plan that has now set the pace for Washington, not the other way around, as had been customary for decades.” At the same time, so far the poster-child victim of the financial crisis has been poor Iceland, a country that is rapidly running out of foreign exchange with which to pay for any imports and so is in contact with the International Monetary Fund for a rescue. But Iceland has gotten some company in the IMF petitioners’ ante-room recently from (among others, but just to name a European country) Hungary. The three Baltic states – Estonia, Latvia, and Lithuania – are likely soon to join them there, although of course the European Union is also offering its own assistance.

So Europe may look “pretty smart,” but still European countries can suddenly find themselves in a deep financial hole in the present dire international conditions – yes, even EU member-states like Hungary and the Baltics. The one common denominator that seems to remove a European state from vulnerability, though, is membership of the Euro-zone, i.e. those 15 states out of the 27 member-states of the EU who use the euro as their common currency. Hannes Gamillscheg of the Frankfurter Rundschau recently picked up on this phenomenon (The guardians of the crown – alone) but from the point-of-view of a couple of those countries now outside the Euro-zone who in the past have explicitly rejected opportunities to come inside, namely Denmark and Sweden. (So the “crown” in the article’s title refers to the two different “crowns” that are those countries’ currencies.) (more…)

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Kennedy and America’s Downfall

Sunday, October 19th, 2008

First off, please note: that’s Paul M. Kennedy, history professor at Yale. One meta-theme that has been floating around the media throughout the global financial crisis of the last month or so has been variations on “the overthrow of the American century,” the “undoing of Wall Street as the world’s financial center,” and the like. If you’re going to write about this, what better expert to consult than Prof. Kennedy, author (although it was way back in 1987) of the noted history The Rise and Fall of the Great Powers?

Germany’s Die Zeit recently caught up with the good professor to do just that, sending correspondent Thomas Fischermann to grab an interview (“USA loses world-power status”). (more…)

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Queen Elizabeth Big Financial Crisis Loser

Saturday, October 18th, 2008

Word comes here from Hospodárské noviny, the Czech Republic’s leading business newspaper, that Britain’s Queen Elizabeth II has found herself to be poorly served – poorly served indeed! – lately by her government’s financial ministers, to her considerable and personal cost. HN’s article (no by-line) reports that the value of Queen’s stock market holdings has recently plunged by 37% “in the past days.” That corresponds to a value lost of 1.2 billion – but fans of the Queen should not freak out too much, since that’s 1.2 billion in Czech crowns, corresponding these days to around £37 million. It’s still a considerable sum, though, I have to admit.

And why is this being reported in a Czech, rather than a British newspaper? Well, the HN report does cite as its source the Daily Express. But I could not find anything on this subject on its site, even by entering “Elizabeth II” in that search-box up-top there. (Yes, I did subsequently click on the “SEARCH” button over there on the right. Nada.)

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Twenty Reasons for the Chaos

Friday, October 10th, 2008

Wow – another EuroSavant post that simply writes itself! This time that delectable characteristic arises from the particular format employed (as you will soon see), and the article in question comes from Information, the Danish intellectual weekly newspaper, with the pungent title 20 reasons for the chaos we find ourselves in (and yes, it’s someone else’s fault).

Let’s go through these twenty reasons, then, shall we? – and see where we agree with the article’s author (with a very German name, I must say), Anna von Sperling. We might even keep a sort of running score; that nice, tapered, obviously feminine, nude (i.e. no rings) finger there pointing accusingly to the right at the article’s head starts us out with “one” . . . (more…)

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