-- Posted Tuesday, 7 September 2010 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Tuessday, September 7, 2010
“Phenomenally accurate forecasts”
[From reader and paid-up subscriber Oliver Fuchs of Munich, we have a very interesting metaphor to explain the seemingly anomalous economic boom now going on in Germany. Is it merely the final, spectacular tipping of a ship about to slide into the deep? Oliver explains why this may be so. RA]
If the global economy is the Titanic, then what is happening in Germany might be the stern rising as the USA “bow” begins to sink. When we read about the grim predictions of Austrian School economists in particular, a Titanic-style crack-up seems like the sort of thing anyone would notice. But the seemingly anomalous business boom in Germany that everyone seems so happy about (and the bankers say -- what else? – “Be merry!”), might just be that: a boom/bust cycle bearing down on us like a juggernaut.
Whatever the case, few are voicing concern over troubling signals in this German boom: German sovereign-debt interest rates are falling as if a Fed were causing it, but on free-market action; the Euro is much stronger than anyone had anticipated, considering the PIIGS dilemma and Eastern Europe’s deep economic wallow. German wages haven’t risen at all, even though booms usually translate quickly into higher wages. And the consumer boom, such as it is, is geared toward safe investments and matters around the house (such as installing those solar panels, etc.). The savings rate keeps climbing although there is hardly any interest being paid, and gold-buying is beginning to explode. Inflation is creeping through the holes via costs for utilities and government services. The employment situation is bright, but that has been going on for a while due to the emerging markets and the famous “Kurzarbeit,” a government-sponsored reduction of working hours to avoid layoffs in a crisis. Construction is also suddenly booming, although absolutely everyone knows the future is “unusually uncertain” at best. All these signals meet the predictions of the Austrian School in perfection.
Exporters ‘Astounded’
It is the investment-goods tier which is the happiest among exporters - and the most astonished. What might be happening is that, in anticipation of a crack-up boom, investors are thinking twice about ordering investment goods (which often necessitate complicated, long-term contracts) in the U.S. dollar realm and specifically in the U.S. realm. Are investment-goods investors and buyers beginning to walk to the other side? Given the steepness of the German-GDP ascent from rock bottom (especially in investment goods) in mind, one might also say they are…fleeing?
If we are indeed sinking bow (USA)-first, this explanation would make disturbing sense. The rise of the stern section, consisting of Germany and other nations with not so much debt and still-functioning economies, should perhaps become an indicator for the wary as the booms gain momentum as it ought, and grows scary at some point.
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-- Posted Tuesday, 7 September 2010 | Digg This Article | Source: GoldSeek.com
