Friday, February 13, 2015


Austerity or the Little Paulie Krugman view of the world?  This isn't going to solve anything but the fourth quarter numbers for Europe just were released today and while dismal for most place there was and excellent rise in GDP in...wait for it...Germany!  Nearly 3% for Angie's mob followed by an equally impressive gain in Spain.  What's the connection?  Nearly a decade ago Germany restructured major portions of its economy particularly relating to labor regulations which greatly improved the flexibility of its labor market.  While not going nearly as far, Spain undertook the same process beginning in 2012 and continuing on today.  France and Italy?  Nope, and the numbers for those two were awful.

As I said, this isn't going to solve anything but it does give a bit more credence to what we have been saying for some time: monetary and fiscal gyrations are fine but when the problem is structural, they are pretty much useless.  Today's reported results are, I believe, the first step in proving that view correct.  We must wait for another quarter or two to be convincing.

Hopefully, this should encourage a re-opening of the debate of what really has to be done to make things better both Over There and especially Over Here.  But like most things there is a down side to this which of course is that life just got a hell of a lot tougher for our Greek friends.

Germany is now in even a lesser mood to compromise and will argue that Spain's adoption of the Germany "model" and the results it produced makes the soundness off its position even more evident.  Greece's clear game of "chicken" with the EZ, reportedly the spawn of finance minister Varoufakis' penchant for game theory, looks very iffy at this stage.  Game theory is terrific...provided the other guy is in the game.  I suspect Germany, and its partners may just have concluded "game over."

Have a good weekend.

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