Germany’s manufacturing industry is now in a rout. Output and new orders dove in July at a rate not seen since April 2009, the depth of the great recession. It was the 4th month in a row of lower production volumes, and the 13th months in a row (!) of declining new orders—a terror for future production. The overall PMI index crashed to the lowest level since June 2009. Exports were hardest hit, particularly to Western Europe, Asia, and the US, the three largest markets in the world! The decline in exports was steepest since May 2009. And there is talk of “job shedding.”
Watching the economies in various parts of the world these days is a little like watching someone die of cancer. It is a slow process, but relentless.
Germany is not able to convince the purchasers in tax subsidized Europe to continue their purchase of over priced cars for the “upwards mobile and want to be” ordinary people.
The uber luxurious will continue, because the Germans are quite good at maintaining this level of buyer. The British lost their panache’ with the labour Governments in the “sixties”. Cheers;
Could this be a John Galt revolt of German producers against their government selling out Germany’s productive capacity to underwite the EU debtor nations amortization to the central EU banks?
Is this a John Galt moment, or is it an indication that economic prosperity all over is stagnated by debt?
@occam at 12:18
The latter is the case.
John Lewis nails it.
Don’t know Occam, but maybe the rest of the World is waiting too see if we can kick Barry Soetoro out, or start Civil War II.
,
No surprises there.
The US economy is in a lingering depression. Western Europe is an absolute economic shambles.
A relatively steady Asia can in no way make up the shortfall.
The tragically laughable aspect to these economic woes is the ongoing indifference toward the root problem: big socialist govt. BSG got the world into this mess yet people irrationally believe BSG is the only way out of it.
The only way out is to limit govt. To do that, balanced budgets must first be legislated. Secondly, there must be astounding tax cuts across the board, i.e. at least 50% of what they are today. With a greatly reduced top line and a legislated balance, this implies gross cuts in expenditures. Govts that do not balance the books head off to jail for 5 years.
Starve the beast or watch as it eats you last.
Bbbbut. The government can be a force for good.
Instead, it hogs all available money and strangles the private sector.
Then, it pretends to fix the problem by borrowing even more money and the cycle continues.
It is futile to resist.
Fortunately I have completed digging and provisioning my cave.
The scary part of this is when these problems hit Canada, Tommy Mulcair will blame it on the conservative’s and the Eastern part of this country will believe him. Thank god there isnt an election coming up.
Obviously they need more solar panels and windmills.
Germany may have been the biggest beneficiary of the Euro and all of the debt-financed growth. They will not get through the ending of the euro and dismantling of the EU unscathed.
Europe’s situation, and to a large degree America’s plight, should send us all a clear message – that government is simply the largest parasite feeding on human productivity (next to debt slavery to central banking cartels). Both Government and the debt they saddle us with are the largst impedements to human creativity and economic freedom ever devised.
Big Govt. = big debt
Big debt = slavery
BUFFETT: I can— I can— I can end the deficit in five minutes.
QUICK: How?
BUFFETT: You just pass a law that says that anytime there’s a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election. Yeah. Yeah. Now you’ve got the incentives in the right place, right?
@Ratt at 12:39pm
You’ve brought up a growing fear of mine, that the economic clusterf**k in the U.S. is going to spark a new civil war. If Obama wins in november and the their economy continues its slide into a depression (if it’s not there already!) I don’t think it will take too long before both the few states that have weathered the storm better than others and those that are at the bottom start making noises about seceding.
Even the rumour of states looking at going it alone would be enough for the world financial community to pull out all the money they can and then a hyperinflation cycle will begin causing those states to start talking seriously about secession. That will be utterly devastating for Canada.
What worries me the most is that I haven’t seen anyone but Ron Paul talking about what it would take to right the ship so I don’t see any other scenario unfolding except for another far more costly civil war.
It’s as I’ve said many times before, economic collapse in the countries in the Eurozone which bought German goods results in an industrial recession in Germany. It’s not new, it’s not unexpected. It’s been coming quite openly for the past four years.
The largest beneficiary of the Euro-zone has been Germany because the Euro amounted to a grossly devalued currency for Germany. That’s what happens when you tie a first world currency to backwaters like Spain, Greece, etc. What that meant is that Germany could sell expensive goods to it’s poor neighbors and us at a discount. As long as the poor Euro-zone countries kept expanding on borrowed money, the party for Germany was great.
Now, Germany will have to face the music. That Germany has some kind of a superior economy is a myth … it has a stronger economy that most of the poor Euro-zone partners, but once Germany is forced to float its own currency, it’s advantage will evaporate. Those so-called “efficient” German industries will prove to be not so efficient after all when the cost of their products climbs 20 to 40%. Ever wonder why Angela is so desperate to save the zone?
Hmmm … reminds one of Ontario running a booming manufacturing sector on a deflated Canadian dollar in the 90’s.
Cjunk: very well put.
Cjunk @ 8:37;
The rationale sounds good but when I find that it was France who started using this line of thought my guard went up. I am to believe that Euroland is failing because the German’s were manipulating the euro? I take that with a serious grain of salt.
Germany did not;
– force southern Euro citizens to borrow at low interest rates and overspend to what they could afford.
– force socialist governments to continue spending above their budgets or their capacity to repay.
– force said socialist governments to maintain and even increase entitlements which could not be paid for.
In essence many Euro countries have spent their wad and now want the Germans to pay for their future spending. Germany spent over a trillion$ incorporating East Germany back into the country. Most Germans must realize the same scenario will be replayed if they guarantee Eurobonds the way some of their partners want them to.
To suggest that Germany’s success is only die to currency manipulation does a serious disservice to what Germany has achieved. That is like saying that their success prior to the ECM was solely the result of the Marshall Plan. Germany has geographic advantages but also high tech advantages. Their revision of their labour training programs 20 years ago also have had major returns for their success.
Some Eurolanders should consider whether it is in Germany’s long term interest to accept the fiscal burden that they assume they can force upon her. Yes, the ECM is a significant market but how much of that market would Germany lose if she left? It is sad to say but the Russians or a combination of other northern European countries might be better long term partners. Russia offers resources and cheap labour. At the end of the day what does the southern Euro countries offer other than continued cash demands?
ct, one thing to remember is that the Euro treaty had provisions in it limiting the size of the budget deficit each nation was allowed to have. Germany was the first Euro member nation to violate those provisions when it financed the reconstruction of former East Germany.
If Germany itself set the example of flouting the Euro rules on budget restraint, why should any of the others heed them?
No, Russia is not a useful economic partner for anyone at this time. It’s a kleptocracy. Just like Hotel California, you can bring in your money any time you like but you can never leave.
ct: I didn’t say that German success is “only” due to currency manipulation … it was, after all, the jewel of European industry prior to the Euro-zone … but Germany has since come to rely very heavily on a cheap currency relative to it’s economy.
Furthermore, Germany has not manipulated the Euro … I didn’t say that. The world has given the Euro a value based on the basket of economies that make up the zone. If there is manipulation, it is in very rich countries enjoying a devalued currency because they are tied to poor ones … Germany is not the only culprit here. Were the German economy to be the only one used to valuate the Euro, the Euro would gain anywhere from 20 to 40%.
Germany, therefore enjoys a much easier time in the world of exports simply because she has tied her currency to backwaters.