Posts Tagged ‘euro’

Here’s one of the most misleading headlines ever… from CNBC no less:

Germany To Blame For Euro Zone Crisis: Study

Why is Germany to blame?  Because:

     Germany’s insistence on keeping wage growth in check has given the country an unfair competitive advantage vis-à-vis its euro zone peers and is preventing troubled countries from returning to growth, a new study argues.

So let me get this straight:

Because Germany has effectively controlled expenses… and not let its workforce bully them into irresponsibly creating unsustainable infrastructure costs… it’s getting blamed for succeeding?

Here’s what anyone in the Euro Zone that thinks Germany is to blame needs to know:

Unemployment Rate (source and source):

     German 5.4%

     France 11.0%

     Spain 26.7%

     Greece 27%  

You think German employees are moaning about lower wages?  All the way to the bank.

I can’t find the article… but a few weeks back, when Greece was in the headlines preparing for their big elections, I read an amazing article about Latvia.

Latvia (not to be mistaken with Latveria, the country Dr. Doom rules) is a small country in Northern Europe.  They were a giant mess, just like Greece.

But unlike Greece, they did not wallow in the feeling that they were somehow being punished (i.e., the dreaded “austerity” word)…

… and instead of just rolling over and dying, they moved forward by being more responsible.

The results?

They did what everyone said was impossible.

From Business Insider:

     Latvia enacted fiscal cuts worth a massive 18% of its GDP over 3 years and cut public sector wages by up to 40%. Latvia’s GDP dropped 25% in 2009, which was Europe’s worst recession. Despite all of that, they managed to grow 5.5% in 2011.

Greece… and all of Europe… heck, even the U.S… could learn a valuable lesson here.

Three cheers for Latvia, my new favorite country in the world!

Update:  Responsibility (vs. “austerity”) seems to be working in Ireland, too!

Update #2:  Looks like Ireland is the first bailed out Euro country to come back to the credit market as well.

Tomorrow is a hugely anticipated jobs report.

From a stock market perspective — NOT the perspective of someone out of work and desperate to provide for loved ones, which is certainly a tragic situation — the jobs report really doesn’t matter.

Our economy is now highly tuned for about 10% unemployment… meaning, corporations are doing just fine selling to the 90 out of 95 people who are employed (remember that the definition of “full employment” is 5% unemployed).

But are these employed people spending?

Check the price of oil… as long as oil is behaving itself — and it has — then the employed people will have more money in there pockets to save and spend… which means that what drives the market — earnings and outlook — should be ok.

Regarding tomorrow, after the last few weeks of carnage, investors are expecting a mediocre or poor jobs report.  So that’s already factored in.

If the jobs report surprises to the upside, then we should see a big, opening market spike, followed by a sell-off given the run-up over the last few days.  Buy the rumor, sell the news kinda stuff.

In both cases, once the dust settles, we’ll meander higher in anticipation of good earnings and outlook… all contingent on, of course, nothing falling down and breaking in Europe for at least a couple of weeks…

… which, in a couple of weeks, you just know something will fall down and break in Europe.

Back in December, 2009, I published a post entitled, “The Stronger Euro Doesn’t Makes Cents.

I posted some “External debt as a % of GDP” figures.  How do they stack up nearly two years later?

With the Euro current around 1.3491, here’s the comparison:

External Debt As A Percentage of GDP:

2009:  #20: U.S. at 94%…                      2011: #20: U.S. at 101.%
2009:  #14: Germany at 178%…         2011:  #14: Germany at 185.1%
2009:  #8: France at 236%…                2011:  #12: France at 250%
2009:  #10: Hong Kong at 206%…     2011:  #11: Hong Kong at 250.4%
2009:  #3: U.K. at 408%…                     2011:  #2: U.K. at 413.3%
2009:  #1: Ireland at 1,267%…           2011:  #1: Ireland at 1,382%

So, really, not much has changed… the U.S. is still the strongest of the bunch… but everyone has gotten a bit worse… with France a bit more than the others… Hong Kong a lot worse (speaks to whether Asia is overheating or not)… and Ireland, unfortunately, a whole lot worse.

P.S.  I know the U.K. and Hong Kong aren’t part of the Euro per se, however, they both are in the thick of it, so to speak.

P.P.S.  Here is where the other “PIIG” nations stand:

2011:  #17: Italy at 146.6%
2011:  #15: Greece at 182.2%
2011:  #13: Portugal at 223.6%