Germany Pours Cold Water Over Europe

Just as I predicted Germany is getting restless at the idea of bailing out the bulk of Europe.

From the Telegraph:

Andreas Vosskuhle, head of the German constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.”The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution),” he said.”There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people,” he told newspaper Frankfurter Allgemeine.

Turns out that listening to Germans in the German government, and on the German street might have more bearing on reality than listening to globe-trotting, world-saving, hopium-pedling, six-pac-abs, tax-evading Timothy Geithner. For example, German finance minister Wolfgang Schauble. He might be in a position to comment (or a better one than Geithner, in any case).

From Zero Hedge:

*SCHAEUBLE SAYS `WILL NOT SPEND OUR WAY’ OUT OF CRISIS

*SCHAEUBLE SAYS `SOLIDARITY HAS LIMITS,’ REQUIRES RETURN EFFORTS

*SCHAEUBLE SAYS `IMMEDIATE FISCAL REFORMS ARE OF THE ESSENCE’

So if Germany won’t bail out Europe (until things get much worse) and China and the BRICS won’t (until things get much, much worse) then who will?

America, apparently.

From Bloomberg:

China and the U.S. finally found something to agree on: Europe is doomed and might take the world’s two biggest economies down with it.

Neither officials in Beijing nor Washington are actually using the “D word.” They don’t need to, not with Zhou Xiaochuan, China’s central bank governor, talking matter-of- factly about emerging nations bailing out the euro region and U.S. Treasury Secretary Timothy Geithner warning of “cascading default, bank runs and catastrophic risk” there.

The price tag for keeping the Greek-led turmoil from killing the euro is rising fast. Asians are so anxious about it that they’re querying Americans — like me. In my travels around the region this month, I’ve faced a harrowing question: Would U.S. President Barack Obama chip in for a giant European bailout?

It’s hard to decide what’s more disturbing: the obvious answer — over Republicans’ dead bodies — or the fact it’s being asked at all, and by whom. Among those posing it were the finance minister of one Asia’s biggest economies, the central bank governor of another and a number of major executives.

After all, the closest thing to concerted action on Europe so far has come from Bernanke.

It’s the same absurd predicament — Americans pay for global stability, everyone else benefits.

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16 thoughts on “Germany Pours Cold Water Over Europe

  1. Aziz, who said being a Geek does not pay off. Geopolitics, human nature and History pays off!

    My Put Options really paid off, and with the Australian market rallying on nonsensical optimism, I loaded up again. Until I see firm action on reduced government waste, lower levels of government intervention, spending on infrastructure for a renewable future, I won’t be buying calls.

    Have people not heard about Google hourly search feeds. EFSF news events anyone? The traders are so desperate they are buying on optimism that is just rumour. Might work for a day or two, but onve the logic hits the mainstream (1-2 days) a massive turnaround is imminent.

    Now for the Wall St Protests. This will snowball when the gangs Tweet, move in and a London style riot develops.. Watching this next plot unfold!!

  2. “It’s the same absurd predicament — Americans pay for global stability, everyone else benefits.”

    Not sure if this is strictly true, because the dollar is a global reserve currency, and oil is priced and sold in dollars, all oil consumers (non Americans as well) pay for the printing of yet more dollars.

    A question which arises is how will all this new printed money (dollars) be released into the economy and cause inflation? Will people and businesses borrow or will the money just sit in bank balance sheets getting interest payments from the central bank?

    • As more dollar is printed, the value of dollar in Forex exchanges go down so it doesn’t create much inflationary problem for other nations… The real problem happens in East Asin countries each with trillions or hundreds of billions of USD forex reserves, most of them long-term Treasuries.

    • It’s not strictly true. America has been having a free lunch. So it’s a supposedly mutually beneficial arrangement. Somehow that became warped into a mutually degenerative arrangement.

      There are two potential big-time inflationary triggers: firstly the return to America of all those FOREX trillions (if they were used to buy gold, productive assets, etc). Second is the elimination of interest on excess reserves, triggering the release of up to $1.6 trillion of non-lent reserves, which could be multiplied up through fractional reserve to $16 trillion new cash.

      Hyperinflation is a different problem altogether: it requires the slowdown or breakdown in the delivery of goods and services, as I explain here:

      http://azizonomics.com/2011/08/15/why-qe-didnt-cause-hyperinflation-2/

  3. how increase money supply cause inflation , this is you can find in the economic text book.

    increase in money supply–> low interest rate–> increase loan ( either consumer or bussiness) ,
    1)more loan lead to more buying goods increase demand for raw material —> import
    2) more businness loan lead to more import of spare parts and machinery –>import

    increase import mean cash outflow over of the country, lead exchange currncy rate fall , then later importing will become more expensive , cause import goods to be sold locally more expensive. then price increase there goesinflation. the process might take months to see the effect or years

    there are few other ways how money supply increase cause inflation , i can only recall this , cos ihavent touc my text books like 15 years lol

  4. And the market dives again.

    I had an epiphany. It is not a global media conspiracy to peddle misinformation in news. It is human incompetence.

    It is very easy to find the information and put it in the mainstream news, but explaining the economy in a 5 second slot on a 20 second business slot during the 1 hour news is impossible. I mean they have to report road accidents, sport, weather, who in Hollywood has Chlamydia etc.

    People only become focused on economics and the markets when they have lost 90% of their life savings and their Daughter has to fly to Macau to be a “Cocktail Waitress” so she can maintain her “Lifestyle”.

    In the meantime I am shorting this global train wreck
    .

    • The market has chlamydia, Buddy.

      In fact, society itself is looking quite diseased. The markets turned into casinos, the world is turning into Las Vegas and Macau (superficial, instantaneous, devoid of content or meaning).

      Being long equities right now is a great way to lose your shirt. But I myself always prefer puts to shorts. Why? With shorts you can only double your money and lose more than your initial stake if it goes wrong. It’s a mathematical quirk.

  5. Pingback: Krugman on Why the Eurozone is in Big Trouble « azizonomics

  6. what strikes me as pivotal here (in a situation that clearly is in gyration) is this:

    “head of the German constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.”The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. ”

    legality and constitutionality are clearly being questioned. it has been the modus operandi at least stateside to ignore, bend or create spurious law to effect their financial raiding and blundering. at last to call it a question of sovereign law lends weight to the counterargument.

    now if the courts haven’t been stacked……

    • Anonymous,

      My friend you hit the nail on the head. If only the Courts were not stacked. It reminds me of the era of the Third Reich. Judges decisions weren’t stacked?

      Unfortunately history is repeating. I hope that Israel gets it’s house in order. They may have a few more “Right of Return” applications to process very soon.

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