This is Ilargi's intro from The Automatic Earth.
People say the darnedest things (which is funny really only in kids), and sometimes it's good to look more closely. We've noticed the Anglo media's tendency to talk down other countries' economies many times before, and that just won't stop. In their view, Germans are incredibly stupid, and so are the Chinese. They should do what America and Albion do: why won't they recognize the shining examples these two provide? Likewise, economists, politicians and investors can't seem to be able to quit touting the advantages of innovations in the markets, no matter that they are tearing entire economies, including their own, to shreds.
I guess the light supposedly shining through the trees on the green shoots in the gutter actually makes them believe what they say, even as I find it hard to believe it could. But why wouldn't they feel good, now that we see the US administration back down off its salaries and bonuses limits for the financial industry? Look at the bright side: whoever gets a piece of the upcoming GM bankruptcy action, first Chapter 11 and later Chapter 7, stands to make billions. (Which reminds me, 7/11 gets a whole new meaning).
Long time economics writer Anatole Kaletsky states in Europe waits for Germany to come to the rescue:
That continental Europe — and Germany, in particular — has suffered far worse from the credit crunch than the US or Britain should come as no surprise.[..]
Mr. Kaletsky, I know a lot of people will read this and believe what you say without any questions. As for me, I'd like to know what your conclusion is based on. And for me, it does come as a surprise. So much so that I don't believe a word you say.
The German economy has now been falling at a rapid and accelerating rate for four consecutive quarters, resulting in a year-on-year decline of 6.9 per cent. The comparable figures for the US and Britain are 2.6 per cent and 4.2 per cent.
First, according to the Bureau of Economic Analysis at the US Department of Commerce the US falls far faster today:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 6.1 percent in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP decreased 6.3 percent.
What I find more interesting, though, is the well-established inbred temptation within the US to under-report all negative numbers. I haven't seen such things in Germany. What I have seen are lots of apples and oranges comparisons in the UK and US, applied with the express purpose to make their own respective economies look better. Let's try this on for size: no German carmaker has yet gone bust. In the US, one has, and the second will follow any day now. No German state is on the verge of collapse; in the US, the economically largest state is. At best, we're talking numbers that are disputable. To contend that "Germany, in particular — has suffered far worse from the credit crunch than the US or Britain.." merely serves to make its author look either disingenuous or lacking in active neurons.
In Asia will author its own destruction if it triggers a crisis over US bonds Ambrose Evans-Pritchard scales new lows by stating that :
Asia cannot yet stand on its own two feet
Excuse me, but what sort of statement is that? Ambrose uses China's (and Japan's) economic problems to argue that they have no choice but to keep buying US debt. With what, AEP? With the same money you yourself claim is badly needed to build domestic demand for their industry? While Chinese exports are down 23%? It's tempting to see the Chinese as really dumb people, isn't it? And you know what I think? I think they like it that way, because while you're blabbering to the hand, they can do what they want. China cannot stand on its own feet, after doing so for thousands of years?
And while we're at it, let's put out Niall Ferguson by the curb with the trash as well. The man's an economics professor at Harvard, believe it or not. The following paragraph from Diminished Returns in the New York Times is the blindest piece of trash:
We need to remember that much financial innovation over the past 30 years was economically beneficial, and not just to the fat cats of Wall Street. New vehicles like hedge funds gave investors like pension funds and endowments vastly more to choose from than the time-honored choice among cash, bonds and stocks. Likewise, innovations like securitization lowered borrowing costs for most consumers. And the globalization of finance played a crucial role in raising growth rates in emerging markets, particularly in Asia, propelling hundreds of millions of people out of poverty.
Economically beneficial? The pure illusion of riches is economically beneficial?
New vehicles like hedge funds gave investors like pension funds and endowments vastly more to choose from...
Gave them vastly more to choose from. And then blew them to smithereens. Beneficial? Hundreds of millions of people "propelled" out of poverty? Does it matter that billions now fall (backward or forward) into new-found poverty? Economists like Ferguson are delusional dangers to their environment. This sort or "reasoning" is akin to saying that shooting up heroin must be beneficial, because, after all, it makes you feel good.
The only reality that lasts is that these creative and innovative instruments are murdering all but a handful of pension funds and endowments, along with countless cities, counties, states and a multitude of other entities including soon entire nations, that consumers who "profited" from borrowing costs lowered by securitization are losing their homes by the millions, and that emerging markets should no longer be called emerging; disappearing markets is a much more accurate term.
Financial innovation has burdened our economies, and our individual selves, with a debt-load that until as recently as 10 years ago would have been considered completely unimaginable. For a professor of economics at Harvard, however, reality is something entirely different: it's a world where the only thing that has real value is the high that occurs in the first few instants after you pull the needle out of your arm.