Friday 27 January 2012

Britain and Germany squaring off

Mish strikes again. Only the naive chuckle when I say that Britain and Germany are squaring off again. What strikes me about this piece is how absolutely stupid every European leader looks right now. Nonetheless, there is something darkly European from an archetypal viewpoint about all this; something as old as Europe as fault lines present since the Roman Empire erupt in fresh earthquakes. Britain will never permit Germany to be the economic policeman for Europe. Because, as the Rothschilds so well understand, whoever controls the economy is the ruler.
Mish nailed this right on the head.
We have a smorgasbord of stupidity, incompetence and failure on tonight's World News Desk. The old paradigm is crumbling before our eyes. SOPA/PIPA were its Stalingrad. I made a new member-only video about that today. The economic news is just horrendous. -- MCR

Cameron Rebukes Euro Leaders at Davos, Calls Financial Transaction Tax "Quite Simply Madness"

Mish’s Global Economic Analysis,
26 January, 2012

Bickering in Davos at the World Economic Forum has taken center stage as U.K. Prime Minister Cameron rebukes euro leaders over crisis

David Cameron has delivered a firm rebuke to Germany at the World Economic Forum, calling on Berlin to contribute significantly more resources and guarantees to help solve the eurozone crisis.

The British prime minister stressed on Thursday that although progress had been made, particularly with the European Central Bank’s funding of the European banking system, policymakers were still far from finding a solution to the underlying problems of the crisis. He criticised eurozone leaders for being distracted by other issues, such as the introduction of a financial transaction tax – an initiative he described as “quite simply madness”.
His speech in Davos reflected British officials’ long-standing and deep frustration with Germany’s leadership of the single currency area and called for a much stronger firewall to prevent contagion within the eurozone, common European sovereign debt and for powerful countries committing to reduce their trade surpluses as much as the struggling countries seek to minimise their deficits.
The sentiments chimed with many British and US delegates at the WEF who have criticised Germany for seeking to persuade other countries to “become more German” without the corollary that Germany must “become less German” by importing more and allowing its trade surpluses to shrink.

Tobin Tax

Cameron is correct regarding the financial transaction tax, commonly known as a "Tobin Tax" named after Nobel Laureate economist James Tobin who originally proposed the idea for currency transactions only. 

Now they want to tax everything.

Mathematical Impossibilities

The sentiment expressed by Germany that other nations need to become "more like Germany" as in "export more" sounds good when you hear it, but it is a mathematical impossibility.

Not every nation can be an exporter. If one country has a balance-of-trade trade surplus, another country must have a trade deficit.

Thus, the only way for other countries to become more like Germany is for Germany to become less like Germany.

The same holds true for the trade relationship between the US and China.

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