| Swamped By Stupidity; Peak Merkel Posted: 18 Oct 2015 08:57 PM PDT Backlash against sheer stupidity is starting to build. I am talking about German Chancellor Angela Merkel's decision to ramrod an agreement that requires EU countries to accept more alleged refugees than many countries want, and even Germany itself can handle. The backlash has finally hit Germany in a big way as was easily predictable months ago. German citizens who once welcomed refugees now complain 'We're Under Water'. Hesepe, a village of 2,500 that comprises one district of the small town of Bramsche in the state of Lower Saxony, is now hosting some 4,000 asylum-seekers, making it a symbol of Germany's refugee crisis. Locals are still showing a great willingness to help, but the sheer number of refugees is testing them. The German states have reported some 409,000 new arrivals between Sept. 5 and Oct. 15 -- more than ever before in a comparable time period -- though it remains unclear how many of those include people who have been registered twice.
Six weeks after Chancellor Angela Merkel's historic decision to open Germany's borders, there is a shortage of basic supplies in many places in this prosperous nation. Cots, portable housing containers and chemical toilets are largely sold out. There is a shortage of German teachers, social workers and administrative judges. Authorities in many towns are worried about the approaching winter, because thousands of asylum-seekers are still sleeping in tents.
But what Germany lacks more than anything is a plan to make Merkel's two most-pronounced statements on the crisis -- "We can do it" and "We cannot close our borders" -- fit together. In the second month of what has been dubbed the country's brand new "Welcoming Culture," it has become clear to many that Germany will only be able to cope if the number of refugees drops.
Merkel's last hope is Recep Tayyip Erdogan, the Turkish president. The chancellor is visiting Ankara this weekend, bringing with her a number of gifts that Europe's leaders had discussed in their summit in Brussels. The plan is to persuade Erdogan to strengthen the border in the Aegean Sea that "the strong nation of Germany" (as Merkel put it) is unable to.
Merkel Increasingly Isolated
The griping over Merkel's policies has grown louder within her own party, the Christian Democratic Union (CDU). The meetings of the party's parliamentary group, which for many years radiated the boredom of an English gentleman's club, now resemble tribunals against the chancellor. Meanwhile, Finance Minister Wolfgang Schäuble, the strong man in Merkel's cabinet, also expressed his own dissatisfaction, in distant Peru, by cracking jokes about border controls in the former East Germany.
Merkel is looking increasingly isolated. Government sources say she has made refugee policy her personal concern, and now she is being left to deal with it on her own. Last week, Interior Minister Thomas de Maizière confided in his Luxembourg counterpart, telling him that Merkel did not have a plan, only "cold feet."
Ralph Tiesler, deputy head of the Federal Office of Civil Protection and Disaster Assistance (BBK), had to get to grips with a real emergency situation: Tiesler is the man who distributes the refugees across Germany, the lord of the buses and trains.
Last week, his team had to pull extra shifts, after the number of new arrivals increased again on Monday night. Between 8,000 and 10,000 refugees have been arriving recently -- per day.
Tiesler's job is to organize a roof over the refugees' heads on their first night -- and then to get them on to special trains and buses as quickly as possible, to be relocated. There are five major routes distributing the asylum-seekers across Germany's states. The "West" route leads to North Rhine-Westphalia, the "Southwest" route to Baden-Württemberg and its neighboring states.
The distribution lists are political hot potatoes. The various states fastidiously make sure they aren't allocated more refugees than has been set down by the so-called "Königstein Key," the agreement between the federal government and the states that stipulates how much each state contributes to national programs.
Meanwhile the weather is giving Tiesler a lot to worry about. Temperatures have fallen, the first frosts have appeared, in some places snow. Authorities are determined not to allow anyone to sleep in the wet and cold in the open air. "We have to do everything we can to prevent homelessness, and we have to organize the distribution accordingly," he says.
Above all, members of the SPD will be watching very closely in the weeks ahead to see if and how quickly Angela Merkel shifts her position. Within her own party, the Christian Democrats, many consider it a given that she will have to change her policy. "The next party caucus is in three weeks," says CSU domestic policy expert Uhl. "If the government hasn't made something happen by then, then the caucus will have to act." Problem in a NutshellThe problem, as I have stated on numerous occasions is quite simple: There is an unlimited demand for free food, free shelter, and free services. Border agreements alone cannot and will not work. The Financial Times reports this evening Brussels draws up plan to resettle 200,000 refugees across Europe. Meanwhile ponder this hyperbolic chart of refugees into Germany alone.  The above chart seems woefully out of date given the claim "409,000 new arrivals between Sept. 5 and Oct. 15" Peak Merkel Angela Merkel, being the chameleon that she is, will soon change he colors for the simple reason she needs to. If she doesn't, it will certainly toll the end of her "grand coalition". Of course, that "grand coalition" may fail for numerous other reasons as well. Indeed, I suggest no matter what the outcome of the migration, Chancellor Merkel's ability to force the EU to her will peaked with the submission of Greece to German demands. For more on the absurdity of Merkel's policies, please see Bargaining With the Devil: Germany Bribes Turkey With Aid Package, EU Sidelines Highly Critical Report on Turkey's Free Speech Record. Mike "Mish" Shedlock |
| Headline #1: "Most Americans Have Less than $1,000 in Savings"; Headline #2: People Saving Too Much is Now a Problem Posted: 18 Oct 2015 08:44 AM PDT A pair of conflicting headline stories caught my eye. One headline says Americans have too little savings while the other says we are saving so much that it's a problem. Let's have a look. Most Americans Have Too Little SavingsMarketWatch reports Most Americans Have Less Than $1,000 in Savings. Americans are living right on the edge — at least when it comes to financial planning.
Approximately 62% of Americans have less than $1,000 in their savings accounts and 21% don't even have a savings account, according to a new survey of more than 5,000 adults conducted this month by Google Consumer Survey for personal finance website GOBankingRates.com. "It's worrisome that such a large percentage of Americans have so little set aside in a savings account," says Cameron Huddleston, a personal finance analyst for the site. "They likely don't have cash reserves to cover an emergency and will have to rely on credit, friends and family, or even their retirement accounts to cover unexpected expenses." Why Have a Savings Account at All?I have a question: Why have a savings account at all? Interest is roughly 0% so it effectively makes no difference whether money earns nothing in a "savings" account rather than nothing in a checking account, or nothing in a money market account. That said, I agree with the overall message: people are not saving enough. Here's a better way of stating the problem, also from the article. A similar survey of 1,000 adults carried out earlier this year by personal finance site Bankrate.com, which also found that 62% of Americans have no emergency savings for things such as a $1,000 emergency room visit or a $500 car repair. Faced with an emergency, they say they would raise the money by reducing spending elsewhere (26%), borrowing from family and/or friends (16%) or using credit cards (12%). And among those who had savings prior to 2008, 57% said they'd used some or all of their savings in the Great Recession, according to a U.S. Federal Reserve survey of over 4,000 adults released last year. Of course, paltry savings-account rates don't encourage people to save either. This is entirely believable. The next headline is pure nonsense. People Saving Too Much is Now a Problem Myles Udland writing for Yahoo!Finance reports People weren't supposed to be saving this much money — and now it's a problem Too much saving means not enough spending means a lack of aggregate demand in the economy, the thinking goes. "Secular stagnation" is another term that might apply.
In a note to clients last week, Deutsche Bank's Binky Chadha looked at the relationship between interest rates and savings rates, finding that — of course — consumers aren't exactly acting the way the economists at the Federal Reserve might expect.
Namely, people are saving money despite low interest rates when many economists expected or hoped these folks would spend that money to buy stuff or put it in assets that actually earn some return. Keynesian FallacyFor starters, it should be perfectly obvious that the first article is far closer to the truth: people are simply not saving enough. Secondly, the idea people can save too much is a Keynesian fallacy. Frank Shostak offers this lesson in Is Saving Bad for the Economy? Contrary to popular thinking, saving doesn't weaken aggregate spending; on the contrary, it reinforces it. On this, Henry Hazlitt, in his "Economics in One Lesson," wrote:
"When money is saved and then invested it is used to buy or build capital goods. Any of these projects puts as much money into circulation and gives as much employment as the same amount of money spent directly on consumption. Saving in short in the modern world, is only another form of spending."
According to Mises, "Production of goods ready for consumption requires the use of capital goods, that is, of tools and of half-finished material. Capital comes into existence by saving, i.e., temporary abstention from consumption."
Since saving enables the production of capital goods, saving is obviously at the heart of the economic growth that raises people's living standards. On this Mises wrote, "Saving and the resulting accumulation of capital goods are at the beginning of every attempt to improve the material condition of man; they are the foundation of human civilization."
When money is printed—that is, created "out of thin air" by the central bank—it sets in motion an exchange of nothing for money and then money for something. An exchange of nothing for something amounts to consumption that is not supported by production.
Because every activity has to be funded, it follows that an increase in consumption that is not supported by production must divert funding from wealth-generating activities. This, in turn, diminishes the flow of real savings to the producers of wealth, which weakens the flow of production, which sets in motion an economic recession.
Observe that what has weakened the demand for goods is not a sudden capricious behavior of consumers, but the monetary injections of the central bank. In short, every dollar that was created "out of thin air" amounts to a corresponding dissaving by that amount.
So long as the real pool of savings is expanding, the central bank and government officials can give the impression that loose monetary and fiscal policies drive the economy. This illusion is shattered once the pool becomes stagnant or starts declining.
Mises wrote, "Without saving and successful endeavours to use the accumulated savings wisely, there cannot be any question of a standard of living worthy of the qualification human."
This sheds light on current events in Japan, where the high savings rate that has ranged between 15 percent and 20 percent is blamed for the economic slump. What is happening in Japan is not the result of "too much saving," as suggested by many experts, but rather of too many loose fiscal and monetary policies that continue to destroy households' savings. The misguided policy of lowering interest rates to almost nil is a major catalyst behind the destruction of real savings. There is no such thing as lack of aggregate demand. Rather, central bank sponsored boom-bust cycles and inflationary policies create so much malinvestment, dissaving, and income inequality that misguided economists mistake money sloshing around for "savings". The proper way to view savings is production minus consumption. To have savings, one must first produce something. Thus, printing money (borrowing it into existence) does not constitute real savings. Mike "Mish" Shedlock |
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