Germany’s Econ Minister Brüderle hits back at French and US criticism

The don’t know the elevated fiscal deficits due to their ‘automatic Keynesian stabilizers’ did the trick, including (temporarily) weakening euro?

So why are they spewing this nonsense?

Class warfare to keep union demands in check and domestic demand suppressed so the well off can optimize their personal real terms of trade?

Expect austerity to continue to work against domestic demand and keep the forces in place that will continue to drive the euro to a level high enough to contain net exports.

Germany hits back at French and US criticism

By Gerrit Wiesmann and Stanley Pignal

October 21 (FT) — “Growing domestic demand shows our recovery is standing on two feet,” said Rainer Brüderle, Germany’s economics minister. Gross domestic product is expected to rise by 3.4 per cent this year, up from a spring forecast of 1.4 per cent, and 1.8 per cent in 2011, up from 1.6 per cent. Mr Brüderle said Germany’s recovery was “a non-Keynesian growth programme” in which fiscal discipline spurred private investment. “It’s a textbook recovery,” Mr Brüderle said, describing how an uptick in foreign demand earlier this year had spurred exports, then investment and finally job creation in Germany itself. Unemployment is expected to fall below 3m this autumn and remain “clearly below” that mark next year. At the start of the year, economists had worried about whether the German upturn would be “V-, W-, L- or U- shaped”, he said. “Now we know that was irrelevant. This has become an XL [extra-large]-recovery.”

Britain to Slash Public Spending in Austerity Gamble

Are they actually going to do this???

Good for us if we realized the right response is to lower our taxes here and letting them export all they want to us.

But we don’t.

Britain to Slash Public Spending in Austerity Gamble

October 20 (AP) — Recession-battered Britain learns the true cost of the global financial crisis Wednesday, as the country’s government outlines the largest cuts to public spending since World War II — slashing benefits and public sector jobs with a five-year austerity plan aimed at clearing the nation’s debts.

After spending billions bailing out indebted banks, and suffering a squeeze on tax revenue and a hike in welfare bills, Treasury chief George Osborne will stake the coalition government’s reputation on fixing the country’s economic ills by the next election in 2015.

In a major address to Parliament, Osborne will announce about 80 billion pounds ($128 billion) in spending cuts, which he claims are necessary alongside tax rises to wipe out Britain’s 156-billion-pound deficit and reduce its huge debt.

It means as many as 500,000 public sector jobs are likely to be lost, while pay for almost all government workers has already been frozen for two years under an initial round of austerity measures announced in June.

Even Queen Elizabeth II has taken a share of the strain, as Osborne froze government funding for her household and staff.

The Treasury chief — seen as a possible future prime minister — has already warned government departments to prepare to cut their budgets by up to 25 percent over four years. While the eventual cuts are likely to be much less severe, they are likely to be the sharpest in about 60 years.

About 1.2 million families will lose child benefit payments beginning in 2013, and tens of thousands more Britons are likely to see their welfare checks trimmed or scrapped.

If the government decides to slash its winter fuel allowance, millions of retirees could lose out on subsidized heating. About 12 million people currently receive the payment.

Mosler on cnbc

Thanks,

It was an hour interview and to some degree taken out of context.

I would not buy euro here- chart looks terrible!!!

But I would look to see it show signs of turning with an eye to getting long, probably vs the yen.

The problem with the euro zone has been a tendency for the currency to continually adjust to levels where the trade balance can’t go into surplus in a meaningful way, like China, Japan, and Germany before the euro.

To run a trade surplus generally requires tight fiscal to keep domestic demand down, but then a policy of buying fx (off balance sheet deficit spending) to keep the currency ‘competitive’ to support exporters at the expense of the macro economy.

Euro May Rise to $1.60 Due to Austerity: Economist

By Antonia Oprita

June 4 (CNBC) — Austerity measures imposed by the euro zone will likely push the euro back towards $1.50 or even $1.60 but the European currency is unlikely to achieve the status of reserve currency, economist Warren Mosler, founder and principal of broker/dealer AVM, told CNBC.com Friday.

The euro has fallen sharply versus the dollar since the euro zone’s sovereign debt worries began, with many analysts predicting it will slide to parity with the greenback or even below.

But Mosler thinks the recent plunge has been caused by portfolio adjustments – investors shifting assets from euros to gold or dollars – and that this trend is nearly over.

Rising taxes and spending cuts, pledged by governments in the single European currency area to cut debt, are “like a crop failure” because they will decrease the amount of euros available, he said.

“Everything they do in the euro zone is highly deflationary,” Mosler told CNBC.com in a telephone interview.

“I think there’s a very good chance the euro would be stronger because of the austerity measures; this can very easily get it back to $1.50-$1.60,” he added.

To keep the euro down, the ECB would have to buy dollars but “ideologically, that would mean they’re accumulating dollar reserves,” which the European Union does not want, Mosler said.

The euro is unlikely to become a global reserve currency because the EU’s economic policy is geared towards growth based on exports and the euro zone is running a surplus, he explained.

“The only way the rest of the world will hold your currency is if you run a trade deficit,” he said. “Economics is the opposite of religion, it’s better to receive than to give.”

The ECB Could End the Debt Crisis

The European Central Bank could easily appease the fears of default which have plagued markets regarding by creating money and giving it to its members, Mosler said.

The ECB, “if it wants to credit any nation, it can,” he added. “The ECB could make a distribution of, say, 10 percent of GDP to each member. The ECB can just credit the accounts of the member nations based on how many people they have. That would reduce all debt ratios this year by 10 percent.”

The measure would not contradict EU anti-bailout rules, since the money would be distributed equally among members and if the cash is used to cover the deficit would not be inflationary, Mosler added.

“My proposal is to put the ECB in a position where governments become dependent of checks from the ECB,” he said. “Operationally, it’s very simple to do, you just credit their accounts. The Finance Ministers would direct the money.”

The central bank could make this an annual distribution, and attach financial discipline conditions to it, such as respecting the EU’s Stability and Growth Pact.

The country that does not respect the pact does not get the money, making it a more powerful enforcement mechanism and helping fight speculators at the same time, he explained.