EU - the Forgotten Market

[qldfrog]

well that depends on what you call productivity .. after being in several ( pointless ) 'health and safety ' ( who couldn't even tell you what the fire-alarm sounds like and way worse distortions of information ) lectures ,and site inductions which never address basic safety issues

given the two current hospital extensions ( both car-parks proudly occupied by the CFMEU ) i am not sure how much 'productivity ' is occurring there either ( they have been at those for years now .. looks more like a money laundry .. or was it an election campaign )

why new schools ? isn't the population decreasing at the younger end of the scale ( and the population gravitating towards the cities )

in fact the high school i attended ( occasionally ) in Brisbane , put out a plea to stop it closing down ( which must have amused my school-mates who tried to burn it three times and blow it up at least once .

BTW the population is NOT stabilizing it is desperately trying to increase immigration

your theory is nice , but in operation it is going abysmally

take one 'inter-city ' rail line , 100 years in the planning/building .. but forgot to train enough rail employees to keep the service regular and that train-line was a whole eight kilometers long and had three new stations .. so now the local criminals 'can jump the train' and ( hopefully ) steal less cars ( and there are three new stations to get mugged at )

There was a 14% productivity loss in Australia in the building industry in recent year, this was in the headlines of serious papers and sites a couple of months ago, our per resident Australian wealth is falling: same static at best pie, more people eating it..and that does not even look at how shared this pie is, or seriously look at inflation impact on this data.
But that is economy, and could be sorted by proper government..fair hope...
The structural and social disintegration is of more dangerous nature and not evenly shared worldwide

 

[Value Hunter]

At the moment the government spends a huge amount of money each year because the population is expanding, without the population growth, tax revenue required shrinks.

Your argument is purely theoretical. In Australia at least the population will not decline or stabilize within your lifetime as no matter how low the birth rate drops they will just continue to fill the gap with immigration and population will continue to grow.

 

[Value Hunter]

At the moment the government spends a huge amount of money each year because the population is expanding, without the population growth, tax revenue required shrinks.

Even if population stopped growing and stabilized in Australia government expenditure would still grow due to the ageing of the population demographic. Pensions and health care, etc for old people costs the system a lot of money.

Obviously total expenditure would still be less than would be required with a growing population but currently you have: increasing tax base offsetting growing expenditure under the no population growth scenario you would have a stagnant tax base compared to increasing (albeit more slowly) expenditure.

 

[Value Collector]

Even if population stopped growing and stabilized in Australia government expenditure would still grow due to the ageing of the population demographic. Pensions and health care, etc for old people costs the system a lot of money.

Obviously total expenditure would still be less than would be required with a growing population but currently you have: increasing tax base offsetting growing expenditure under the no population growth scenario you would have a stagnant tax base compared to increasing (albeit more slowly) expenditure.

Yeah so spending would be exactly what it was going to be, minus the growth capex, why don’t you understand that? A growing population also means more old people eventually.

The tax base is based on output, as I said if the GdP continued to grow, and output continued to increase due to increased automation, the tax base could grow while the required spending was less.

 

[Value Hunter]

The tax base is based on output, as I said if the GdP continued to grow, and output continued to increase due to increased automation, the tax base could grow while the required spending was less.

Nice in theory but there are all kinds of reports saying that countries like Japan will eventually have their governments bankrupted by a skyrocketing dependency ratio.

Besides like I said before either way in Australia its a moot point:

Your argument is purely theoretical. In Australia at least the population will not decline or stabilize within your lifetime as no matter how low the birth rate drops they will just continue to fill the gap with immigration and population will continue to grow.

 

[Value Hunter]

The tax base is based on output, as I said if the GdP continued to grow, and output continued to increase due to increased automation,

Just so you are aware GDP per capita in Australia has been going backwards for the last 8 quarters.......

And furthermore as I pointed out earlier GDP per capita in Australia measured in U.S.A. dollars adjusted for CPI is lower now than in 2012. Is that the productivity growth you are referring to? The kind of productivity growth where we boost total output by immigration and inflation?

Bro stop living in Disneyland and join us in the real world.

 

[mullokintyre]

As much as I hate to upset the two values, I am going out on a limb and actually posting something that in a small way relates to the topic of this thread.
It seems that the lawmakers in the EU market have practiced their gymnastic moves in an attempt to back down on the threats to impose tariffs on Chinese EV's.
It seems that the Chinese had the temerity to threaten to curb exports of rems like Gallium and Germanium.
Ah, the law of unintended consequences.
From Zero hedge

mick

Edited to fix up copy and paste

 

[Value Collector]

Just so you are aware GDP per capita in Australia has been going backwards for the last 8 quarters.......

And furthermore as I pointed out earlier GDP per capita in Australia measured in U.S.A. dollars adjusted for CPI is lower now than in 2012. Is that the productivity growth you are referring to? The kind of productivity growth where we boost total output by immigration and inflation?

Bro stop living in Disneyland and join us in the real world.

And what happens to GDP per capita if GDP stays the same or grows, but the population declines or stabilises?

8 quarters is only 2 years, that’s not even a full Business cycle, and that’s probably only gone backwards because commodity prices are lower.

I am talking about way down the line when the global population starts to reduce but automation and AI really takes hold.

 

[Value Collector]

Bro stop living in Disneyland and join us in the real world.

Hahaha, Well I go to all sorts of theme parks the Disney and Universal ones just happen to be my favourite, maybe you should try them your self, it might put a bit more of a spring in your step.

But my travels aren’t limited to theme parks, in the last 12 months I have driven across the 19 states of the USA, driven top to bottom of UK and am currently in Switzerland having just been to France and Germany.

Here is a little song to get you started that might dowse some of the cynicism and pessimism you are afflicted with, it was true then and I believe it’s true now. That song was written during the Vietnam war and Cold War nuclear arms race, there was oil shocks coming, stock market busts, and many many things the doom dayers had to worry about, but none of it held the economy or progress back in the long run.

 

[Dona Ferentes]

As much as I hate to upset the two values, I am going out on a limb and actually posting something that in a small way relates to the topic of this thread.
It seems that the lawmakers in the EU market have practiced their gymnastic moves in an attempt to back down on the threats to impose tariffs on Chinese EV's.
It seems that the Chinese had the temerity to threaten to curb exports of rems like Gallium and Germanium.
Ah, the law of unintended consequences.
From Zero hedge


View attachment 187070
mick

Edited to fix up copy and paste

we can but try

 

[qldfrog]

If you read the article, did i just notice that the Chinese gov wants to put all exporting companies under one umbrella..fair
Why target byd or saic differently,?
And this includes BMW . And would Tesla if tesla was exporting chinese made vehicles into the EU.
I find that brilliant

 

[mullokintyre]

German ruling coalition collapses, and fresh elections are called.
It seems to have been triggered by Trumps election, but that may be merely an extension of TDS where he gets blamed for anything.
It could be that FDP, being a centre right party that is centred around liberalism, small government etc, may have been emoldened by trumps sucess, and demanded something Scholz could not give.
Whatever the reason, one suspects that SDP hopes that TDS spreads through Germany and the right of centre parties get killed off.
Time will tell.
mick

 

[Garpal Gumnut]

German ruling coalition collapses, and fresh elections are called.
It seems to have been triggered by Trumps election, but that may be merely an extension of TDS where he gets blamed for anything.
It could be that FDP, being a centre right party that is centred around liberalism, small government etc, may have been emoldened by trumps sucess, and demanded something Scholz could not give.
Whatever the reason, one suspects that SDP hopes that TDS spreads through Germany and the right of centre parties get killed off.
Time will tell.
mick

View attachment 187512

The only thing that will save Germany is to unite under a strong leader and arm up to take on other powers in the region. Everyone else thinks they are progressive patsies for immigration and every -ism under the perverts' umbrella.

Oops.

They tried that and it didn't end up well.

gg

 

[mullokintyre]

Except for one gorious but frief period in 2008, the EU has consisty fallen behind the US in terms if economic activity.
the US has pulled away from the EU.
Mick

 

[Dona Ferentes]

As much as I hate to upset the two values, I am going out on a limb and actually posting something that in a small way relates to the topic of this thread.

ditto

"Europe - the forgettable market."

whilst European markets "rarely underperform this much", it would be also valid to say they "rarely outperform at all".

 

[mullokintyre]

I came across some oddly counter intuitive data points last night.
Firstly, German productivity is going down the toilet
It has been negative for the past 14 months.

However,, the German DAX Index has been going gang busters.

The European centric STOX 500 has also been going upwards for a few years.

So I really struggle to see where the valuations are coming from.
Mick

 

[JohnDe]

I came across some oddly counter intuitive data points last night.
Firstly, German productivity is going down the toilet
It has been negative for the past 14 months.
View attachment 191403

However,, the German DAX Index has been going gang busters.
View attachment 191401

The European centric STOX 500 has also been going upwards for a few years.
View attachment 191402

So I really struggle to see where the valuations are coming from.
Mick

I wouldn’t touch the European market until the European voters of the big player nations get rid of their woke leadership and put in a positive leadership with ideas of growth, development and a future.

 

[JohnDe]

The median disposable income in the US is 25 per cent higher than in Germany and 60 per cent higher than in Italy. The US continues to power ahead in terms of productivity growth while the largest economies in the EU – Germany and France – are both in the doldrums. The German economy is barely bigger than it was pre-Covid; it is currently in recession.​

The predictions for a strong Europe have been proved wrong​

Leading German Greens Party member Robert Habeck, who is also Germany's Economic Affairs Minister. Germany will hold elections on February 23 following the collapse of the three-party federal coalition. Picture: Getty Images

I have been sorting through my books with the aim of giving away as many as I can. Nobody wants books these days.

It’s a slow process as I end up flipping through the pages of the more interesting books or wondering why I purchased some of them in the first place.

I came across a copy of Lester Thurow’s 1992 book, Head to Head: The Coming Battle Among Japan, Europe and America.

It went straight to the discard box. Thurow was a left-leaning economist working at the Massachusetts Institute of Technology – he was an old-fashioned social democrat. He wrote a number of books and was a prolific columnist.

As a fervent believer in government intervention and a strong social welfare system, he had his money on Europe to draw away from the US. According to Thurow, “major investment decisions have become too important to be left to the private sector”.

He was also attracted to the Japanese economy in which the ministry of international trade and industry played a dominant role. Thurow is no longer with us but the fact remains that he couldn’t have been more wrong. At the time, the economies of the US and the EU were about the same size. Today, the EU economy is less than three-quarters the size of the US economy.

The median disposable income in the US is 25 per cent higher than in Germany and 60 per cent higher than in Italy. The US continues to power ahead in terms of productivity growth while the largest economies in the EU – Germany and France – are both in the doldrums. The German economy is barely bigger than it was pre-Covid; it is currently in recession.

Even at the time Thurow was being extremely optimistic in his predictions. The EU was in the process of adopting a common currency even though the underlying economic and fiscal situations of the member countries were extremely disparate.

The value of the euro was too high for the low-productivity countries, particularly Greece, Italy and Spain, but too low for Germany, in particular.

For some time, this suited Germany, which was able to develop strong export markets in automotive and engineering-related products, in particular. China became an important trading partner with high-end German cars making their way to China.

Germany was able to access cheap piped gas from Russia that was used by the large manufacturing sector. But what suited Germany didn’t suit the poorer EU countries, including Greece, Portugal, Spain and Italy, as they struggled to deal with the common currency. As a result, there was a need for fiscal compensation to these lower-income countries that was largely met by Germany and, to a lesser extent, France.

Thurow was, of course, not the only true believer in the European model and in Germany, in particular. In 2015, well-known international commentator Thomas Friedman wrote that Germany was about to become Europe’s first green solar-based superpower.

“There is an impressive weight to Germany today – derived from the quality of its governing institutions, its rule of law and the sheer power of its economy,” he wrote. He even favourably quoted the president of the Green Party’s political foundation, who claimed “the greatest success of the German energy transition was giving a boost to the Chinese solar panel industry”. He was referring to Energiewende, the German government’s decarbonisation strategy initiated in 2010.

Wind turbines at a wind farm in northern Germany. Picture: AFP

The aim was to shift electricity generation away from coal, gas and nuclear to renewables.

In 2019, Germany’s Federal Court of Auditors estimated that the program had cost €160bn over the previous five years, claiming the costs were “in extreme disproportion to the results”.

That said, the energy system in Germany continued to be underpinned by affordable gas from Russia, an arrangement that effectively ceased in 2022 when Russia invaded Ukraine.

Today, the German economy is on its knees, with the rate of unemployment above 6 per cent. It is much higher for recently arrived migrants. There is a massive rationalisation of heavy industry going on as industrial companies reduce the size of factories or close them altogether. There are some big names here, including Volkswagen, ThyssenKrupp and BASF. BASF is investing billions of euros in a new plant in China.

This is not entirely surprising given that the price of electricity in Germany is twice as high as in the US and three times higher than in China. To be sure, Germany has so many wind and solar installations, including offshore wind, that there are times when renewable energy generates around 70 per cent of all the electricity demanded. The trouble is that there are times when that percentage falls dramatically – to below 5 per cent.

At that point, Germany is reliant on the electricity produced in other nearby countries and transported using the interconnectors. Ironically, much of this electricity is generated by nuclear plants. The effect of this arrangement is to drive up electricity prices in those other countries.

In November last year, Germany recorded the highest electricity prices since the Ukraine War began. There are now palpable tensions between Germany and a number of countries that supply Germany with electricity when needed. Note here that installed battery capacity in Germany can currently generate less than an hour of the country’s daily demand for electricity.

In the meantime, the German government is restricted in its spending by the constitutionally enshrined debt ceiling. The attempt by the left-leaning Olaf Scholz coalition government to use Covid moneys to pay for energy and climate measures, thereby circumventing the fiscal rules, was disallowed by the Constitutional Court.

There is a widespread acknowledgment that more government spending is required for both defence and infrastructure.

In the meantime, the second largest economy in the EU, France, is in a world of pain with an inoperative government in charge. Unemployment is approaching 8 per cent and the budget position is dire, with the deficit now above 6 per cent of GDP, in clear breach of the EU’s fiscal rules. The attempts by the Macron government to trim the generous entitlements that drive a great deal of government spending have largely failed. The European Commission continues to impose costly and productivity-sapping regulations that must be met by the member countries. These include a number of climate-related measures, including the mandating of the purchase of electric vehicles.

The US is now powering ahead, with very strong gains in productivity and employment. The most recent data on employment saw the numbers in new jobs greatly exceed expectations. The rate of unemployment in the US is now a fraction over 4 per cent. Business investment is strong and the application of new technologies, particularly AI, has huge potential.

So, Lester and Tom, you were wrong about Europe and Germany, in particular. Affordable and reliable energy is the bedrock of economic prosperity as well as government arrangements that allow some companies to thrive and others to fail. Governments simply don’t pick winners well. There are lessons here for Australia.

 

[Dona Ferentes]

I wouldn’t touch the European market until the European voters of the big player nations get rid of their woke leadership and put in a positive leadership with ideas of growth, development and a future.

it's post-industrial, resource-poor and wedged by others

 

[qldfrog]

The median disposable income in the US is 25 per cent higher than in Germany and 60 per cent higher than in Italy. The US continues to power ahead in terms of productivity growth while the largest economies in the EU – Germany and France – are both in the doldrums. The German economy is barely bigger than it was pre-Covid; it is currently in recession.​

To be fair, we are not really better here yet our stock market is up....