The trade war is definitely on, no matter how Wall Street wants to deny it. Serious investors have downplayed recent events as part of a grand strategy, a negotiating tool that will all work out in the end. The reality, that there isn’t really a good strategy in place here but simply petty tactics, has not sunk in yet, at least in America. But the rest of the world knows better.
For the purposes of this discussion, the European Union will be diminished to Germany. After all, this is the economic engine that powers the continent right now, and Merkel’s leadership is critical. Where is Germany going? The long and short of it, the strategic and the tactical, is to the east. This response is proof enough that there is no US strategy which makes any sense.
It’s generally assumed that the biggest issue this election is job creation. That is interesting given how the economy has already created 14 million jobs in the last six years. More interestingly, as we’ve pointed out, we’re getting close enough to full employment that it’s hard to imagine where enough workers will come from.
If we want to seriously talk about jobs, the first thing we have to realize is that the short-term is probably covered by the coming worker shortage as Boomers retire. That’s the good news. Over the longer haul, however, automation of various kinds will replace more and more workers. That will take careful attention to what’s going on as well as a completely new definition of “work” to get us through the other side.
The time was a year before the Euro launched, the place was the tiny town of Burghausen, Germany. Busloads of people from their sister city in France were welcomed with fluttering tricolors silently proclaiming liberty, equality, and brotherhood. It was declared “French Week” through the town as menus in German gave way to French and the whole town celebrated unity.
I asked Herr Mitterer, the owner of the Hotel Post, if this grand “Eurozone” idea was going to work. “It has to,” he replied, “We’ve seen the alternative.”
Underneath the giddy celebrations at the end of a long period of expansion, the Euro was launched in 1999. It was always a forced marriage, a necessity blessed like any marriage with talk of happiness and great times ahead. But at the first sign of trouble the cracks are showing. Fourteen years on it is at a turning point – move closer or forget the whole thing?
The European Central Bank (ECB) has come to the rescue! On Friday, they announced a separate permanent fund to buy €500 billion worth of national bonds from EU member nations. Markets were up worldwide in response to news that the Euro would be preserved and stabilized. It’s nothing but good news all around! Right?
Not so fast. Like all good news these days, it has its roots in bad news. Two days earlier, the German government was unable to sell enough bonds at auction, as demand fell for anything tied to the Euro. Bailing out Greece or Spain was never really on the table, but bailing out Germany is a priority for the Frankfurt based ECB. And this starts the twisted and difficult tale of the bailout that may or may not culminate in the closing chapter of the Eurosaga that has plagued markets for over four years.