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Germany the Latest to Give 'Free' Money

Germany the Latest to Give 'Free' Money

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Freelancing Germans like singers, dancers, consultants and others in the service industry, in addition to small businesses, are to receive €15,000 each.

That is expected to cost €50 billion, with a huge €400 billion to be given to larger companies “to be stabilized with capital from a stabilization fund.” According to Spiegel:

“Larger companies are to be stabilized with capital from a stabilization fund. In cases of need, the state will also be allowed to become a stakeholder in companies. Plans call for up to 400 billion euros in credit guaranties for the companies to be made available. Up to 100 billion euros has been earmarked for possible direct investments in companies.”

In total €750 billion, which is about the yearly tax intake for Germany, is to be spent on measures to address the government imposed curfews and their effect on the economy.

An effect that is expected to be drastic. At least 10% of GDP is estimated to be the cost of these measures, with it potentially reaching Great Depression levels at -15% depending on just how long these curfews continue.

There are mixed messages on that end. Italy, and soon after France, should now be coming out of the peak, with the peak in UK probably around now and next week. Same for NY and other affected areas in USA.

At the end of next week the UK government is to review the curfew measures, while President Donald Trump is now saying this might go on until the end of April, although New Yorkers have been complying so we’ll know better around easter.

For UK the experts here are impressed with the level of compliance with a somewhat static 1,000 new hospital admissions for the past three days.

The data is apparently lagging however by about two weeks for fatalities as there have to be diagnosis and so on, but at this point what might matter more is the rate of new infections with the aim being to bring the rate of anyone infected passing it on to anyone else down to under 1, meaning pretty much zero.

They are measuring it by the number of hospital admissions, with it unclear whether numbers here too are lagging as they go through tests.

A static 1,000 however suggests that even measures taken before the complete curfew have worked. And they have worked because as stated Brits have self complied and pretty much fully.

Such measures began three weeks ago, with closures about two weeks ago. At that point, traffic dropped considerably, with people not really going out.

The curfew was then implemented about a week ago, with traffic dropping to what is now pretty much just bare essentials.

So UK and New York should be at the peak right now, while the rest should be coming out of the peak, but due to the lag in data, official confirmation of it might not quite be announced for another week.

If that is the case then it would be about a month since measures began and were gradually tightened, corresponding too with pretty much the coldest time in UK.

Logically by easter this should be over, with the cost to productivity maybe not that much as usually most are entitled to three weeks of paid holiday, and of course there are all the bank holidays and so on.

What is somewhat different here is that the entire west has basically shut down pretty much at the same time, but China is now humming so it’s not the entire globe.

Meaning we may well get a V recovery, but the economical aftermath and the politics that might rise out of it can be a reason for concern.

In Italy for example China appears to be gaining considerable influence with the rich Italians blaming the EU for not helping them when all EU member states are busy helping themselves as this has affected all of them.

How much more debt the already indebted Italy and Spain can afford is not clear, with temptation probably rising there to get their own central bank and print baby print.

Something the US and EU can collectively do due to their strong economies, but significant inflation or even hyperinflation were Italy to print alone would probably be a considerable risk.

Another outcome out of this might be a strengthening of the US-EU alliance, which includes UK because they haven’t quite left yet.

That’s because they’re finding out the cheap Chinese goods are actually very expensive, with Boris Johnson accusing China of hiding their numbers, stating they are 40x higher.

For America, Mexico and South America in general might become big winners as manufacturing is moved there in addition to significant investment in US robotics to produce more goods with far less needed labour with the help of high tech manufacturing.

For Europe the Balkans is an easy ‘off-shore’ as well as North Africa where too high tech investment can reap good results and can facilitate a continuation of cheap and durable quality goods.

There might even be a return of non-taxing practices where a new phone is not thrashed in one’s face every year unless there is some actual innovation.

We’ve all heard of Apple for example manipulating ‘old’ iPhones by forcing them to upgrade to an OS that slows it down or even breaks it fully to get us all to buy more ‘cheap’ China produced phones.

That practice should be made illegal, because it’s basically a China tax on consumers, a tax shared with Apple too and other companies that engage in these practices of intentionally breaking goods or designing them so that they break.

Some vape pods, for example, for some reason barely last more than two months when you’d think they’d last far longer.

They are ‘cheap’ however, but at a recurring cost instead of a one off as it should be, replaceable in years not weeks.

As robotic manufacturing can produce in quantity what in the west would be quality products, you’d think the west can probably compete.

Another politics that might come out of this considerable sudden accumulation of new debt, besides the outright COMMUNISM in capitalist governments now taking equity in corporations, is the very political question of who is going to pay for this debt?

The millennials of course, but the rich ones or the poor ones? The answer is probably the middle class, but this is like taking a second mortgage while you were already borrowing to pay off the first mortgage.

The true answer is everyone will pay it through the regressive tax of inflation. So the poorest will be hit hardest. The rich will escape it through assets like bitcoin which might even see some of this €15,000 per person make its way to it. The middle class will be hit but they too will escape part of its effects through assets.

If we bring manufacturing home then the poorest might be cushioned with nice jobs which might give them and their children a way out of poverty for at least the more disciplined ones.

If we continue exporting more than selling, then you can expect continued slow growth especially as a lot of productivity would now have to go towards paying this debt instead of investing on innovating and taking calculated risks.

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