Germany Benefits from a “Weak” Euro – Totally False.

oped_300Even Bloomberg talking heads are saying this now.

Unfortunately this is total and utter nonsense.

Look at the facts.

Check the Euro exchange rate against major currencies since 2000.

The Euro has got stronger.

About the Euro being cheap for German manufacturers.

Again, total BS.

The only people the Euro is “weak” for is Germans.

The Euro is expensive is countries such as Greece.

The euro being “weak” in Germany puts pressure on Germany to buy from other countries including Greece.

The “weaker” the Euro gets in Germany, the easier it is for Germany to buy things from Greece and more difficult it gets for Greeks to buy BMWs.

Making it more difficult for Greeks to buy BMWs hurts Germany, it is does not help it.

The problems in Greece have nothing to do with the Euro currency and everything to do with massive financial mismanagement of the Euro by the ECB and the Greek government.

The ECB was monetising Greek government bonds right up to 2007. Even though it knew the debt would be unsustainable. It is the ECB that looked the other way when Greece was admitted to the Euro.

Again, the more things Greeks buy from Germany the harder it is for Germans to sell to Greeks in the future.

The current crisis is a reset of this financial mismanagement.

The truth is if Greece had not increased VAT, fuel duties, property taxes and “solidarity” taxes the economy would have adjusted to the stronger Euro.

The gradually increasing tax burden throughout the crisis has eliminated the benefits that would have been reaped by Greece going through an effective deflationary period.

If you wanted to create a perfect storm you would have done these steps:

1. Lend massive amounts to the Greek government to cause a crisis

2. Increase taxes to negate the benefits of a Euro devaluation inside Greece.

3. Cut off liquidity to Greek government & increase taxes further as the economy gets worse.

4. This creates an impossible situation for the Greek economy. It cannot print its own currency, it cannot benefit from the devaluation of the Euro in Greece.

5. The only “solution” to this artificially created crisis is to set up a federal EU surplus recycling mechanism which massively increases the power of the ECB, massively increases the profits of the member banks of the ECB and massively increases the power of the EU by massively increasing the budget that it oversees.

This “solution” creates a simply massive moral hazard.

It rewards the entities that mismanaged the Euro

It penalises people who create wealth as they have to redistribute their wealth to entities which mismanage their economic affairs.

A surplus recycling puts power in the hands of parties that have been proven to be incompetent and it puts a ball and chain around creators of wealth.

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