Europe – update (7)

Regular readers of da-boss will remember how the February 2013 post:

reported some grim economic news from Germany and France. While there appeared to be a degree of optimism expressed by the pundits in Europe:

The outlook [for German economy] is very promising. The chances that the economy will return to growth at the beginning of this year are very good.

da-boss remained skeptical:

The outlook may be promising but outlooks cannot trump the reality which in this case is very grim. Europe is in a death spiral; demographically, economically and socially. The politicians will talk things up for as long as possible so they can keep milking the system before it goes belly up for good.

Two months have passed and it is time to review which way things went:

Germany’s economy slowed to “near stagnation” last month, while France’s recorded its biggest contraction for four years, according to a closely watched survey. (…) Chris Williamson, chief economist at Markit, said the latest data painted a gloomy picture. “The [eurozone] recession is deepening once again as businesses report that they have become increasingly worried about the region’s debt crisis and political instability,” he said. (…) Mr Williamson added that the weak showing from Germany “suggests that the only source of bright light in an otherwise gloomy region has once again begun to fade”.

So da-boss was right – the “promising outlook” for Germany has not converted into growth and France continues to nosedive. But what about the politicians milking the system while they still can?

A financial scandal is threatening French President Francois Hollande, after it emerged that his former Socialist Party treasurer invested in two Cayman Islands offshore companies. (…) Meanwhile, ex-budget minister Jerome Cahuzac has been charged with fraud. (…) Mr Cahuzac admitted this week that he had hidden about 600,000 euros (£509,000; $770,000) in a Swiss bank account.

You may be wondering why my predictions are so spot on. While I would like to claim more credit the issue is actually quite simple. I use a basic understanding of human nature and Maths 101, in a three stage process.

• First I apply psychology. What do most people want? More stuff. When do they want it? Now. Who is going to pay for it? They do not care as long as they get what they want.
• Then I use maths. The Western countries have been spending 105% of what they earn for a few decades now and are all deep in debt. To reverse this trend they would need to cut down the spending by 10% – the 5% they borrow to spend and another 5% to start paying back the debt. This would be a wise thing to do.
• Finally, I combine psychology and maths. In a democracy, what portion of the population needs to agree to make a decision? 51%. Are there more stupid people or wise people? There are more stupid people. Is a democracy likely to agree to cut down the spending by 10% to balance the ledger? No.

This is why the West is doomed but before it implodes you can count on many entertaining updates on da-boss.

Europe – update (8)


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