Tuesday 29 November 2011

WHEN THE FUNDAMENTALS ARE WRONG THE CONCLUSIONS WILL BE WRONG TOO!

Comment to
http://www.nytimes.com/2011/11/29/opinion/nocera-germany-cuts-off-its-nose.html?_r=1

It is fine to learn from past historic events, but unfortunately this is not a 1930tieth crisis and the major problem is not the most indebted Southern European countries but the fact that all the Old Industrialized Countries continue to be uncompetitive. In that situation there is no chance of a speedy recovery and to continue to prop up everybody and everything will just weaken those countries that we expect to help us out of the crisis some time in the distant future!

A part from the fact that this crisis by now has lasted almost 4 years where the suggested remedies have been tried and retried without producing the desired results it is important to understand the real cause of the malady.

http://unifiedscience2.blogspot.com/2011/02/deeper-causes-of-downturn.html

There is a lot of focus on what we should do in the present disastrous situation, but it is conspicuous how little energy is used to understand the fundamentals. It is just assumed that we have been overspending!
It is thought inspiring that on the basis of that assumption the best remedy should be to continue spending by bailing out even the most inefficient countries that furthermore have cheated!

By now it should be obvious that something is fundamentally wrong. Up to the point where the crisis emerged the Old Industrialized Countries had had growth rates of 2 – 4 %. If all the unveiled “overspending” shall be accounted for it will amount to much more than 4 % a year since the last dotcom crisis! The implication of this is that ALL the Old Industrialized Countries have had huge and growing deficits for years. Such deficits does not build up in ALL the Old Industrialized Countries at the same time without there being a fundamental flaw!