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Triple Whammy for German Economy

  • Written by Syndicated Publisher No Comments Comments
    July 21, 2014

    I have a guest post this morning from Saxo Bank chief economist Steen Jakobsen regarding the slowing German economy. Steen says the German economy is decelerating too quick for comfort and faces a triple whammy from Asian rebalancing, the US economy, and a bad energy policy.

    From Steen Jakobsen

    Germany May Have Won the World Cup, but Its Economy is Cooling Fast

    We need to congratulate Germany on its World Cup win. It was a victory for organisation and science, but unfortunately the Germany economy is slowing fast — and too fast for comfort when we look at Eurozone GDP.

    I have long argued this slowdown was coming based on Asia rebalancing (reducing imports of capital goods and turning more domestically-based); Bad energy policy (being dependent on Putin and his Russian gas rather than German nuclear energy — not exactly perfect substitution); A new minimum wage and a coalition government that has either reversed or halted a lot of the progress that had been made in the labour market.

    Unlike its football team, Germany became complacent and the switch to a reliance on green energy is now at risk as growth collapses.

    A few charts to illustrate my old argument …

    ZEW Expectations

    Industrial Production

    Strategy

    This confirms that we are destined for new lows in yields in core Europe, something I have constantly said since Q4-2013. The world is barely producing growth with zero interest rates — how can ANYONE believe rates will go higher? Beats me!

    Therefore: Long IEF, Bund futures and 10-year US Treasury notes.

    Above courtesy of Steen Jakobsen

    Europe is not prepared for a German slowdown, but it is coming.

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.
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