Today I want to tell you a short story. Imagine I have a car. It doesn't matter if it is an old one, a fast or a cool one. I have a car. Now there is another person taking a look at my car. Following dialogue gets started:
He: "You have a nice car! Can I lease it from you?"
Me: "But then I don't have a car anymore."
He: "That's not a problem. I will lease it out to you immediately."
Ring! Ring! Ring! Alarm! Sounds suspicious.
Me: "What's the point of it!?"
He: "Wait, it's even better. I will you pay you money for this business!"
Ring! Ring! Ring! (Was that an alarm ring or the money sign in my eyes?)
He: "Yes! We are investors, the leasing rates are our investment and so they are tax deductible. We will just give you part of the tax reduction in advance."
Now replace me with German municipalities, the other person with American investors and the car with municipal facilities and services like incineration or sewage plants and you get so-called Cross Border Leasings (German). The article says around 150 contracts have been concluded over 30 to 80 billion Euros.
On the second ring I (smart-ass me, not the supposed me from above) would have asked pathetically if this isn't fraud - if not legally (obviously there was a loophole) then morally. A court in Cleveland, Ohio ruled in one case (Case No. 1:07-CV-857) last year that the tax saving has to be paid back by the investor - at least.
But now the German municipalities are left behind with these financial constructs and the problems they cause. They were backed by the now infamous Collateralized Debt Obligations which are nothing worth anymore (if they were ever) - and the German municipalities have to take all the risks and pay for possible losses.
This is economical growth simply based on the flow of money. Even better, the money wasn't actually flowing except for the initial payment. The investors borrowed the money from the same bank the German municipality had to pay the leasing rate to. And the investors did not have access to the money but it was used to pay their leasing rates. So it was simply moving money from one account to another, fictitious transactions which I consider fraud at the expense of American and German taxpayers.
One final point to add: The article only points finger at the German politicians for taking such high risks rather than questioning the approach because of the moral issues. Since moral obviously doesn't pay off and you can't charge somebody for irresponsibility politicians should finally be liable for their actions in office. They would think more than twice about such high-risk transactions.
Disclaimer: If I have oversimplified the case and there is economical sense in such a transaction I would really like to hear it. Feel free to contact me!
23 February, 2009
15 February, 2009
A Heart for Producers
Last week I had to try hard to keep from laughing. I was shopping for grocery and saw a new campaign: Ein Herz für Erzeuger (A Heart for Producers). The idea: Rather than spending 49 cents on a liter of milk you pay 59 cents and the additional 10 cents go completely to the farmer. This is ridiculous in many ways!
In Germany there is both a charity campaign Ein Herz für Kinder (A Heart for Children) for needy children and a magazine Ein Herz für Tiere (A Heart for Animals respectively Pets). And now needy farmers? So first it's simply a ridiculous name from a marketing perspective - or am I the only one who thinks first of a donation account when hearing this campaign name?
Second, why should I pay more for the same product? For my good nature or my conscience? I'm sorry, but this is the same milk from the same intensive livestock farming where cattle is fed with the same antibiotics! Isn't it understandable I don't feel sympathy for this kind of farming? If I want to have a better product for which I'm willing to pay more I'll get organic milk.
Third, I'm not denying that many farmers, especially small businesses, have major problems with the low milk price and their costs. But the problem is far more complex (German) - and needs painful consequences. For years the market for milk was totally regulated (just like every other agricultural product in the EU) by setting quota how much a farm can produce. This led to the infamous so-called milk seas or butter hills - products produced beyond the market's needs, bought with huge subsidies by the EU and destroyed or fed to livestock.
Now the quota system is going to be removed - and the market will fix the distortions caused by the regulations: The price will likely drop due to the oversupply. Some farms might switch to the production of organic food which gives them higher income per unit (a liter of organic milk costs 89 cents). But there will definitely be individual fates, especially small farms, that will have to shut due to reduced income. But it is not possible to work against the market or it will cost an enormous amount of money. It makes more sense economically to spent the money otherwise despite the costs for social benefits or other support for the victims of this change. Only one thing is sure: The 10 cents can't prevent that change. If at all it will extend the agony.
In Germany there is both a charity campaign Ein Herz für Kinder (A Heart for Children) for needy children and a magazine Ein Herz für Tiere (A Heart for Animals respectively Pets). And now needy farmers? So first it's simply a ridiculous name from a marketing perspective - or am I the only one who thinks first of a donation account when hearing this campaign name?
Second, why should I pay more for the same product? For my good nature or my conscience? I'm sorry, but this is the same milk from the same intensive livestock farming where cattle is fed with the same antibiotics! Isn't it understandable I don't feel sympathy for this kind of farming? If I want to have a better product for which I'm willing to pay more I'll get organic milk.
Third, I'm not denying that many farmers, especially small businesses, have major problems with the low milk price and their costs. But the problem is far more complex (German) - and needs painful consequences. For years the market for milk was totally regulated (just like every other agricultural product in the EU) by setting quota how much a farm can produce. This led to the infamous so-called milk seas or butter hills - products produced beyond the market's needs, bought with huge subsidies by the EU and destroyed or fed to livestock.
Now the quota system is going to be removed - and the market will fix the distortions caused by the regulations: The price will likely drop due to the oversupply. Some farms might switch to the production of organic food which gives them higher income per unit (a liter of organic milk costs 89 cents). But there will definitely be individual fates, especially small farms, that will have to shut due to reduced income. But it is not possible to work against the market or it will cost an enormous amount of money. It makes more sense economically to spent the money otherwise despite the costs for social benefits or other support for the victims of this change. Only one thing is sure: The 10 cents can't prevent that change. If at all it will extend the agony.
08 February, 2009
Top 10 Albums 2008
2008, the year of Chinese Democracy is over. Unfortunately, neither the one nor the other worked out. I don't even want to append as expected because I can hardly imagine anybody was actually expecting anything. And all the hope for 2008 was already used up.
Anyways, in 2008 I bought again around 40 CDs, most of them within the last days of my trip to Philadelphia because CDs are so much cheaper in the US than in Germany - and that's not only due to the Euro exchange rate. So I only influenced the US Amazon 2008 charts, but not the German one. Maybe that's why not even one of my personal Top 10 made it into the latter :-)
And what does it tell you about the year 2008 in music (or the people buying music) if the first 3 places are taken by albums from 2006 and 2007? I found some great CDs though and here it is, my personal Top 10:
Most surprisingly there is a German album on the list. I can't remember when the last one was even close to that. But '1968' by Rainald Grebe is so amazingly sarcastic - I'm still laughing whenever I listen to it. As a sample his performance in German satirical TV show Neues aus der Anstalt: Der Präsident.
Most of the other 12 songs are even better, but this one fits Germany's Presidential elections this year. Since the president doesn't have actual power in Germany (that's also what the song is about) the parliamentary elections at the end of September are more interesting. Though German democracy isn't actually endangered let's see what uses up our hopes this year :-)
Anyways, in 2008 I bought again around 40 CDs, most of them within the last days of my trip to Philadelphia because CDs are so much cheaper in the US than in Germany - and that's not only due to the Euro exchange rate. So I only influenced the US Amazon 2008 charts, but not the German one. Maybe that's why not even one of my personal Top 10 made it into the latter :-)
And what does it tell you about the year 2008 in music (or the people buying music) if the first 3 places are taken by albums from 2006 and 2007? I found some great CDs though and here it is, my personal Top 10:
- The Walkmen - You & Me
- Gus Black - Today Is Not The Day...
- Rainald Grebe - 1968
- MGMT - Oracular Spectacular
- Kings Of Leon - Only By The Night
- Fleet Foxes - Fleet Foxes
- Sun Kil Moon - April
- Vampire Weekend - Vampire Weekend
- The Mountain Goats - Heretic Pride
- Randy Newman - Harps And Angels
Most surprisingly there is a German album on the list. I can't remember when the last one was even close to that. But '1968' by Rainald Grebe is so amazingly sarcastic - I'm still laughing whenever I listen to it. As a sample his performance in German satirical TV show Neues aus der Anstalt: Der Präsident.
Most of the other 12 songs are even better, but this one fits Germany's Presidential elections this year. Since the president doesn't have actual power in Germany (that's also what the song is about) the parliamentary elections at the end of September are more interesting. Though German democracy isn't actually endangered let's see what uses up our hopes this year :-)
02 February, 2009
The Good, the Bad and the Ugly
Reading an article about Angela Merkel reminded me of finishing my classification of politicians which I have in my drawer since quite some time: The Good, the Bad and the Ugly. Don't ask me why but somehow this movie title came to my mind. More serious it's the programmatic, the ideologist and the opportunist. Of course this classification isn't scientific at all, I just made it up during last year's US election campaign.
Let's start with the ideologist, the obvious example is George W. Bush. His 2 terms can be characterized by the ideology of the everlasting fight of Good vs. Evil. Unfortunately, for pursuing his goal of spreading democracy especially in the Middle East to "build a safer world" he regarded every means as justified - including those I consider to be preserved for the Evil:
Not talking about all the problems that got out of focus, ignored and grew into crises on their own. Even looking back Bush shows hardly any sign of regret (and even less does Vice President Dick Cheney). I consider that very typical for people blinded by ideology.
The second characterization is opportunist. There is no ideology he blindly sticks to, but the lack of leadership and predictability is also the problem in these times of crisis - just as with German Chancellor Angela Merkel:
Former Vice Chancellor and Foreign Minister Joschka Fischer of the Green Party describes her style in an interview as follows:
A more recent article is even more excoriating:
Of course her behavior could be interpreted simply as cautious - if she just wouldn't change her opinion too often. Not long ago environment was an important topic for the former Minister of Environment:
Now that's no longer valid since it might cost jobs? This argument sounds very familiar, just like the failed strategy of the US economy, in particular car industry. If only many experts would not see green technologies as a chance to create thousands of jobs. In my opinion she endangers Germany's leading position in environmental technologies and so jobs in the long run.
Or the economic crisis:
Sure, she is still by far preferable to French Omni-President Nicolas Sarkozy with his aimless actions for the sake of acting. But I'd like to know what she is actually up to.
Somewhere in the middle is the programmatic, with a general plan laying out the base for the politics, an idea, but not blindly sticking to it like an ideology. The means are chosen as the cases arise but according to the greater plan. For being successful this needs good judgment and a strong team of experts - and a strong leader for this team.
My hope is that the new US President Barack Obama will fulfill this role. So far he has laid out the general guideline in his speeches: being a president for all US Americans, no matter what descent, what religion, what region or walk of life. The speech in Berlin showed that he doesn't intend to limit the guideline to the US, but also apply them internationally.
He has also chosen his team of experts for which he received praise from left and right (actually more from right since the lefts are kind of disappointed he didn't choose more radical candidates). He now has to prove his judgment and his leadership of this alleged team of rivals.
As little scientific my classification is as blurred are the borders between the groups. Bush was forced by the "circumstances" aka economic crisis to give up the neoconservative ideology and rather spend a whole lot of money to bail out banks - which just underlines his failure even more. A weak leader will switch from his program to opinion polls as guideline of his politics just when leadership and guidance is needed the most. (That is what I think actually happened with Angela Merkel.)
The last 2 months were a lame duck season not only in the US but also in Germany if not Europe. Everybody seemed to wait for the inauguration of Barack Obama. Now Obama made an impressive start. Let's see how it is going to work out.
Update: There is a new article on Angela Merkel's failure:
Let's start with the ideologist, the obvious example is George W. Bush. His 2 terms can be characterized by the ideology of the everlasting fight of Good vs. Evil. Unfortunately, for pursuing his goal of spreading democracy especially in the Middle East to "build a safer world" he regarded every means as justified - including those I consider to be preserved for the Evil:
Those methods, including the use of stress positions and forced nudity, continued to spread through the military detention system, and their use “damaged our ability to collect accurate intelligence that could save lives, strengthened the hand of our enemies, and compromised our moral authority.”
Not talking about all the problems that got out of focus, ignored and grew into crises on their own. Even looking back Bush shows hardly any sign of regret (and even less does Vice President Dick Cheney). I consider that very typical for people blinded by ideology.
The second characterization is opportunist. There is no ideology he blindly sticks to, but the lack of leadership and predictability is also the problem in these times of crisis - just as with German Chancellor Angela Merkel:
She put together a rescue package for banks that so far hasn't had much effect. She has come up with an economic stimulus package that may not be enough. She hasn't made a single major speech. There is no sign of a claim to leadership, whether in Germany, Europe or the world.
Former Vice Chancellor and Foreign Minister Joschka Fischer of the Green Party describes her style in an interview as follows:
Until now, if opinion polls are anything to judge by, this approach has served her well. She always takes positions that allow her to maintain a majority. However, in this global crisis, that is simply the wrong attitude. What is needed now is strategic, large-scale planning -- in the European spirit.
A more recent article is even more excoriating:
A major crisis actually presents an opportunity for a chancellor. Everyone is at a loss, everyone is plagued by uncertainty, and virtually everyone is waiting for someone to take charge. And what has Merkel done? She has joined those who are waiting. She has become the leader of the waiting game. [..] What counts for her is that she has a result. It doesn't matter what it is. It is typical of a chancellorship that searches for harmony but lacks leadership.
Of course her behavior could be interpreted simply as cautious - if she just wouldn't change her opinion too often. Not long ago environment was an important topic for the former Minister of Environment:
Chancellor Angela Merkel has gone out of her way to show herself as a climate saviour. In August 2007, she had herself photographed on a block of ice in Greenland in order to draw attention to the consequences of climate change. Just a short time before she helped to negotiate a global climate "roadmap" at the G-8 summit in Germany.
Now that's no longer valid since it might cost jobs? This argument sounds very familiar, just like the failed strategy of the US economy, in particular car industry. If only many experts would not see green technologies as a chance to create thousands of jobs. In my opinion she endangers Germany's leading position in environmental technologies and so jobs in the long run.
Or the economic crisis:
The chancellor seemed unsure of herself when it came to preventing the impending collapse of the banking system. [..] First she touted an international solution before eventually bowing to pressure from German banks and agreeing to a coordinated European approach. [..] Merkel also flip flopped when it came to the political consequences of the economic downturn. At first, her office announced that she and Steinbrück had agreed to bring forward a plan to make health insurance premiums tax-deductible. But then she dropped the plan when it came in for sharp criticism.
Sure, she is still by far preferable to French Omni-President Nicolas Sarkozy with his aimless actions for the sake of acting. But I'd like to know what she is actually up to.
Somewhere in the middle is the programmatic, with a general plan laying out the base for the politics, an idea, but not blindly sticking to it like an ideology. The means are chosen as the cases arise but according to the greater plan. For being successful this needs good judgment and a strong team of experts - and a strong leader for this team.
My hope is that the new US President Barack Obama will fulfill this role. So far he has laid out the general guideline in his speeches: being a president for all US Americans, no matter what descent, what religion, what region or walk of life. The speech in Berlin showed that he doesn't intend to limit the guideline to the US, but also apply them internationally.
He has also chosen his team of experts for which he received praise from left and right (actually more from right since the lefts are kind of disappointed he didn't choose more radical candidates). He now has to prove his judgment and his leadership of this alleged team of rivals.
As little scientific my classification is as blurred are the borders between the groups. Bush was forced by the "circumstances" aka economic crisis to give up the neoconservative ideology and rather spend a whole lot of money to bail out banks - which just underlines his failure even more. A weak leader will switch from his program to opinion polls as guideline of his politics just when leadership and guidance is needed the most. (That is what I think actually happened with Angela Merkel.)
The last 2 months were a lame duck season not only in the US but also in Germany if not Europe. Everybody seemed to wait for the inauguration of Barack Obama. Now Obama made an impressive start. Let's see how it is going to work out.
Update: There is a new article on Angela Merkel's failure:
[..] A chancellor without a compass, a head of government without authority and a party leader who lacks the support of her own people.
Subscribe to:
Posts (Atom)