naked capitalism

Paul Tioxon says:

When the surplus value of labor is taken in Germany, where does it go? Does cheaper exports mean more money in the pockets of American consumers of BMWs and Porches? Are there more German power tools floating around Dubai construction sites than should be if German workers were paid more? Is it in better social welfare programs, education or private pensions and numerous vacation days? Where is the Warren Buffet of Germany feasting off of the geyser of profits? Since the Germans are paid less, and exports are up, securing their jobs, shouldn’t there be some outlet for the wealth accumulated. It is not in German domestic purchasing power according to the lecturer.

What is interesting to note, is the political sequence of events for European currency. The Euro is not some sort of business alliance or merger and acquisition scheme, since all of the so called sovereign nations with their sovereign currencies, pegged their exchange value to the D-Mark, at first de facto then, de jure, rebranded as the Euro.

There was informed political consent to couple the various European national currencies together via the D-Mark, then a continuing more perfect union. But structural flaws remain and come out forcefully during the stress of the current financial crisis. As I tried to point out in previous my previous comments, do not expect to necessarily see France or Germany or Greece leave, expect to see the UK left out in the cold. London integration lies with the US as the AIG credit default business headquartered in The City, the financial district of London indicates. The UK wants what is its self interest and the rest of the EU allowed for it, EU member, the common market goodies, but no Euro participation, friends with benefits. But during this crisis, politicians jettison friends for permanent interests. Consider this bit of finance history between Germany and the UK:

“The pivotal event in the battle between screens and floors

The defining event in the transition from floors to screens took place in Europe and involved a battle between a floor-based Goliath and a tiny screen-based upstart. The London International Financial Futures Exchange (LIFFE) was the largest derivatives exchange in Europe ever since its creation in 1982, which was consistent with London’s position as the world’s most prominent financial center. In 1988, LIFFE listed futures on Europe’s leading sovereign debt instrument, the German government bond, or Bund. Traditionally, exchanges listed derivatives chiefly on their own country’s assets (stock indexes, government debt and agricultural commodities). But Germany had not yet started a derivatives exchange to list the German products. This was due to German law that viewed futures as gambling and futures contracts as non-enforceable. So LIFFE decided to list Bund futures, a smart move as trading in the product grew rapidly and by the early 1990s the Bund had become LIFFE’s most actively traded product.

About the same time that LIFFE was launching Bund futures, a group of German banks began discussing the creation of a German derivatives exchange along with the change required in German law. They hired Jorg Franke, the head of the Berlin Stock Exchange, to set one up. Just like the wool traders in New Zealand, the banks sponsoring the exchange were spread around the country, in this case in Berlin, Hamburg, Stuttgart, Munich and Hanover, and each wanted the exchange to be in its city. As in New Zealand, they solved the problem by locating the exchange in cyberspace. And to speed up time to market, instead of building a new electronic matching engine from scratch, they bought one from their neighboring Swiss Options and Financial Futures Exchange (SOFFEX). In its first year (1990), the Deutsche Terminbörse (DTB) listed three products – futures on the German stock index (DAX), the German equivalent of Eurodollars (FIBOR), and LIFFE’s crown jewel, the German Bund.”

http://www.world-exchanges.org/focus/2011-07/m-2-1.php

Germany, as much as it denigrates the lazy Club Med set, trusts the English about as far as they can throw them. The financial transaction tax, which would siphon off profits from the commanding heights of capitalism from with THE CITY, was a deal breaker for the British PM. He left and went home, and Europe, being Merkelized, are trying to move in concert. That is the thing about politics and the politics of powerful centralized nation states, it is the strength drawn from the act of political integration, which in our experience is structured with a single point, a central power, which has to reside somewhere in some form, to govern over the parts forming them into a meaningful whole, in this case the The European Union. From the British Empire/Commonwealth of Nations, to the Japanese Co-prosperity SPhere, to the USA, the political lesson is not lost any national leader. They must hang together, failure is not an option.