Tag Archives: Germany

04.20.2013 | The Money Supply: Gold Matters

In its basement, the NY Fed has a vault. A very safe place for countries or central banks or international organizations to store their gold, a shared home also makes it easy for countries to transfer bars from their pile to someone else’s when they need to.

During a recent visit, when my class was told that one country kept just one gold bar there, we asked who owned it. Our guide said he could not tell. But he did divulge that the Fed had sand bags ready if Hurricane Sandy had created an emergency. Also during a crisis, closing the airtight doors, a person probably had enough oxygen for 72 hours.

The Fed’s website says that in 2012, its vault held approximately 530,000 gold bars that weighed 6700 tons. Soon, they might have less. Or maybe they do already.

During January, the Washington Post reported that Germany wants to take its 674 tons back home. (I am not sure if Germany is taking all that it stores there.) The reason seems to relate to eurozone monetary crises. Analysts hypothesized that they just will feel better with it closer to home. Germany would not say when its $36 billion or so would be on a plane, a train or in a truck. (Remember Oceans 11? Die hard With a Vengeance?)

Meanwhile, in a recent column, NY Times financial writer Floyd Norris returned us to the gold or fiat money debate. To some, gold is the standard because they believe gold has intrinsic value. To others, the definition of money–a unit of value, a medium of exchange, a store of value-is all that matters. Then, it is okay to have central bankers use discretion to control the money supply rather than using the supply of gold that backs it.

But still, many point out that gold is just a commodity whose price tends to fluctuate because of a change in demand during financial crises. For 1980/82 and the Great Recession that started during December 2007, the price of gold soared (See below).

And that returns us to the gold vault. Should countries be using that gold to back money and thereby limit its supply?

Sources and Resources: For more about why Germany wants its gold back, this Washington Post article was good while this Floyd Norris NY Times column on gold and the Fed’s gold vault description ideally complement each other.

Posted by: adminEcon
Tags: balance of payments, central bankers, Germany, gold vault, money supply, NY Federal Reserve
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11.20.2012 | Greek Privatization Progress

Will international creditors say yes again to Greece after today’s meeting in Brussels?

Part of the deal involves selling or leasing whatever the Greek government owns. The proceeds reduce the debt and meanwhile, by building roads and business parks, resuscitating ports and recapitalizing banks, foreign investors pour money into the country.

It has not been quite that easy, though.

A closer look at government-owned beaches that were for sale revealed squatter communities composed of thousands of undocumented houses. In addition, because Greek property registries are woefully inaccurate, land transfers everywhere have been problematic. (If you can’t prove you own the land, then no one will buy it from you.)

The ports? Greek citizens are worried about prime assets being transferred to foreign ownership or worse, to Greek oligarches awaiting a fire sale. In addition, no one appears to be quite sure how much ownership the government should retain. And even if the Greek parliament settles all of that, foreign banks hestitate to finance Greek deals and the Greek banks need recapitalization.

All of these privatization complications made me wonder how many deals could be involved so I went through a month of articles at eKathimerini.com and came up with this random list of government-owned properties that could be partially or entirely sold or leased. They represent only a small proportion of the hundred of deals that might transpire but do provide a picture of the massive task facing the Greek government.

Public Power Corporation
Gaming company, OPAP
State lottery licenses
Public Gas Corporation
Gas transmission operators
Hellenic Postbank
Elliniko International Airport
Athens Water Company
Hellenic Petroleum
Hellenic Vehicles
Assorted Port Authorities
Buildings that house state agencies
Thessaloniki Water Company
Larco, Europe’s largest ferronickel producer
Egnatia motorway

Finally, where will the money go? Satisfying the bailout “troika,” the IMF, the European Central bank, and the European Commission, the Greek Parliament has issued “decrees” that direct the money to an escrow fund dedicated to paying the Greek debt.

Sources and Resources: I recommend these NY Times articles, here and here, for interesting stories while a Greek perspective is at eKathimerini.

Finally, the following Merle Hazard “Greek Debt Song” is always fun to watch.

Posted by: adminEcon
Tags: austerity, bailout, China, deficit, euro zone, European Central Bank, European Commission, fiscal policy, Germany, Greek debt, Greek Debt Song, Greek ports, Greek privatization, Grexit, IMF, Merle Hazard
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09.30.2012 | Who Works the Hardest in the Euro Zone?

I just discovered a surprising statistic.

In the euro zone, judged by hours per week, the Germans are not nearly the hardest workers. Instead Greece, with an average of 42.1 hours is close to the top of the list. By contrast, for 2011, the average German devotes 35.5 hours to a job and the Netherlands, with the lowest time, is 30.5.

Greece????

The reasons that Greeks work long hours relate to where and who. More Greeks are in agriculture where longer hours prevail. Also, in Greece, people tend to work full time or not at all while in Germany there are more part-time opportunities. Finally, more women work in euro zone countries and women tend to work less.

This takes us to a predictable conclusion. Although Germans work less, they are much more productive. A Greek worker generates €20.3 per hour while Germans produce more than double at €42.3. In 2011, at €51.8 an hour, the Irish topped the productivity list and their low corporate tax seemed to be the reason. Attracting multinational firms, they became a magnet for the world’s best technology, technology that boosted Irish productivity to relatively stratospheric levels.

A definition: When we look at productivity, we are comparing factor inputs-land, labor and capital– to the value of the goods and services they create. More output from less input means a more productive economy. It also means resources are then freed to do other work and produce still more.

Sources and Resources: Many thanks to the Brussels WSJ blog where I first saw the Greek German worker hours/productivity comparison. For up-to-date information and analysis on worker hours and productivity, Eurostats has easily accessible data.

Euro Zone Labor Productivity Per Hour Worked

Legend (euro per hour worked):