The recent economic data out of Europe continues to underwhelm. These two charts via Credit Suisse win the unsexy data of the day award:
I’ve stated that Europe looks much more “Japanese” than America does. And the reason is simple – their monetary system remains suboptimal. The incomplete monetary system has resulted in a permanent inadequacy of aggregate demand because the single currency system has no inherent mechanism by which it can rebalance its trade imbalances. And since the Germans refuse to allow a central Treasury to redistribute from the north to the south (as is done in the USA) then the south is in a state of near permanent decay. Ironically, this actually brings down the north because the north relies on the south for a big chunk of its exports.
So the story here remains the same. The European and global economies are being dragged down by silly policy decisions and an inability to recognize a design flaw in the Euro. They either need to make a push towards something more closely resembling a United States of Europe or they need to break up the whole thing and revert back to individual currency systems. One thing is for certain – the current system isn’t working well at all and something BIG needs to be done about it.