Germany in recession: you can't import everything

The secret of strong and weak currencies is simple: who runs a strong currency (relative to others, specially the US dollar or in the past the gold pattern) imports cheap but has difficulties exporting because domestic costs are high, instead who runs a weak currency imports at high price (and hence imports less) but has it quite easier to export. 

Late Yugoslavia (or Serbia-Montenegro) under Milosevic exported very cheap (mostly weapons for the international black markets) thanks to hyper-inflation. The experiment is worth studying because it is probably the longest lasting case of hyperinflation and a conscious attempt at it. The regime lasted that way almost 20 years, not without facing revolts and wars and ultimately isolation and defeat but it is clear that it keeps you going for a while if properly managed. 

Much more controlled inflation rates were the norm in Europe for last decades before the euro experiment was conceived. France, Italy, Spain, Greece, Turkey and Britain... all suffered from variably troublesome rates of inflation and all them landed on their feet in spite of them (in most cases there was no hyperinflation however). Thanks to that the state got short-term resources at will not being reliant on international usurists and kept production costs relatively low at the expense of the worker's income mostly (what was compensated sometimes by other means such as inflation-plus adjusted salaries, etc.) and/or at the expense of domestic consumers, including capitalists, who found imports, including raw materials and basic components, increasingly expensive (but as purchasing power was increased because the economy overall grew, this was less noticeable). 

In brief: if you want to export and not to rely on big usurists, then let the currency depreciate reasonably. Otherwise you will end up buying more and more and selling less and less until the currency and the economy itself collapse. 

That is what has happened in the Eurozone. The collapse hit first the weakest link: Greece, but it has been eroding the strength of the European real economy (the debt blah blah is much less important than what happens with the industrial production in the end) until it has finally hit the main paladin and apparent beneficiary of the failed model of irrational deflation and anti-inflationist hysteria: Germany's GDP shrank in the last quarter of 2011 and it is expected that it will repeat in this quarter, what is technically a recession (although this is just an academic convention: the Western Imperial Economy is in deep trouble since 2007 and has never recovered from that - nor probably will, at least not in a globalized Capitalist context - and anything else means creative and radical revolution). 

What to do? It is too late for just hope that calculated inflation and euro-deprecation alone wills solve the problems: Brussels should have tracked and mimicked the inflationist maneuvers of the USA, which controls the global reference currency and can dictate the terms. That is what China did in fact and what other states with satisfactory economies (so far) have done. 

But what to do now? Surely we will need still years to realize but actually no solutions within the obsolete Capitalist model can work anymore. A reason is that the the parasitic nature of the Capitalist system has already externalized to Earth almost all it could and we are now well in the decreasing yields phase, with each new externalization backfiring for more than the profit made. Another reason is that Capitalism is Imperialism but Imperialism is nearly impossible now (again too costly, largely because of nuclear weapons but also because Earth is very much exhausted in general).

Will this affect the global markets? No doubt. The late role of the imperial centers has been to be more and more mere consumers and therefore exporting developing economies rely heavily on the ability by Europe and North America to import. So, for as long as they depend on others buying their products, these economies will unavoidably suffer. There has been much talk of China redirecting its economy inwards and becoming a demand generator but I have to see to believe: China is still for the most part a poor country that has succeeded largely thanks to the practice of internal colonialism (exploiting hierarchically different regions and social groups, same for India) so most of the country is necessarily still poor and unable to buy much, be it to Chinese capitalists or to Western ones.

Maybe the USA briefly takes the role of locomotive again? Maybe but it does not have much fuel left either: the globalization it has promoted has not been too keen with its own productive capacity either. If it does it will be for just a short time: it has no strength to do much, not even in the military aspect, it seems to me (although this remains and will likely remain for some time the main bargaining chip of the Washingtonite Empire).

Japan is disintegrating in a radioactive cloud of mistrust in the authorities and can only play an ever shrinking role unless it first addresses (if it can) the key issue of a capitalist-bureaucratic caste that has no scruples in destroying the whole country. 

So honestly, I do not expect much other than continuous recession until the real problems are faced with real aim: radically and revolutionarily. You can't heal a drug addiction (and Capitalism is ultimately an addiction to money and useless consumerism) without interrupting the drug administration.

Time to heal, time to change everything.


Update: Financial Armaggedon reports that the following states are all in recession or nearing it: 

• China: in slowdown
• Japan: economic recovery has paused (c'mon: a radioactive country can't grow!)
• Germany: in recession
• France: in recession
• Brazil: slows down, GDP stalls
• UK: likely to shrink
• Italy: growth contracts and recession fears