Tuesday 9 April 2013

US Treasury Secretary Jack Lew seeks a boost in demand

US Treasury Secretary Jack Lew seeks a boost in demand

Jack Lew said policies to promote consumer demand would be ‘helpful’
The US Treasury Secretary has been in Europe and is asking the countries with any capacity to help boost economic growth via consumer demand in what seems to be dig at Germany.
Speaking after talks with the finance minister in Germany, he pointed out that the economy in the US was affected by problems in Europe.  But whereas it appears obvious thatMercedes-Benz ImageGermany should dip in to its huge reserves, the German finance minister, Wolfgang Schaeulbe was himself revealing the latest data showing that imports and exports are down.  Evidence that internal demand is weakening in Germany can be seen in the 4% fall in imports, whereas exports have fallen 1.5%.

Evidence of certain German car manufacturers attempting to target the UK with units that would have gone to Greece, Italy or Spain,  can already be seen in some of the business car leasing  and personal lease deals being offered directly by Mercedes Benz.   But, Germany itself  has something of a balancing act going forward, this, an economy that has boomed enormously by virtue of a  captive market for  its exports and a currency that no matter how successful that economy, has not changed in value relative to its main market.  It did affect the Euro value as a whole, but this was weighted by the weaker economies who need low interest rates to sustain growth and fit the criteria of the Euro. In order to maintain this position, Germany appears to have no option, once the politicians can get it past the public perception, but to support the very markets that buy their exports, such as Greece, Spain, Cyprus and Italy.
The Euro has weakened again recently after a few years of strengthening relative to the Pound and Dollar.  Now events such as the Italian elections and the unknown problems in Cyprus have  investors running scared of the Euro and taking, if only short term, an interest with the Pound and Dollar.
Once Germany begins to invest in its own customers, it will be doing exactly what the US is asking right now, but nothing about the whole position will have changed, except the US pushing Germany toward the obvious. Without exports the German economy virtually stops  and without the Euro, the Deutschmark, or whatever the currency would be,  would race upward in value, without its protection brought by the Euro, and render its newly expensive goods unsalable

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