What to do about Germany?
- The German crisis continues to drag on - as was entirely to be expected the talks over Greek restructuring collapsed yesterday with the normal theatrics. The collective market reaction was an eye roll of exasperation, but no inclination to price in a Euro collapse. The expectation is that a deal will be done in the end.
- A deal over the Greek situation does not resolve one of the fundamental flaws of the Euro area, namely that the German standard of living. Germans have been forced to accept too low a standard of living for too long, and living standards are falling further and further behind their potential. This is causing Euro-wide problems.
- Assorted forms of UK inflation are due - consumer price inflation is still expected to be positive, but the rate is expected to decline. The Bank of England has signalled that it regards the relative price shift of the oil price as being a stimulus for growth, and thus a potential cause for tightening.
- The minutes of the Reserve Bank of Australia signalled that they too regard oil as a stimulus (and like the Bank of England they have tightened regulatory policy and want to see the effects). However pointed concerns about the health of the Chinese economy keep the option of another rate cut on the agenda.