Despite weakening economic growth and industrial production in recent months, Germany continues to look much better than the rest of Europe on the surface.

It boasts a very low unemployment rate (although ?ber-low-wage work has grown tremendously) and relatively small public deficits.

However, none of that is stopping Merkel and her administration from betting their re-election on the fact that they can implement significant austerity in the next 2 years, while also containing the Euro crisis, and “lead by example”.

Sven B?ll, Peter M?ller and Christian Reiermann report for Der Spiegel:

Just how healthy German finances are was revealed at the beginning of last week, in the form of an early-warning report by the European Commission. Germany was the only large country to be given an almost perfect grade.

And yet, if Merkel and Sch?uble have their way, the country many in Europe already see as a model of sound budget management will become even more exemplary. “We cannot expect Greece and the other crisis-stricken countries to accept more and more austerity measures, while nothing changes in Germany,” says a close associate of the chancellor.

As such, Merkel and Sch?uble want to significantly ratchet up consolidation efforts. The 2013 budget, currently being prepared at the Finance Ministry, will include many billions in savings. In addition, the last stage of the so-called debt brake — Germany’s constitutionally anchored law regulating state borrowing — will be brought forward by two years instead of going into effect as planned in 2016. Measures under discussion include cuts in social benefits and a reduction in government services. Merkel and Sch?uble believe that Germany can only remain credible in the euro crisis by demonstrating that it is not simply reaping the benefits of past efforts. Germany wants to lead by example.

In other words, the German populace is about to find out just how destructive austerity can be to an economy when the world is in the midst of an ongoing Depression, in a system that values credit creation above all else. Of course, the most immediate threat to the Germany economy is financial contagion when (again, not if) Greece exits the Eurozone, which will certainly be within 0-2 years. Merkel is also betting that this will now be contained, primarily due to the ECB’s LTRO programs (the second one to occur in a week). If you ask me, that’s a lot of losing bets she’s placing on the table. Back to the austerity:

It’s an ambitious goal. To achieve it, the coalition will have to adhere to strict austerity rules in the current year’s budget, but especially when assembling the budget for 2013. According to CDU deputy floor leader Michael Meister, new borrowing will remain at €26.1 billion this year, even though the first installments of at least €8.6 billion for the new euro bailout fund, the European Stability Mechanism (ESM), will come due in the summer. Meister intends to achieve this goal primarily through “smart budget management.” In other words, each of the 5,500 items in the budget will be closely examined and will be granted only as much as absolutely necessary.

In addition, tax revenues last autumn were significantly higher than forecast. And Germany has also saved billions on sovereign bond interest rates, with returns at record lows due to the ongoing euro crisis.

The challenges will be greater next year. In 2013, the finance minister hopes to reduce new borrowing to €15 billion. But because the planned financial transaction tax cannot be implemented throughout Europe, and a number of additional expenses will be incurred, Sch?uble will have to find some €10 billion in order to hit his target.

That is the primary motivation for assembling a new austerity package. Finance Ministry officials already have a clear idea of what it should look like. In particular, they have set their sights on the social benefits coffers, which, thanks to a strong economy, are currently well funded. Federal healthcare subsidies are to be reduced by up to €2 billion and the government’s contribution to the pension insurance system is to be trimmed by a similar amount. Both cuts are to be lasting.

Sch?uble also intends to cut the budget of the Federal Employment Agency by several hundred million euros and to cap outlays for the parental leave allowance program, expenditures for which have risen substantially in recent years.

As explained in Employment = Poverty and Inequality, the German populace is not in a great position to absorb these cuts to social spending that amount to almost a 40% reduction in new borrowing by next year, and 100% in the next two. Many of them are performing part-time, low-wage work that has greatly exacerbated wealth inequality within the population. As the German export industry is squeezed from the revenue side of the equation due to extremely low demand in Europe and the world, it will be forced to lay off workers and cut wages further, placing even more people into relative poverty.

POPULATION BELOW POVERTY LINE (%)

?

Assuming that everything is contained within the Euro crisis, and Greece either stays in without further German money or exits peacefully (fat chance!), these “exemplary” and ambitious austerity plans will simply place more downward pressure on German aggregate domestic demand, economic growth and tax revenues, making its deficit situation worse over time. That is especially true if Merkel sticks with the Euro experiment and is forced to pony up ever-growing sums of bailout money and Germany’s sovereign borrowing costs correspondingly rise. So Merkel may be leading Germany and Europe by example, but she’s leading them straight into the depths of economic depression and sociopolitical chaos.

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Despite weakening economic growth and industrial production in recent months, Germany continues to look much better than the rest of Europe on the surface.

It boasts a very low unemployment rate (although ?ber-low-wage work has grown tremendously) and relatively small public deficits.

However, none of that is stopping Merkel and her administration from betting their re-election on the fact that they can implement significant austerity in the next 2 years, while also containing the Euro crisis, and “lead by example”.

Sven B?ll, Peter M?ller and Christian Reiermann report for Der Spiegel:

Just how healthy German finances are was revealed at the beginning of last week, in the form of an early-warning report by the European Commission. Germany was the only large country to be given an almost perfect grade.

And yet, if Merkel and Sch?uble have their way, the country many in Europe already see as a model of sound budget management will become even more exemplary. “We cannot expect Greece and the other crisis-stricken countries to accept more and more austerity measures, while nothing changes in Germany,” says a close associate of the chancellor.

As such, Merkel and Sch?uble want to significantly ratchet up consolidation efforts. The 2013 budget, currently being prepared at the Finance Ministry, will include many billions in savings. In addition, the last stage of the so-called debt brake — Germany’s constitutionally anchored law regulating state borrowing — will be brought forward by two years instead of going into effect as planned in 2016. Measures under discussion include cuts in social benefits and a reduction in government services. Merkel and Sch?uble believe that Germany can only remain credible in the euro crisis by demonstrating that it is not simply reaping the benefits of past efforts. Germany wants to lead by example.

In other words, the German populace is about to find out just how destructive austerity can be to an economy when the world is in the midst of an ongoing Depression, in a system that values credit creation above all else. Of course, the most immediate threat to the Germany economy is financial contagion when (again, not if) Greece exits the Eurozone, which will certainly be within 0-2 years. Merkel is also betting that this will now be contained, primarily due to the ECB’s LTRO programs (the second one to occur in a week). If you ask me, that’s a lot of losing bets she’s placing on the table. Back to the austerity:

It’s an ambitious goal. To achieve it, the coalition will have to adhere to strict austerity rules in the current year’s budget, but especially when assembling the budget for 2013. According to CDU deputy floor leader Michael Meister, new borrowing will remain at €26.1 billion this year, even though the first installments of at least €8.6 billion for the new euro bailout fund, the European Stability Mechanism (ESM), will come due in the summer. Meister intends to achieve this goal primarily through “smart budget management.” In other words, each of the 5,500 items in the budget will be closely examined and will be granted only as much as absolutely necessary.

In addition, tax revenues last autumn were significantly higher than forecast. And Germany has also saved billions on sovereign bond interest rates, with returns at record lows due to the ongoing euro crisis.

The challenges will be greater next year. In 2013, the finance minister hopes to reduce new borrowing to €15 billion. But because the planned financial transaction tax cannot be implemented throughout Europe, and a number of additional expenses will be incurred, Sch?uble will have to find some €10 billion in order to hit his target.

That is the primary motivation for assembling a new austerity package. Finance Ministry officials already have a clear idea of what it should look like. In particular, they have set their sights on the social benefits coffers, which, thanks to a strong economy, are currently well funded. Federal healthcare subsidies are to be reduced by up to €2 billion and the government’s contribution to the pension insurance system is to be trimmed by a similar amount. Both cuts are to be lasting.

Sch?uble also intends to cut the budget of the Federal Employment Agency by several hundred million euros and to cap outlays for the parental leave allowance program, expenditures for which have risen substantially in recent years.

As explained in Employment = Poverty and Inequality, the German populace is not in a great position to absorb these cuts to social spending that amount to almost a 40% reduction in new borrowing by next year, and 100% in the next two. Many of them are performing part-time, low-wage work that has greatly exacerbated wealth inequality within the population. As the German export industry is squeezed from the revenue side of the equation due to extremely low demand in Europe and the world, it will be forced to lay off workers and cut wages further, placing even more people into relative poverty.

POPULATION BELOW POVERTY LINE (%)

?

Assuming that everything is contained within the Euro crisis, and Greece either stays in without further German money or exits peacefully (fat chance!), these “exemplary” and ambitious austerity plans will simply place more downward pressure on German aggregate domestic demand, economic growth and tax revenues, making its deficit situation worse over time. That is especially true if Merkel sticks with the Euro experiment and is forced to pony up ever-growing sums of bailout money and Germany’s sovereign borrowing costs correspondingly rise. So Merkel may be leading Germany and Europe by example, but she’s leading them straight into the depths of economic depression and sociopolitical chaos.

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This post originally appeared at CBS Moneywatch.?

The White House is?proposing to cut corporate income taxes?from 35 percent to 28 percent. President Obama also recommends that manufacturers get a further cut, to 25 percent, and he wants to impose a minimum rate on foreign earnings to discourage the use of tax shelters. There would other less substantive changes as well under his plan.?

The cut in the statutory tax rate, however, may not have as large an effect on the corporate sector as many anticipate. The reason is that this is intended as a revenue neutral change in taxes. To accomplish revenue neutrality, the cut in the tax rate will be accompanied be closing loopholes, i.e. a broadening of the base. Thus, every company receiving a tax break will be matched somewhere else by companies experiencing a tax increase. Thus, while some firms will benefit, others will get hit harder by these taxes and the net effect overall should be roughly a wash.

Another way you think about this, as?noted by Jared Bernstein, is to consider the difference between the statutory tax rate — the rate on the books — and the effective tax rate, the rate after all deductions, loopholes, etc. have been exploited.

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This post originally appeared at CBS Moneywatch.?

The White House is?proposing to cut corporate income taxes?from 35 percent to 28 percent. President Obama also recommends that manufacturers get a further cut, to 25 percent, and he wants to impose a minimum rate on foreign earnings to discourage the use of tax shelters. There would other less substantive changes as well under his plan.?

The cut in the statutory tax rate, however, may not have as large an effect on the corporate sector as many anticipate. The reason is that this is intended as a revenue neutral change in taxes. To accomplish revenue neutrality, the cut in the tax rate will be accompanied be closing loopholes, i.e. a broadening of the base. Thus, every company receiving a tax break will be matched somewhere else by companies experiencing a tax increase. Thus, while some firms will benefit, others will get hit harder by these taxes and the net effect overall should be roughly a wash.

Another way you think about this, as?noted by Jared Bernstein, is to consider the difference between the statutory tax rate — the rate on the books — and the effective tax rate, the rate after all deductions, loopholes, etc. have been exploited.

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As long as everyone is talking about gasoline prices, here’s another way to think about it: How long does the average American worker have to work in order to buy one gallon of regular gas?

We’ll answer that in two steps.

First, here’s a chart of average hourly earnings divided by the price of an average gallon of gasoline.

The number of gallons of gas you can get from an hour of work.

So right off the bat you see how workers have fallen behind on this measure since the late 90s.

In the late 90s, an hour of work bought you 14 gallons of gas. Today, an hour of work gets you 6 gallons of gas.

Now to take it another step further, and see how long it takes to buy one gallon of gas, you just have to divide this number into 60.

How many minutes it takes to buy a gallon of gas.

So in the late 90s, you could earn one gallon of gas in just over 4 minutes.

Today you have to work for 10 minutes to buy a gallon of gas.

Now we’ll just take it another step further. Assuming a gas tank requires 20 gallons to be full, we can just multiply by this by 20, and see that it will take the average worker over 3 hours now to fill up a tank of gas.

Back in the day, it took just 80 minutes.

How many minutes it takes to buy a fill up your full gas tank

And here’s one last chart. Assuming you have to fill up your car 50 times per year, then it means you spend about 170 hours every year just to fill up your car.

The number of hours it takes to fill up your gas tank for the year.

And if you work 2000 hours per year, then it means that about 8.5% of your working hours just go to filling your gas tank

The percentage of work time you spend on buying gas.

And finally, one last chart.

Let’s assume that the average person is awake for 5840 hours per year (16 hours a day times 365). Then it turns out that 3% of every waking hour is spent towards working to just fill up your car.

The percentage of your waking life devoted to working to afford gasoline.

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As long as everyone is talking about gasoline prices, here’s another way to think about it: How long does the average American worker have to work in order to buy one gallon of regular gas?

We’ll answer that in two steps.

First, here’s a chart of average hourly earnings divided by the price of an average gallon of gasoline.

The number of gallons of gas you can get from an hour of work.

So right off the bat you see how workers have fallen behind on this measure since the late 90s.

In the late 90s, an hour of work bought you 14 gallons of gas. Today, an hour of work gets you 6 gallons of gas.

Now to take it another step further, and see how long it takes to buy one gallon of gas, you just have to divide this number into 60.

How many minutes it takes to buy a gallon of gas.

So in the late 90s, you could earn one gallon of gas in just over 4 minutes.

Today you have to work for 10 minutes to buy a gallon of gas.

Now we’ll just take it another step further. Assuming a gas tank requires 20 gallons to be full, we can just multiply by this by 20, and see that it will take the average worker over 3 hours now to fill up a tank of gas.

Back in the day, it took just 80 minutes.

How many minutes it takes to buy a fill up your full gas tank

And here’s one last chart. Assuming you have to fill up your car 50 times per year, then it means you spend about 170 hours every year just to fill up your car.

The number of hours it takes to fill up your gas tank for the year.

And if you work 2000 hours per year, then it means that about 8.5% of your working hours just go to filling your gas tank

The percentage of work time you spend on buying gas.

And finally, one last chart.

Let’s assume that the average person is awake for 5840 hours per year (16 hours a day times 365). Then it turns out that 3% of every waking hour is spent towards working to just fill up your car.

The percentage of your waking life devoted to working to afford gasoline.

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Rental prices for office spaces in prime urban locations are increasing at a steady clip in most places around the globe, according to a new annual report from Cushman & Wakefield.

Rents increased most in the Asia Pacific region, growing 8 percent in 2011. Hong Kong held its position as the most expensive place to rent office space, with London’s West End taking second place and Tokyo coming in third. Those positions were unchanged from the previous year, the report said.

Beijing and Shanghai led the way in rental growth in Asia, with Beijing rents growing by a staggering 75 percent and overtaking Shanghai to have the most expensive office rental rates in mainland China. In Shanghai, rates grew by 30 percent in 2011.

Moscow also experienced a major growth rate of 41 percent, thanks to a combination of robust demand and a lack of prime space, according to Cushman & Wakefield.

In the U.S., most cities experienced steady rental growth. Prices grew the most in San Francisco–around 18 percent–in large part due to expansion in the technology sector. Midtown Manhattan, which has the most expensive rental rates in the U.S., experienced stable growth in 2011 at around 4 percent.

Some highlights from the report:

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Rental prices for office spaces in prime urban locations are increasing at a steady clip in most places around the globe, according to a new annual report from Cushman & Wakefield.

Rents increased most in the Asia Pacific region, growing 8 percent in 2011. Hong Kong held its position as the most expensive place to rent office space, with London’s West End taking second place and Tokyo coming in third. Those positions were unchanged from the previous year, the report said.

Beijing and Shanghai led the way in rental growth in Asia, with Beijing rents growing by a staggering 75 percent and overtaking Shanghai to have the most expensive office rental rates in mainland China. In Shanghai, rates grew by 30 percent in 2011.

Moscow also experienced a major growth rate of 41 percent, thanks to a combination of robust demand and a lack of prime space, according to Cushman & Wakefield.

In the U.S., most cities experienced steady rental growth. Prices grew the most in San Francisco–around 18 percent–in large part due to expansion in the technology sector. Midtown Manhattan, which has the most expensive rental rates in the U.S., experienced stable growth in 2011 at around 4 percent.

Some highlights from the report:

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Sometimes going against the prevailing market consensus can pay off in a big way. So, many investors look for contrarian calls.

Citi’s Javier Guardo is out with his list of best contrarian calls based on the firms analysts’ ratings and earnings forecast.

These are stocks that Citi analysts view much more positively than the rest of Wall Street.

Ticker: NFLX

Sector: Entertainment services

Why:?Q4 results showed stabilization after the negative impact of the price hike and Qwikster fiasco. Concerns about Netflix’s profitability are addressed through its guidance on expanding streaming contribution margin, and relatively low international losses.

Analyst: Mark Mahaney

Source: Citi

Choice Hotels valuation could go higher as projects in the pipeline get bigger

Ticker: CHH

Sector: Lodging

Why: The stock currently has reasonable valuation, which could increase as the? projects in the pipeline grow. Meanwhile, EPS is in line with historical average at times of cyclically low earnings.

Analyst: Michael Bilerman

Source: Citi

Advanced Energy is in a profitable segment of the solar industry and is insulated from Germany’s FIT cuts

Ticker: AEIS

Sector: Semi equipment

Why: Advanced Energy is one of the best franchises in a segment of the solar market that is growing fast and which is sustainably profitable. It is insulated from additional cuts to photovoltaic feed-in tariffs (FIT) in Germany.

“Furthermore, we have more confidence in solar margin leverage as the company shift manufacturing to lower cost China and the Street has historically under modeled leverage.”

Analyst: Timothy Arcuri

Source: Citi

See the rest of the story at Business Insider

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Noam Scheiber, author of the hot new book, Escape Artists, has revealed a great new nugget today.

It’s a memo written in 2008 by Obama econo advisor Christy Romer.

The gist: The size of the stimulus needed to be around $1.8 trillion to actually accomplish the goal of closing the massive output gap.

The full meme is here, but here’s the key part.

The President never saw the memo, but as Matt Yglesias explains, it was because Summers knew that given the dynamics of intra-White House politics, it was necessary to come with a more modest ask, so that the aggressive pro-stimulus camp would win over Geithner and Orszag, who were worried about a financial market freakout.

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