Donnerstag, 26. Oktober 2023

How I Became Pro-Israel

Only a month ago, I hardly paid attention to events in the Middle East, the conflict between Israel and the Hamas. It always seemed the same: Hamas attacked, Israel retaliated in a heavy-handed way, Israel was accused of brutalities and then things returned to a new quiet for a while. Had I had to choose sides then, I probably would have sided with Israel (for no other reason than the fact that Jews are closer to our civilization, the 'Judeo-Christian Tradition', than the Arabs) but I truly felt no reason to choose sides.

All this changed since October 7 and I have now become a full supporter of the pro-Israel side. Not because of the assumption that we Austrians owed it to the Jews to unequivocally support them but, instead, because the Hamas-defenders triggered rage on my part, a rage which I presume will increase as time goes on and Hamas continues to win the propaganda war. The impression is being nurtured that the Jews had stolen the home of the Palestinians from them, that they had occupied their home, expelled them from their home, persecuted them, etc. In fact, many accused the Jews of behaving like the Nazis had. The famous arbiter of world affairs, Yanis Varoufakis, made international headlines with an article where he wrote: "I refuse to condemn Hamas but insist that we, Europeans & Americans, are the culprits for the atrocities in Israel-Palestine.“ Applause from many sides was assured.

And now the Secretary General of the UN, Antonio Guterres, said the following in a speech at the UN:

"The Palestinian people have been subjected to 56 years of suffocating occupation. They have seen their land steadily devoured by settlements and plagued by violence; their economy stifled; their people displaced and their homes demolished.  Their hopes for a political solution to their plight have been vanishing."

This is, in my view, a distortion of history which not only justifies the terrorism of Hamas but even encourages it further.

The term "Palestine" was coined by the Romans. The term "Palestinians" was invented maybe 100 years ago. There were never Palestinians in Palestine. There were Arabs and Jews (as a relatively small minority) for nearly 2000 years and they lived more or less peacefully side by side. "Palestinians" are Arabs; Jews are Jews.

That the Jews populated this area roughly 2000 years before Mohammed is historically proven (even though there are still Arabs who deny this). The Romans de facto expelled the Jews in 70 AD and, since then, they had lived in the diaspora, praying and dreaming that one day they would return to their original homeland. This dream was energized in 1896 when Theodor Herzl coined the term "Zionism". Until then, the Jews represented 5-10% of the Palestine population. Zionism became a movement and Jews from all over the world started immigrating to Palestine. By the end of WW2, their share of the population had grown to almost 50% even though during this time the Arab population also increased.

There has never been a state in the territory of Palestine. Since 3000 years ago, many great powers had occupied the Palestine (the most important ones: the Greeks, the Romans, other Arab neighbors, the Ottomans and, finally, the British under their mandate). Notwithstanding that, none of these powers ever considered the creation of a separate state.

The immigrating Jews did NOT steal anything from the Arabs and they did not expel anyone. They purchased land from the Ottomans and later from the British and, of course, from the Arabs themselves. And they also turned unpopulated, barren desert land into arable land and made it habitable.

Along with the expansion of Zionism, the Jews developed a strong lobbying structure which lead to the fact that the British allowed themselves to be enticed to issue the "Balfour Declaration" in 1917. 

"His Majesty's Government view with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavors to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine or the rights and political status enjoyed by Jews in any other country."

Note the part about the 'non-Jewish communities'!

Between 1917 and 1945, the Arab-Jewish conflict intensified with violent actions from both sides reaching dangerous levels. After WW2 and the holocaust, the British threw the towel and handed the responsibility to the UN. The UN recognized that the conflict could not continue and, in 1947, approved with a large majority the Partition Plan for the Palestine: two separate states (Arab and Jewish) bound together by an economic union and Jerusalem stand-alone under international responsibility. The Jewish state was geographically a bit larger than the Arab state but it included a large portion of non-arable and uninhabited desert. 

The Jews immediately accepted the plan; the Arabs immediately rejected it. They did not even want to negotiate it. Their goal was to "drive the Jews into the sea."  

Many argue that the UN deprived the Palestinians of their home and that to this day, they do not have a new home and are forced to live in refugee camps. Well, the home which they could have had they rejected in 1947 (and repeatedly thereafter) and the fact that they have lived in refugee camps for 70 years has other causes. Every war produces 'displaced people'. After WW2, millions of Europeans were displaced: the Finns from Russia, over 12 million Germans from the East, the Italians from Dalmatia, the Romanians from Bulgaria, and more. But there were NEVER long-term refugee camps. Their 'countries of origin' accepted their displaced brethren and assisted them in building up a new existence. The Arabs have done exactly nothing for their Palestinian brethren. On the contrary, they opposed every possible peace plan and continued to nurture hate against the Jews. 

Had the Arabs accepted the 1947 partition plan of the UN, their Palestinian brethren would have an immeasurably better life since then than they have today. Peace would de facto have been assured by the international community and there could not have been unilateral action in Jerusalem.

On May 14-15, 1948, Israel issued its Declaration of Independence which included a peace proposal:

"In the midst of wanton aggression, we yet call upon the Arab inhabitants of the State of Israel to return to the ways of peace and play their part in the development of the State, with full and equal citizenship and due representation in its bodies and institutions -- provisional or permanent. We offer peace and unity to all the neighboring states and their peoples, and invite them to cooperate with the independent Jewish nation for the common good of all.“

The next day Arab troops invaded the just established State of Israel with the goal of "driving the Jews into the sea." To the surprise of most, the Israeli won the war. They expelled not only Arab soldiers but also Palestinian civilians and they expanded their land through 'occupied territories'. This was repeated in 1967 and 1973: attacks by the Arabs, victory of Israel and expansion of occupied territories. In the process, Israel expanded its territory massively relative to the 1947 UN Partition Plan.

The issue of 'occupied territories' and Israeli expansion of settlements therein (accompanied by the expulsion of Palestinians) is obviously not a kosher thing. On one hand, given the history of continued attacks from the Arabs, it is understandable that Israel felt vulnerable to attacks from the Golan Heights and the West Bank and, therefore, wanted to control these areas. On the other hand, the new settlements certainly caused bad blood on the Arab side and served as a justification for their continued terrorism.

Now, I will not argue that Israel was always the 'good guys' and the Arabs were always the 'bad guys' but one has to recognize that in the culture of Arabs (and perhaps also Jews), a compromise is always seen as a sign of weakness and that even the Bible referred to "an-eye-for-an-eye". The intensity of Israel's 'self defense' increased with the increase in Arab aggressiveness. Undoubtedly, Israel could have conducted itself in a more restrained way. But please - the responsibility for killed Arab civilians and even children rests overwhelmingly with Hamas because they use civilians and even children as human shields. Because of that, the law makes Hamas the perpetrators and not Israel. And by the way, who is a civilian when Hamas soldiers do not wear uniforms?

Since 1948, Israel has made at least 5 peace offers for a separate Palestinian state. It almost succeeded with Yasser Arafat but then the man died. Since then, the Palestinians do not have a strong, legitimate leadership. The PLO has become more or less sidelined and the terrorists have gained the upper hand. Incidentally, in 2007, Israel's Prime Minister Ehud Olmert entered into peace negotiations with the Arab Peace Initiative. He allegedly offered to give the Palestinians about 95% of the West Bank. He allegedly told the Arabs that "an offer like this you will never receive again in the next 50 years!" Regrettably, the Arabs were not interested in peace because the fanatics still wanted to "drive the Jews into the sea" (which is the official policy of Hamas to this day).

To summarize: I do not defend Israel because of any suspected guilt feelings about Austria's anti-semitism (not only) during the Nazi years. And even less do I defend Israel because I might feel that they have never made mistakes or are completely innocent. Both sides have legitimate claims and reasonable people would have to reach a compromise. 

The UN had attempted to satisfy the demands of both sides. The Jews had accepted that and the Arabs had not. That was the original sin from which everything else followed.

I have become pro-Israel because public opinion seems to shift and view Hamas as the liberators and Israel as the Nazis. That is a brutal violation of every value which the Judeo-Christian Tradition has instilled in me.

Post Scriptum

There are 2 sides to every issue and there are obviously also 2 sides to the Arab-Israel issue. I have discussed this issue with my former college roommate, an American who is a highly intelligent lawyer in the US with bachelor and law degrees from Harvard. I sent him the pro-Hamas statement which over 30 Harvard student organizations had published and asked him for his opinion.  In the interest of objectivity, I reproduce his message below.


That’s an interesting list of organizations.

I’m surprised some of them are allowed to exist given the Harvard “never criticize Israel” approach.

Remember Larry Summers – a Jew – saying that anyone who supported the boycott of Israel was an antisemite?

The Guardian put current events in context:

Palestinians have endured decades of occupation, the erasure of a viable future state by settlements, and growing violence by settlers, emboldened by impunity. The decade-and-a-half long blockade has destroyed Gaza’s economy and left half the population in poverty. A modest recent economic uplift is no fix for the political crisis begat by a moribund Palestinian leadership which lacks both power and legitimacy – and, above all, by Mr Netanyahu, who has overseen massive settlement expansion, handed extreme nationalists and overt racists not only a veneer of respectability but key positions, and promised annexation.

You put folks in an open air prison for 16 years, take over all of the West Bank by settlements, and tolerate heinous attacks by settlers and day-time raids that kill so many innocents, and people will respond in whatever way they can.

Remember, in 1908 Jews were 8% of the population of Palestine and owned 3% of the land. 

Think of Poland. Germans moved into Poland to get Lebensraum:

Duiker and Spielvogel note that up to two million Germans had been settled in pre-war Poland by 1942. Eberhardt gives a total of two million Germans present in the area of all pre-war Poland by the end of the war, 1.3 million of whom moved in during the war, adding to a pre-war population of 700,000.

Sometimes the Polish resistance murdered these settlers. Were the resistance members who did so terrorists, or were the settlers fair game. At the time, many, if not most, Poles would say they were fair game.

It will be interesting to watch. Israel normally kills 30 Gazans for each Jew killed:

In June 2014 three Israeli teenagers were kidnapped; Israel conducted a massive crackdown in the West Bank and increased air strikes in the Gaza Strip, prompting retaliatory rocket fire from Hamas. As fighting continued to escalate, Israel launched a 50-day offensive into the Gaza Strip on July 8. Some 2,100 Palestinians and more than 70 Israelis were killed in the ensuing conflict, with about 5,000 targets hit in the Gaza Strip.

With 900 Jews killed, that would mean the Jews will kill 27,000 Palestinians.  My bet is the Netanyahu will kill many more than 27,000, and lay waste to Gaza – again.

What the Jews don’t understand that folks just refuse to be quiert and accept their fate – as Jews demonstrated in the Warsaw uprising.

We’ll just observe. 

The irony is that because of this we’ll get a new Speaker of the House.  All American politicians want to show their obeisance to Israel and will want to give it billions more and weapons that should go to Ukraine, which Israel lets twist in the wind. But to do so there has to be a new speaker. So the mere spectre of paralysis and shutdown of the government is no reason for the Republicans to elect a speaker, making the Jews angry is.

I agree with much if not all of Yanis Varoufakis' analysis. He’s entirely correct that the only solution is a single state with equal rights for all and non-discrimination laws.

We may get one state when Abbas dies and the PLO just disintegrates.  It will, however, be an apartheid, police state.

I think that the Jews will kill 60,000 to 100,000 Palestinians in the next thirty days and maim another 200,000.

Jews are 2.5% of the U.S. population and have 100% control of Congress  When Israel calls for members of Congress to kowtow, the U.S. Congress complies – out of the 535 representatives and senators, there’s never more than a dozen who fail who to abase themselves. There are 500,000 Jews in France, 1% of the population. That’s enough to control France. England has 330,000 – not enough for absolute control, but enough to make the politicians jump – witness the Balfour Declaration.

This means that nothing will change.  Witness Macros outlawing demonstrations by Palestinians.  And with Biden declaring himself a Zionist, Netanyahu has a carte blanche to commit genocide.


Sonntag, 18. März 2018

Handelsbilanzdefizite und Handelskriege

Um Donald Trump’s Handelsphilosophie zu verstehen (“America has been ripped off”), muss man verstehen, wie die Zahlungsbilanz eines Landes funktioniert. Ein Land hat Einnahmen außerhalb seiner Grenzen (z. B. Exporterlöse) und Ausgaben (z. B. Importkosten). Exporte/Importe (d. h. Handelsbilanzüberschuss/-defizit) sind zwar immer der weitaus größte Teil obiger Einnahmen/Ausgaben, man muss aber auch die Dienstleistungen berücksichtigen (z. B. Fremdenverkehr). Das Endergebnis dieser Faktoren ist die Leistungsbilanz. Wenn die Leistungsbilanz negativ ist, dann heißt das, dass ein Land außerhalb seiner Grenzen mehr Geld ausgegeben als es dort eingenommen hat. Dieses Defizit muss (nicht aus volkswirtschaftlichen, sondern aus mathematischen Gründen) durch Überschüsse in der Kapitalbilanz ausgeglichen werden. Solche Überschüsse, sind hauptsächlich im Ausland ausgenommene Kredite und Investitionen aus dem Ausland.

Faktum ist jedoch, dass das jährliche Leistungsbilanzdefizit nicht anderes bedeutet als den Übertrag von inländischen Vermögenswerten in ausländischen Besitz. Man kann durchaus sagen, dass ein Land durch das jährliche Leistungsbilanzdefizit jedes Jahr i.H.d. Leistungsbilanzdefizits ärmer wird.

Schon lange vor Trump, im Jahr 1992, hat der Präsidentschaftskandidat Ross Perot mit diesem Thema Wahlkampf betrieben und erhielt aus dem Stand 19% der Stimmen. Hätte er nicht seinen Wahlkampf anderwertig vermasselt, meinten Beobachter damals, dass er wohl zum Präsidenten gewählt worden wäre.

Warum ist es relevant, wenn die Vermögenswerte eines Landes zunehmend in ausländischen Besitz kommen? Wo wäre das Problem, wenn China/Japan/Deutschland eines Tages ganz Manhattan und alle Fortune 500 Firmen besitzen würden? Weil mit ausländischem Besitz die Rendite auf diese Vermögenswerte auch ins Ausland fließt (das sind in der Leistungsbilanz dann wieder “Ausgaben”) und auf diese Weise ein Land ausgesaugt wird.

Bis zum Vietnamkrieg hatten die USA (als Hauptproduzent der ganzen Welt) enorme Leistungsbilanzüberschüsse und sie wurden der größte Kreditgeber der Welt (der Preis, einen Leistungsbilanzüberschuss zu haben, ist, dass man den Rest der Welt finanzieren muss). Das Netto-Auslandsvermögen war gewaltig. Seit dem Vietnam Krieg haben die USA fast durchgehend nur (enorme!) Leistungsbilanzdefizite verzeichnet und heute sind sie der größte Kreditnehmer der Welt. Anders ausgedrückt, die USA haben seit Jahrzehnten mit dem Rest der Welt deficit spending gemacht. Wachstum und Wohlstand im Rest der Welt wären heute wesentlich niedriger, hätte es nicht diese amerikanischen Leistungsbilanzdefizite gegeben. Auf gut Deutsch: der keine-Angst-vor-Schulden-habende amerikanische Konsument hat für Vermögen und Wachstum im Rest der Welt gesorgt, aber nicht einmal ein Danke-schön vom Rest der Welt bekommen.

Das Problem ist, dass eine Regierung – anders als beim Budget – die Leistungsbilanz nicht wirklich steuern kann, zumindest nicht direkt. Handelsbeschränkungen haben noch nie zu nachhaltigem Erfolg geführt. Man muss aber auch daran denken, dass mit einem Leistungsbilanzdefizit nicht nur Vermögenwerte in ausländischen Besitz kommen, sondern auch Arbeitsplätze ins Ausland wandern. Das ist wahrscheinlich Trump’s Hauptpunkt.

Trump ist jedoch naiv. Er meint, wenn man Importe drosselt und Exporte erhöht, werde sich die Leistungsbilanz verbessern. In der heutigen globalen Wirtschaft mit ihren komplexen und verzweigten Lieferketten ist es extrem schwierig (wenn nicht sogar unmöglich), Ursache und Wirkung bei Handelsströmen richtig zu steuern. Trotzdem, Trump’s intuitive Kritik (“Americans have been ripped off”) ist nicht falsch, nur dass halt die amerikanischen Verbraucher sich freiwillig ausnützen lassen haben. Leistungsbilanzdefizite bedeuten auch, dass amerikanische Verbraucher wesentlich billiger und vielfältiger konsumieren konnten, wenngleich es Konsum auf Pump war.

Österreichs Philosophie bis zur Ostöffnung: wir haben kein Öl und wir bauen keine Autos. Wir haben auch nicht genug Exporte und Fremdenverkehrserlöse, um diese Importe zu bezahlen. Deswegen müssen wir ein attraktiver Wirtschaftsstandort sein und unsere Staatsfinanzen müssen solide sein, damit wir Investitions- und Kreditkapital aus dem Ausland bekommen.

Montag, 12. Juni 2017

What Exactly Is Democracy?

If there is one thing that the West is in agreement about, it is the conviction that democracy is the best and the only acceptable political system. Only when democracy is spread throughout the world can there be the hope of world peace.

Democracy, everyone knows, is the rule of the people. By the majority of the people, that is. The governing are accountable to those who elected them.  But wait! It now looks like the French President Macron will get an absolute majority in parliament with only 32% of the vote! What will the majority of the people say about that?

There is NOT only one form of democracy. The ancient Greeks called it a democracy when people were elected by lottery. When people were elected by electors, they called it aristocracy. In the early days of American democracy, only land owners could vote. Today, in Western countries every one can vote even though the voting ages differ. And what differs most of all are the individual electoral systems. Had the French Presidential voting system been applied in the 2016 American election, Hillary Clinton would now be President.

The majority of the voters don't really care about all that. They think that if they give their vote once every few years, they have fulfilled their democratic duty and whoever gets the majority will win. Nevertheless, I wonder what the other 68% of French voters now think about the fact that Macron has an absolute majority in parliament.

Democracy without active participation of the people is democracy only on paper. The question of how we want to be governed, by what kind of party, electoral or voting system - that is a question which ought to be subject of lively debate all the time. The question of what exactly democracy is (or could/should be) should be a subject in High School.

The late American voice of conservatism William F. Buckley once said: "I am obliged to confess I should sooner live in a society governed by the first two thousand names in the Boston telephone directory than in a society governed by the two thousand faculty members of Harvard University." Both forms could be democracies. They would be democracies if the necessary majority of the people had approved a respective constitution and if that constitution provided for the possibility of changing that system if and when the majority of the people no longer liked it. One person, one vote is an attractive slogan but only seldom does it correspond with reality.

Jeremy Corbyn required 49.000 votes for each parliamentary seat, Theresa May only 43.000. One person, one vote? Yes! But not every vote carried the same weight!

Samstag, 11. März 2017

About Those Animal Spirits...

"A large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."

John Maynard Keynes (General Theory of Employment)

When, during the post-2008 recovery, the expected recovery never really became a recovery, the star economist Paul Krugman, a biblical follower of Keynes, often proposed that some 'act of irresponsibility' was required, either by the Treasury or by the Fed, to set animal spirits in motion. One of his ideas was that the Treasury should 'mint that coin', the trillion USD coin, to circumvent the debt ceiling.

Since then, Krugman seems to have forgotten all about animal spirits. Instead, he described the improved job situation more or less as 'the outcome of weighted average of quantitative benefits multiplied by quantitative probabilities'. In Krugman's words: "The first few months of job numbers reflect the previous president's policies, not the new ."

If Krugman is right, then consumer confidence must also have a lagging impact, i. e. the confidence was built up by the previous President but it didn't show until the new President arrived. Be that as it may, according to Bloomberg, US consumer confidence is now at its highest level since 2001.

With so many positive news about the US economy, one forgets easily that it could have developed in the opposite direction, as Krugman predicted the day after the election:

But, fortunately, Krugman's then prediction did not (yet) prove correct. Perhaps it never will.

PS: Maybe the election of Donald Trump as President was the 'act of irresponsibility' which Krugman considered so necessary, except that he probably had a different act in mind.

Montag, 14. November 2016

Reflections On Donald Trump

I am amazed at the ignorance which opinion leaders, politicians, intellectuals, etc. display about the American system. Perhaps they should read up on James Madison, the "Father of the Constitution", particularly his Federalist #51 where he explains in detail the system of checks & balances. The worst fears of the Founding Fathers were that America could return to something akin to a monarchy, an imperialist Presidency, for example. In terms of domestic policy, the President is rather weak and in terms of foreign policy he is only a bit stronger. A sole major decision by a President, a decision which might affect future generations and the rest of the world (like Angela Merkel's gut decision to exit nuclear energy or to open doors to mass migration) would be impossible in the American system.

The most critical check of all on the President is impeachment. Two of the very few prominent people who predicted a Trump win (Prof. Allan Lichtman who has now correctly predicted 9 Presidential elections and Michael Moore who predicted a Trump win since July (but changed his mind in late October)), both of them are now predicting a Trump impeachment within a year. They argue that it will simply be impossible for Trump to spend an entire year without breaking a law. And David Brooks of the NYT predicts the same.

Trump appears strong because the Republicans also have the House and the Senate. In fact, George F. Will argues that not since the 1920s have the Republicans been as strong as now (and the Democrats as weak as now). And yet, there are checks and balances between the two houses and within each party. Some people may remember in the hysteria of the day that a lot of Republicans were against Trump. They will not automatically rubberstamp Trump's proposals (because they have to bear in mind the constituencies which elected them).

Newt Gingrich now calls the "Mexican Wall" a great "campaign device", not to be taken literally. The same will happen with other Trump provocations of the campaign. Someone wrote that "Trump's critics take him literally but not seriously. His followers take him seriously but not literally". American pragmatism: if you want to change the country as President, you first have to be elected President. What you need to do to get elected may be different from what you need to do to change the country. Anyone who claims to know what will happen under Trump is a demagogue. Perhaps Trump himself is not so sure yet.

The critical milestones are: (1) whom will Trump choose for his cabinet? (2) Inaugural Speech and (3) State of the Union Speech (both in the second half of January). By the end of January, one should have a reasonably clear picture of what Trump aims at.

The most thrilling experience of my life was the campaign and election of Barack Obama 8 years ago. When Trump later started the birther hysteria, I was thrilled how Obama shut up the lunatic in an elegant way. Am I for Trump today? No, but I have never in my life felt as brainwashed as in the last few weeks and if that brainwashing continues I may well be forced to join those who hate brainwashing with a passion.

Do we remember how upset we were when Trump said that he might not concede on election evening and how forgiving when, instead, Clinton did not concede? Do we remember that we warned of militant Trump followers in case of defeat and how tolerant we are now of militant Clinton followers? Are we concerned that 3 million Clinton followers signed a petition to change the result of a constitutional election? Is there an outcry when the German singer/entertainer Konstantin Wecker expresses his wish that Trump had died instead of Leonard Cohen? Is there an outcry when a features writer of The Guardian writes that it's about time for a Presidential assassination?

If we pride ourselves of being open-minded liberals, we should extend that courtesy not only to those whose values we share but also to those whose values we do not share. If we think their values are wrong, declaring them as such won't do any good. One has to convince them of better values. I recommend an article by the renowned liberal Prof. Robert Skidelsky on Project-Syndicate titled "Slouching toward Trump". I wish every self-appointed liberal would feel that way!

Samstag, 5. November 2016

How To Get Rich Quickly!

"If I were to predict the direction of the market movement correctly for five successive weeks, you might think that I knew something you didn’t. Indeed, you might be willing to subscribe to an investment service with that sort of track record. How might one create the illusion of clairvoyance? Select around six thousand names and addresses from the London or NY phone book. Divide the names into two groups. To the first group, send a letter predicting that the market will rise over the coming week. To the second, write predicting a fall in the market. At the end of the week keep the three thousand or so names who were given the correct prediction and discard the others. Divide those names in turn into two groups. To the first, predict a rise in the market and to the second, a fall. Repeat this process for five weeks, at which point there will be around 200 people to whom the following letter could be sent: „You may well have been sceptical when you received our first letter, but by now you will know that we have indeed found the secret of predicting successfully the direction of movement of the stock market. You know that our method really works. To subscribe to our investment service please send $ 5,000 by return.’"

Mervyn King: "The End of Alchemy: Money, Banking, and the Future of the Global Economy".

Freitag, 7. Oktober 2016

Deutsche Bank Shareholders: Life Under Capitalism Can Be Tough!

Reports about the impending failure of Deutsche Bank are greatly exaggerated! Deutsche - like any other company - can only fail in one of two ways: illiquidity or insolvency. De facto, Deutsche cannot become illiquid because of the (de facto unlimited) refinancing availability from the ECB. On the other hand, Deutsche could become involvent (insufficient capital) and that scenario actually looks quite probable at this point.

If Deutsche were to need capital, there should be no lack of supply. Certainly some of the existing shareholders (Qatar?) ought to be interested in increasing their ownership share at a cheap price. The greatest source of fresh capital, however, would be the German state.

The role model should be the US government's rescue of AIG in 2008. The state acquired 80% of AIG at a relatively low price. In the end, that allowed the state to take a very large profit when it exited AIG a few years later. AIG's founder and previous major shareholder Maurice Greenberg may justifiably feel that the has been ripped off by the state to the tune of 30 BUSD.

But, then: a capitalist like Maurice Greenberg will understand that life under capitalism can be very tough.