Weak Dollar and 8100 layoffs at BMW

The value of the dollar is with 0.66 €/dollar at an all time low. Theoretically this should help to sell American products e.g. cars abroad. However, US cars cannot be exported because they are technology dinosaurs and need too much expensive gas (8 $/gallon in Germany).  However, the weak dollar reduces the profitability of companies like BMW selling cars in USA at much lower price than in Germany. Instead of increasing the price of BMW cars in USA, BMW will lay off 8100 automobile workers in Germany in order to reduce manufacturing cost. This comes quite as a surprise to the BMW workers. They thought that a company which produces top quality and produces sound profits would be also safe for workers. This seems to be no longer true in the global market place.      

Slimming down increases health care cost

Health care and insurance for every citizen seems to be the #1 theme for the Democratic candidates Hillary Clinton and Barrack Obama. However, health care is probably the most complex problem in modern societies. US health organisations seem to be obesessed to slim down the nation. It is common belief that slim people live healthier and cause less health cost to occur over their lifetime. However, a recent statistical study in the Netherlands in the PLoS Medicine Journal   “Does preventing obesity lead to reduced health-care cost” comes to the conclusion that slim, non-smoking people accumulate the highest health-care cost ( 420 k$, 84.4 years) compared with obese people (375 k$, 79.9 years)  and the real low cost smokers (330 k$, 77.4 years) over lifetime. The major reason for higher health-care cost is the longer lifetime of the slim people and the fact that there is a high probabalilty that they will get very costly deseases like Alzheimer and Parkinson in their last years. In contrast heavy smokers die early and fast!   

Certainly the study reflects the Netherlands health care system. However, the scientist found strong evidence, that obesity is not increasing overall lifetime health cost. There are many other factors in favor of slim people like better quality of life, better chances to get better jobs or finding more attractive partners. But the assumption that obese people have higher health care cost seems not to be true. 

In fact slim people probably have exactly the same health-care cost as obese people if you assume that they pay a minimum of 10 k$/year for their health insurance. The message: don’t believe in the messages of insurance companies, health care organisations and doctor’s associations.    

Bonus bonanza for bankers

UBS, the major Swiss Bank is participating in the US subrime debacle with a 4 billion $ loss in 2007 . Nevertheless the UBS employees get boni of 8 Billion $! A loss of 18 Billion $ was piled up by the US investsment banking branch with about 200 employees, which could not be compensated by other branches in the bank. Certainly the the other 22 000 employees who did a good job want their pay as defined in their 2007 measurement plans. Nice to a be a banker and get big bonus money regardless how good the overall performance of the company is.

Virtual Money – candidates for the next blow up

The per capita money supply in the USA is about 69 k$ (M1, M2, M3). This is probably the real money in the country. Assuming the banks get about 1% of this amount/year for fees and interest etc they would have net earnings of about 70 $ / capita and all US banks would have net earnings of about 21 billions from regular business with their customers. However, the net earnings of US banks at least till 2006 were much higher. Most of these excessive earnings are probably due to “fake” business with all kinds of “banking products” which are not backed by real money. This allowed the banks but also private investors to extract huge amounts of money (real money) because their fake business was so successfull. This scheme works fine as long as enough new money is flowing into the system but it is obvious that this scheme will not work forever. Certainly the sand castles of derivatives, gold options, ”prime rated” loans etc will come down with the next rain. Just watch out and learn from a prominent Swiss banker: he stores “real gold” in a vault at home in his basement!         

Why free education is so important for nations

In the industrial society wealth of nations is created mostly by the skill of scientist and engineers feeding the manufacturing industry with new and improved products. Although lawyers, bankers and administrative managers are also needed they hardly create values wich can be exported. Typically engineering is a natural step for students with parents in the working class whereas children of  the upper middleclass prefer “soft” professions where talking is more important than thinking. For more than 50 years USA is relying on immigrants to staff the development labs. There were three major waves of scientist immigration. After world war II people came in from Europe very often with jewish background. Then came the Chinese wave – mostly people educated in the US followed by  engineers and scientist from India. Today, Indian and Chinese engineers and scientist can find interesting work in the scientific centers and labs in their own country. Thus USA must rely more on their own people. However, academic education is too expensive for working class people – thus you will not get enough hardworking engineers the country needs. You can see a similiar trend in the UK.

Germany was always famous for its excellent engineers because engineering education was free and a preferred career path for children with working class parents. Now Germany is doing the same dumb thing as USA and UK and start tuition fees which make it hard for the children of working class parents to go to university. Now the industry is already complaining that they can’t find enough engineers!    

Europe and Clinton versus Obama

Europeans got used to the Bush style of government – almost nobody was expecting any positive news from the USA anymore. However, the fight between the “old tricky US” style by Ms Clinton and the “there is hope” style of Mr. Obama together with a revitalisation of the bottom up democratic forces have impressed most Europeans.  There is suddenly a feeling that the US still is the home of democracy and that the US citizens are able to force change upon the government. The way how USA selects their candidates for the presidential election seems to be “root democracy” compared with the closed nomination procedures European political parties have established. Now it will be seen what tricks will be played with the super delegates. Regardless what is the outcome of the presidential race, it has revitalized the interest of Europeans in US politics and the trust into the democratic roots of American people. Keep going!

The world does not finance US consumers any more!

In the past, US consumers role in the world was to consume the surplus money which was generated abroad. US was attracting the money with promises on high interest rates, rising values of company shares or “clever” banking schemes with high profits. People did so because there where not too many alternatives where to put money without being threatened by crime or local government. However, rich oil countries have now learned how to invest on their own. Emerging businesses in China, India and Russia seem to provide attractive return on  investment for surplus money. The sheiks have learnt how to spend their money in the world directly and not to hand it over to American banks.

The US society is so used to spent other people’s money that it will be very difficult to change the attitude. The method of lowering the value of the dollar against other countries (people abroad get less return on their investments!) is also not going much further.

It will be interesting to see how the American society manages this crisis. However, even if Americans spend less money most of them will still will have very comfortable lives as compared with other countries.  The problem is that people have to realize and accept this fact. 

    

Health Insurance – Clinton vs Obama

The lack of reliable health care for everybody is the biggest problem for the poor but also for the middle class in US. Without reliable and affordable health care people cannot plan for the future. Mr. Obama thinks the problem can be solved by providing low cost service through private insurance companies whereas Ms Clinton proposes mandatory basic insurance for everybody. The experience from European countries shows, that voluntary insurance does not work. Young people (with low health risk) and rich people (which have to pay high premiums) find all kind of tricks not to participate in the cost of health insurance to the poor. In case of problems (when they get older and the health risk is higher) they enjoy the public system as  nice fall back solution. Everybody must share the cost of public health care otherwise the premiums will be too high for the low and middle class. With mandatory health care, the pressure by the public (and the rich) to manage cost of the health care system will be higher than with a voluntary system. 

It is obvious that Ms Clinton and her advisors have learned from previous experience with the US health care system. She is also right to install government controlled insurance to compete with private insurance companies. In Germany, private insurance companies must offer “public health” level insurance to their customers. However, no private insurance company offers this type of plan for less money than the public, non-profit insurance institutions! 

Mr Obama seems to prefer a soft “no position” in order to win the election. But he will not win the battle of health care with this approach.              

How important is government?

Today, the European Union and China are probably the most successfull political models in the world. The USA are no longer perceived as the most attractive model. The EU has successfully helped people in ex communist countries like Slovenia, Poland and Romania to enjoy more personal freedom and to rebuild their economy. Whereas the USA was not able to really help its neighbors in South America. 

The European Union is not a real “state”. Local governments, tax laws and local business regulations are totally different. There are the highly successfull northern countries like Sweden, Finland, Norway with highly developed social systems put in place mostly by social democratic parties. There is Italy which always is and was a political chaos. UK is doing only what seems to be good for the country etc. However, the standard of living for the middle class is not very much different in the EU countries and the poor receive at least free medical treatment and some subsidies. Health care in Slovenia is about at the same level as US!

The EU concnetrates on market regulation and free trade in the union. However, EU regulations are “modified” and “handled” very country specific. A nice example is pollution control. The Germans set up the pollution control systems next to roads with high traffic. The Italians set up their control stations in Rome in enclosed backyards – thus Rome must not report any pollution problem to the EU regardless wether you can see the Capitol in summer or not! 

Analyzing the situation in the EU, you may come the conclusion that politics and politicians are not that important for the standard of living in the country. A conclusion politicians and political parties don’t like. However, people in the EU seem to understand. When I was discussing a couple of years ago the political chaos in France with a senior French wine grower, he said: “We need a president in France like chancellor Kohl in Germany.” When I replied “Why? He is doing nothing!”. He replied ” That’s exactly what we need in France!”