EUCOM Economic Analysis - Part I

[Fuchs]

A couple ten thousand of those migrants are actually university students. Universities are almost free in Germany (about 500 €/year all inclusive) and there hasn't only been a rise of German university students*, but also of foreign ones.



*: Abitur (highest school degree) shortened from 13 to 12 years, producing a double class, no more conscription or alternative compulsory social service, efforts to improve especially the education of Germans 'with migration background' and the unsatisfactory labour market with poor pay expectations for non-academics have contributed tot his rise.

[Firn]

A couple ten thousand of those migrants are actually university students. Universities are almost free in Germany (about 500 €/year all inclusive) and there hasn't only been a rise of German university students*, but also of foreign ones.



*: Abitur (highest school degree) shortened from 13 to 12 years, producing a double class, no more conscription or alternative compulsory social service, efforts to improve especially the education of Germans 'with migration background' and the unsatisfactory labour market with poor pay expectations for non-academics have contributed tot his rise.

Can you back that up quickly?

Not that I don't think it is likely, as my brother studied in Munich 'Elektrotechnik'. Keep in mind that there are many Germans who study abroad. So once again the net difference would be interesting. In any case university is a steal in central Europe compared. I also don't think the quality is bad...

Personally I think that by far the biggest share of the net surplus is searching desperately for work...

[Fuchs]

2011 there was more than a quarter million foreign students in Germany for the first time.
https://www.daad.de/portrait/presse/.../21295.de.html
More in 2012, no doubt.
I know a university of applied sciences for engineering and IT that's operating at 200% of designed capacity in terms of students enrolled becuase of huge growth in past three years.

[davidbfpo]

One of the consequences of the English government requiring universities to raise tuition fees, starting this academic year, to 9k UK Pounds per annum (or US$14k), funded by student loans (by a specific agency, not the banks) was a 6% drop in admissions. Few want to consider the impact of emigration after graduation, so avoiding repayment of the loan. What better why to encourage emigration of the "best & brightest"?

[Firn]

In a depression the implicit opportunity costs of studying at a university should be considerably lower then during a booming economy, especially if you are fresh out of school. Thus such a drop is quite interesting even if the explicit cost did rise and credit got possibly tighter.

A quick look at the age structure of the UK reveals that the group from 15-19 is quite a bit smaller then the 20-24 one. It is quite a rough yardstick, but the trend is relatively well supported by one agegroup up and down. So maybe it is mostly just a 'natural' trend, one would need to dig a little bit deeper.

Interesting to see a rise in the 0-4 group. The effects of the large immigration in the last 6-7 years and the bad economy for young people? On of my sisters got the kids earlier because a certain job program at the local hospital took a bit longer then expected to get approved. Quite a few capable & educated people lost to the UK, Switzerland and Germany, congratulations.

@Thanks Fuchs: Interesting to see so many Chinese. My brother said they were rather reclusive compared to the other guys and that some cooperating companies quietly told the uni that next time they would rather have a student from a different country working with them. Stories about copied data and so forth. It is of course difficult to get an objective overview on that.

[Firn]

Let's get real about the stock market puts all the recent records in perspective. For non-economists the 'real' is a play on the important adjustment for inflation.



He also uses the Graham/Shiller P/E to put the price in context of the (past) long-term earnings. It is one of relative few metrics I value for a few reasons I have outlined in the past. For obious reasons he will tend in the long run to hover above the current P/E...



Buffett pretty much said the same thing last week underlining especially the part about the retained earnings. So should you invest now in stocks? Just like pretty much everbody else I have no idea. I will continue to sell bonds and have not bought a new one in the last 3 years or so. Too much risk IMHO as someday you will have higher yields and thus in the long run bond prices will come down. Hopefully we won't all be dead...

I enjoyed this post about why old hedge fund managers hate Ben Bernanke. Luckily I did change my views on inflation within a liquidity trap, after having faced the facts. I would be quite a bit poorer today and have much less faith in ordinary macro textbooks...

Hedge funds are doing badly in this rising-tide-lifts-all-boats market, and they feel that they would be outperforming if the Fed just let things collapse, and they could swoop in when prices "clear."

The inflation and hyperinflation fantasies are another important aspect here. A lot of these guys cut their teeth during the 80s, when inflation was the enemy, and Volcker was a hero for fighting it. Thus being anti-inflation is kind of a nostalgia trip for them. Also in general, the older people are, the more worried they are about inflation. Also the older people are, the more they are inclined to invest in bonds and risk-free assets, so low rates aren't fun.

[Firn]

Time travel in Euroland

Unfortunately, this is not news by now, but the president of the Euro group, Jeroen Dijsselbloem in an interview with CNBC yesterday dismissed the role that fiscal policy and monetary policy can have to address the economic crisis (emphasis is mine):

"Monetary policy can really not help us out of the crisis. It can take away the pressure, it can accommodate new growth, but what we really need in all countries is structural reforms in the first place. I'd just like to stress the point that in the policy mix of fiscal policy, monetary policy and structural reforms — I'd like the order to be exactly the other way around. Structural reforms in the first place, fiscal policy and viable targets in the mid-term for all regions in second place — and monetary policy can only accommodate domestic economic problems in the short-term."

The bloggers respond:

It is not exactly clear what to make out of his statement but it seems that long-term solutions should come first before we implement those that will help us in the short term. It is surprising that even today there is such a great confusion about long-term versus cyclical problems.

This confusion comes from a basic belief that some hold that there is nothing inherently different in the dynamics of an economy when one looks at the short run and the long run. This is part of a never-ending academic debate but when it comes to policy makers and politicians it seems to be more a matter of beliefs.

What it is not always understood is that we are dealing with two separate problems and therefore we need two different set of tools or solutions to deal with them.

I fully agree with their point of view. Right now the ECB is in life-saving mode and tries to keep the patient afloat. The governments should act quickly and pump into him the needed medicaments and other proper treatments including expensive surgery. There is now little sense to force him to undergo and even light training to get into good shape and to shed some weight. The latter is an excellent approach for the long term but in the short run it might lead to an exitus.

Of course some political actors seem to fear that good fiscal treatment will ease the way for dolce vita and not harsh austerity, with an adios to structural reforms.