Is the European Central Bank really this stupid?

To believe that Spanish and Cypriot househholds are richer than German ones?

Apparently, yes. They really are that stupid.

19 thoughts on “Is the European Central Bank really this stupid?”

  1. Fair point about the pensions, but you’ve got one thing wrong: the UK guaranteed pension for couples is not twice that for individuals, it’s about 52% higher.

    The report is quite clear that it’s not including occupational and public pensions, and that “as a result, cross-country comparisons should be made with care and sources of differences should be carefully examined”. So I can’t see why you’re calling the ECB stupid in this respect.

    Tim adds: We’ve already, yes already, had one senior German politician stating that as a result of this report then the next set of haircuts should be on real property owners in Med countries. Because they are richer than Germans.

    Yes, that’s stupid and so is releasing a report that allows someone to make that argument.

  2. The Germans know perfectly well not to store all their wealth in housing or registered investment funds. They’ve been ripped off by governments before.

  3. In which the token lefty commentators on this blog disagree…Paul B, the report leaves out a massive issue, and those compiling it really ought to have guessed that it would be seized on by comfortable Northern Europeans reluctant to bail out much poorer Southern Europeans.

    It is like saying most Chinese peasants have savings but no mortgages, therefore they are richer than most Americans. Even the Torygraph smelt a rat when reporting on it.

  4. I read once that 98% of Bangladeshis own their house, but only 33% of Swiss do so. It would be silly to assume Bangadeshis are richer.
    But is the ECB stupid?
    Probably not in their careful report. But they were very very tactless to issue it in a way that they did.
    And it does underline the issue of imbalances and the sheer arrogance of forming a single currency.
    If Greeks doubled their prices and doubled their wages, would they suddenly be as rich as Germans? No, they wouldn’t sell their products.
    But in the short-term, any Greek getting his hands on those euros would be as rich as a German if he took them to Munich.
    Capital flight is not a bug, it’s a feature of the system.

  5. This is that thing where I say the people who run the financial system don’t actually understand economics, and then I get called a nutter, or something like that. But I really think that. I think they literally don’t know what they’re doing.

    Also, big bombing in America, so expect more chaos in general. I’m an atheist and all that, but even I’m beginning to believe we’re in the End Times.

  6. If the argument, from Luke and Tim, is that it’s stupid to publish a report which is incomplete in any way, even if the report prominently acknowledges its incompleteness, or to publish a report which is capable of foolish or dishonest misinterpretation, then that’s not very different from saying that it’s stupid to publish any report at all.

    I prefer to see data published, with any known problems with it highlighted. I can’t help thinking that in any field which didn’t give him the chance to bash the EU or its institutions Tim would be in favour of openness not concealment.

  7. …and then I get called a nutter, or something like that…but even I’m beginning to believe we’re in the End Times…

    Ian, how can I put this? You are a nutter.

  8. I’m sure this is a stupid question but if Germans rent more than the med countries, who tends to own the properties and what is to stop them being subjected to a wealth tax too?

  9. Paul, I slightly regret my outburst….but try it this way- did the report actually shed any light and/or usefully provide information that helps anyone make an informed decision about anything?

    I admit my approach might allow suppression of statistics by self interested authorities of the sort Tim rails against, but these figures are just so useless. (Ok, maybe so useless that even Tim can see through them…)

    Tim adds: It’s the *even* that I object to. One of the (very few) things that I am actually good at is reading a report, looking at the references and working out where the error comes from. Figuring out why the stats are nonsense. I’m not arrogant (insulting, oh yes, but not arrogant) nor self-regarding. But that “even” does sting when I’m one of the few people in the UK scene who even bothers to look at these sources.

    Well, OK, I am arrogant. Arrogant about that.

  10. Er, property ownership is somewhat concentrated here. You only need landlord to have two BTLs, or one BTL and the place he lives in and that sticks him over median wealth. There are some properties for let owned by companies but most landlords are people.

    It’s that we’re looking at medians that’s the key here. With 50% home ownership.

    Do please everyone shut the fuck up. Because if you don’t the left will start campaiging to take our houses off us and give them to the poor who don’t own houses. And probably take our pensions off us too.

  11. Gaah.

    With greater than 50% home ownership, the median is going to be much higher than anywhere with less than 50% home ownership. Absent other forms of wealth to be considered.

  12. So Much For Subtlety

    JamesV – “Because if you don[]t the left will start campaiging to take our houses off us and give them to the poor who don[]t own houses. And probably take our pensions off us too.”

    As I understand it, this sounds like the German position. The Italians et al have houses that are worth a lot, and they have generous pensions, so why should the Germans pay for their debts? Let them take out mortgages.

    As arguments go, I find it hard to refute. The South has benefited from a high Euro that means their properties are worth a fair bit. If the euro collapses, their houses will be worth a damn sight less. They should pay their own debts. If they want to be in the Euro but not play by the rules, they should be the ones to suffer, not the poor Germans.

    And I would think that no matter how poor the Cypriots are and how rich German pensions are. The Germans did the right thing. They should be rewarded. The Spanish did not. They should not be rewarded.

  13. Ok, I apologise for the even. I am not really sure what I was trying to say. It is not a point on which the various bees in your bonnet apply.

    Also, I was wrong to say the figures are useless. The very wrongness might indicate something. Not sure what. Off balance sheet pension obligations of German govt? Fact that Southern European property is massively overvalued (and so Euro not sustainable)?

  14. The problem is this – the Germans arent that much wealthier than some other Europeans (I think in per capita wealth they are on a par with the Finns, Dutch, Austrians and Belgians), but that there are a lot of them. Ergo they are the only nation with the wealth AND the capacity for money raising. Some very interesting stats here:

    I have to say if I was a median wealth German (and there must be a lot of them, given the size of the German population) I would not be happy at the idea that I have to pay higher taxes (or get lower State benefits/pensions etc) because Germany has to subsidise the Med, allowing lots of people to live wealthier lives than mine.

  15. @Frederick,

    Having the spouse hold assets to avoid disclosure is presumably all above board and proper though? The Greens, for example?

  16. Surreptitious Evil

    Having the spouse hold assets to avoid disclosure is presumably all above board and proper though?

    For tax purposes, yes (allowing for French tax law not being the same as UK tax law so it may not be okay over there).

    For ‘have I got money that I can’t explain how I got it’ or ‘do I have a conflict of interest in this political decision because of my personal or close connection investments’ – much less so.

  17. The German pension system is complex but it is also a non-funded pay as you go one. Given that the population is shrinking counting pension promises as weath is certainly counting the proverbial chickens before they are hatched. Most Germans will never receive what they a being promised.

  18. Turns out that Tim’s hunch that (shock horror) Germans are richer than Greeks is true.

    Turns out that one reason is that the headline figure of 50,000 euros or whatever was for the median German household. And Germany is the most unequal in wealth in the Eurozone. Also that Germany has high corporate and government assets.

    But it was the inequality of Germany that struck me. The top 20% had 149 times the bottom 20%. Not sure what it leaves out (pensions etc) or how that compares with UK. But still enough to Will Hutton pause for thought before suggesting we copy Germany.

    Tim adds: The basic point is that Germany is not a property owning democracy. Maggie was right!

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