The FDP’s German Economic Minister Hr. Bruederle stated that Germany does not yet have a self-sustaining economic recovery; risk remain to outlook :
- Economic recovery will be bumpy in Germany
- Q4 Growth below expectations; 2010 GDP forecast to reflect Q4 growth
- Exports are a uncertainty for 2010
- Winter having "dampening effect" on economy

On top of this, the European Central Bank is likely to keep interest rates at 1% out to Q4 2010 in order to “support” the economy. The problem with this outlook is that it deafeningly looks like a deflationary type of scenario where the consumer gets squeezed from both sides : on the one hand we see salaries stagnating or dropping, as we have often times discussed ; but we also see that the cost of living is actually not so deflationary as prices continue to rise in medical insurance, social expenses related to employment and other unsavoury and not so hidden costs.

The real whammy comes to savers. Germans love to save. Wrong! Bad! Savers are the worst hit because real inflation on the street is far higher than the interest rates provided at any bank for cash savings. One is penalized for saving. One loses money.

The alternative is that nimble investment in international markets becomes a near must. Unfortunately, many people do not want to take the time to become financially educated or at least a modicum thereof. They trust their banks for consultations. Unfortunately German banks have a poor track record of independent consultation in both products and follow-up with investors.

The financial future of many in the middle-class, the backbone of any society, will require that people become more interested and more discerning in their finances, their investments and their future.

Another interesting tidbit is that according to latest money flows, Asia is now attracting the most money for investment. Leaving London and New York behind. Likewise, London has now become the most expensive place for bankers with a tax of 50% on salary... Hong Kong has 11% . Now really, who is going to stay in London if offered to go elsewhere ? Tax, tax, tax - that's always a bad recipe for growth. Instead of crucifying the CDU / FDP coalition for some stimulus tax cuts, maybe we ought might consider if it could actually work !! Funny, but when the ECB cuts rates to 1% and pumps trillions into the economy nobody blinks - but the coaltion's tax cuts are PEANUTS compared to what the ECB is doing ! Just a thought folks...


Randolph Buss
Financial Editor
contact me : editor@gmrletter.com