Saturday, May 19, 2012

Struwwelpeter - Moral Tales for Modern Europe

"Just look at him! there he stands,
With his nasty hair and hands.
See! his nails are never cut;
they are are grim'd as black as soot;
And the sloven , I declare,
Never once comb'd his hair
Any thing to me is sweeter
Than to see Shock-headed Peter "

Team Macro Man, when they were little macro children, were given a book called "Struwwelpeter" which was written in the late 1800s by the German Psychiatrist Heinrich Hoffmann as a set of short stories for children showing the shockingly disastrous consequences of misbehaviour. To some, the book is an anachronistic psychological nightmare to be confined to the Politically Correct incinerator but TMM have always delighted in it, leaving them rounded with fond memories of moral tales with endings that didn't pussy foot around.

This morning found us once again reading the book to the squeamish delight (note not horror) of our own offspring and as we did so it became abundantly clear that the book should have been made essential reading for all Eurocrats and Greek politicians. The stark Germanic cultural attitude towards transgression from the rules shines through and is as valid today as it was when the book was written.

Rather than us rewriting each story in its modern context we would suggest you fire up THIS copy in another window and read along as you consider the following -

Harriet and the Matches - Obviously the Greeks playing with borrowing and spending, as they have seen their elders and betters do, but ending with Greece as a pile of ashes.

Augustus who wouldn't have any soup - Greece turning down the bailouts handed to them by Europe and they end up slowly starving to death.

Fidgety Philip - Phillip is so obviously Greek Politics pulling down the dining table of Europe as the Core tell him to behave.

Robert - Investors buying periphery sovereign debt thinking they are protected by CDS and getting carried away never to be seen again?

Johnny Head in the Air - The Eurostriches of European policy reaction with 2011 being the first fall and 2012 the big fall into the canal (hopefully to be fished out by the IMF) all because they couldn't see and react to what was obviously in front of them.

Cruel Fredrick - Frederick is Germany, forcing austerity on periphery countries only to be bitten by them and confined to bed as the periphery then eat his dinner.

The Man that went out Shooting . - This story involves a hunter who, whilst dozing, finds the hare he was after has stolen his gun and his spectacles. The hare then wrecks havoc upon the Hunter and his home, eventually killing him. Hunter - Germany, hare - periphery, specs and gun - policy?

Finally "Struwwelpeter" himself - Europe.

There are other stories in his book that we will leave you to interpret yourself (the comments column is open for alternatives) but, Heinrich Hoffmann, we thank you. You were either the Nostradamus of European politics or have beautifully illustrated how the current European turmoil boils down to basic childish behaviours that the rest of us that were taught from a very early age are just plain wrong.


Anonymous said...

Very nice way to look at this book. Actually, there has been a fairly recent analysis of it claiming that it was in fact a satirical portrait of Hoffmann's contemporary political forces, which he disguised as a children's book to evade censuring. If this holds true, your interpretation might be closer to his original intentions than you might have guessed.

Polemic said...

Anon. Thank you, that's really interesting.


Anonymous said...

The thumbsucker story is obviously about bondholders getting an excuriatingly painful haircut.

Corey said...

Well the man that went out shooting is obviously banking regulators who fell asleep on the job and let those sneaky hare investment bankers steal their power to see infractions or enforce regulations.

The inky boys is tougher, but I think its pretty clear that the great Agrippa is the wise wizard we all know and love, who happens to have an abundance of ink - something certainly that comes in handy when one needs to actually print banknotes as they would have in those days. The naughty boys are ze germans who make fun of his policies, but eventually succumb to printing themselves - i.e. get dunked in ink.

As an aside would JPM represent a call on Eurosurvival since their 'hedge' seemed to go bad as the situation worsened?

Leftback said...

What do those of a recently Yennish disposition think of the effect of the Japan downgrade? USDJPY has just passed above 80 and I suspect it may never return below that level.

As investors slowly begin to file out of JGBs, (b/c those who panic first panic best), are we going to witness the final death of Japanese deflation? This may be such an important moment that it may be worth a post all on its own. Has Ye Olde Wyddowemakker* finally met its match?

* widow-maker = a trade that makes sense but ruins your P/L for years until you close out your position b/c your firm has been bankrupted, your wife has left you and your dog won't even talk to you, at which time it begins to work, big style. Typically, the widow maker is "Short JGBs", unless you are Jon Corzine, in which case it is "Long BTPs".

Leftback said...

Right now, we think markets have priced in about 2% growth in US and complete Armageddon in Europe (a -2% y/y GDP recession or worse across the Eurozone). We think both might be a bit exaggerated.

So if the Euro PMI is less than apocalyptic and US data on claims and durable goods are weak, then we might be poised for a period where the Euro (and European stocks) might actually outperform a bit.

The Chinese flash PMI concerns us. Not the number, but the reaction. We could have had the same number 5 weeks ago and the market would have rallied, but now it feels like it wants to sell this bounce. So we want to sit this one out before deciding whether to go BOLIVIAN.

Anonymous said...

Please dont get bullish usdyen on the back of a fitch downgrade, tha way lies penury.

Anonymous said...

The relative levels of foreign investor ownership of jgbs versus japanese ownership of foreign assets makes the downgrade irrelevent. Bbg article yday shows japanese pwnership of foreign assets at the second highest lest ever of 7.3 trillion usd equiv. japan remains the worlds biggest creditor. Ignore it at your peril.

Gus said...

Perhaps relevant to LB's musings:

"Japanese stocks advanced despite a downgrade of the nation’s sovereign credit rating by Fitch. Since 2000, ratings agency downgrades have resulted in little or no impact on Japanese bond yields. The downgrade was overshadowed by the announcement from Japan’s Finance Ministry that the nation’s companies were able to take advantage of the stronger yen by increasing foreign investments. During 2011, foreign investments by Japanese companies increased by 3.3 percent to 582 trillion yen, or 7.3 trillion dollars. The Nikkei 225 Stock Average surged on Tuesday by 1.10% to 8,729 (NYSEARCA:EWJ)."

Anonymous said...

LB, getting bullish USD/JPY -Kyle Bass.

"Kyle Bass' most famous Trade is a disaster and it is never going to work"

"Confirmed:Kyle Bass's performance really is that disastrous".".

I guess nobody is perfect!