My dear boy, the stress test findings were published on July 15th and the drop only started August 2nd. The latter has obviously had nothing whatsoever to do with the former. Intervening trends and occurrences such as the US debt limit circus or the ECB interventions in Spain and Portugal are more likely candidates, wouldn't you say?

You said 37% aggregate tax -> optimal growth

I say German aggregate tax = more like 50% -> superior growth

AII

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Tax has nothing to do with German growth though does it?? Germany takes a big interest in ensuring the export environment is suited to it's companies.

They specifically disincentivise certain parts of the economy to ensure manufacturing over services and consumption.

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they would be the shocks i was talking about, and yes they are part of the decline.

i have seen nothing to indicate that that would be true, given the three papers i linked.

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The stress clearly test wasn't a shock to anyone, anywhere. Nor was it a relief. It was just a useless exercise, can we at least agree on that?

As for the tax issue, it's too complicated for poor old AII to go into all of that right now. There may well be an optimum tax level per country, but it would vary according to the specifics of each economy. Putting it at 37% is fetishism.

Generally speaking tax computations fail to take into account the medium and long term effects of specific taxes. A prime example would be a punitive tax on fuel which hampers growth in the short term but forces industry to innovate and find new energy sources and technologies, thus stimulating growth in the longer term.

AII

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It would seem half of the Euro countries have joined Finland in demanding cash guarantees from Greece, while Merkel and Sarkozy dream of "eurobonds". I cant understand what dream world the leaders of largest euro countries are living in? If the economies of Southern and Northern Europe have so different level of strength, how can they think that the North should just give everything up they have achieved with hard work, so the South can live as they please.

Cant we just have a monetary Union without some delusional dreams of Federal State, when it is clear that majority of people in most European countries dont want that?

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Not really man the problem is that countries without there own currency are being attacked/shrewdly bet against and cannot use the usual means of preventing this problem Inflation/Devaluation.

In effect the markets have quite rightly found that internal devaluation ie reduction of living standards or implementation of austerity does not work in a currency union hence the bailouts.

The bondmarkets and interbank lending is forcing the ECB to act more like a normal central bank and less like it has up to now, hence the buying of bonds and the extension of liquidity to weak banks.

Unfortunately the more it acts like a proper central bank the less people in the North like it.

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A north and south would be lovely, and we bail out the Irish because the Irish are sympathetic

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If you ask me there are several possible solutions to the problem of not having a nice even Euro.

1 Divide the North and South.
2 Unshackle the ECB
3 Integrate fully (not the new Sarkozy/Merkel fuzzy announcement I mean a federal state)
4 Eurobonds

To be honest option one is the best really in my view but it would prob take maybe 5 to 10 years in order to not cause a major flight of capital out of the Eurozone.

What there doing is trying to convince people in the South to accept lower everything along with higher inflation which balances the equation as a whole (Great for Germans the pressure is off them, not so great for Southern workers or there unemployed hence the rioting)

The only reason Ireland is bucking the trend is because we have reduced our costs of doing business, we have low inflation and it's getting lower plus were exporting a lot outside the Eurozone
We still however owe a lot due to the bailout which limits our growth potential due to austerity, Spain Italy Greece and Portugal have none of the things to be hopeful about that I stated are present in the Irish economy and all of the same bad ones.

Also it helps when your population is highly mobile and also crucially young enough still to relocate both internally and abroad.

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You are the expert Gaelic Cowboy, why not introduce a second currency, no garlic allowed

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Very much agreed.

No, having taxation at a level no higher than 37% of GDP when the economy is at the top of the cycle is what I demand and expect my political representatives to implement, because I do not hold to notions prevalent in other societies that encourage a greater personal sacrifice for the community good. There is nothing wrong with a society taking that view, but it ain't mine and it ain't British. We have never been a social-democracy in the continental sense, and much as some people in Britain might wish it otherwise there have never been enough of them to change society as a whole. As i noted back on page 16:
p.s. i ran the graph from the eighteenth because they 'cunningly' announced the stress tests after the markets closed on the 15th.............. a friday.

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