Just as it was in October, Phoenix was the only city among the twenty top US metro areas where home prices went up in November, according to the latest S&P/Case-Shiller Home Price Indices
release. The indices showed a 1.3 percent drop in both the 10-city and 20-city composites. Washington, DC and Detroit remain the only two metro areas where home prices for November 2011 were higher than November 2010. "Atlanta, Las Vegas, Seattle and Tampa all reached new lows in November," according to the Case-Shiller report, with Atlanta looking particularly bad with an annual drop of 11.8 percent. Here's a look at the long term trend:
From the release:
““Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall. Weakness was seen as 19 of 20 cities saw average home prices decline in November over October,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “The only positive for the month was Phoenix, one of the hardest hit in recent years. Annual rates were little better as 18 cities and both Composites were negative. Nationally, home prices are lower than a year ago. The 10-City Composite was down 3.6% and the 20-City was down 3.7% compared to November 2010. The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand.
The crisis low for the 10-City Composite was April 2009; for the 20-City Composite the more recent low was March 2011. The 10-City Composite is now about 1.0% above its low, and the 20-City Composite is only 0.6% above its low. From their 2006 peaks, both Composites are down close to 33% through November.
Multi-family homes are showing more positive signs than single
family homes. Otherwise there just isn't much positive coming through
in these Case-Shiller reports of late. Read the full
This Global Ethics Corner from the Carnegie Council does a nice job of laying out the core questions we should be asking about the bipartisan push in Washington for a revival of manufacturing in the U.S.:
"Is the rebirth of America's manufacturing industry necessarily a good thing?"
This, and the other questions raised in the slide-show about factories and innovation, should be good conversation starters for a class discussion on the role of manufacturing in the U.S. economy today.
In a new Economic Letter for the San Francisco Fed, Rob Valletta and Katherine Kuang take a look at unemployment duration, which has been much longer following the Great Recession than following previous recessions. Factors like the changing demographics of the workforce (age, mainly), and the extension of unemployment benefits may be factors, but the authors note that they have had only a small impact:
The limited impact of workforce characteristics and extended UI suggests that other factors bear primary responsibility for the recent spike in unemployment duration. The most obvious one is the severity and persistence of employment losses compared with past recessions. Figure 2 shows employment patterns during and after the last four U.S. recessions, in each case measured relative to the pre-recession employment peak. At the recent employment trough in early 2010, employment was down 6.3%, compared with a cumulative decline of less than half that during the early 1980s. Moreover, employment has recovered little following the trough, growing on net by less than two percentage points through late 2011. That’s about 10 percentage points below the growth path from the early 1980s recession.
It is likely that the recent pattern of massive job losses and a weak jobs recovery is the primary explanation for elevated unemployment duration. The contribution of these elements can be examined more formally by performing a regression, a standard statistical technique for measuring the relationships among variable factors. We follow the approach of Aaronson et al. (2010), who calculate the extent to which rising duration can be explained by changes in characteristics of the workforce. We extend their approach by incorporating measures of cumulative employment losses. For each month of CPS data on individual unemployment duration, we calculate the percentage change in payroll employment relative to the pre-recession peak and include it as an explanatory variable in our statistical exercise. We use payroll employment for each individual’s state of residence for this calculation (see Valletta 2011). The data used are for periods covering the latest recession and its aftermath, and the corresponding periods from the early 1980s recession. These are matched by counting months forward from the pre-recession employment peak. The recent duration data are adjusted for the 1994 and 2011 changes in survey measurement.
Read Why Is Unemployment Duration So Long? here.
The Commerce Department just released more data on personal income from December. Americans saw a nice uptick in their incomes last month, and then resisted the holiday urge to spend, saving more of their new gains. Here is a look at personal income and spending moves during the final quarter of 2011:
From the Bureau of Economic Analysis release:
Private wage and salary disbursements increased $29.1 billion in December, in contrast to a decrease of $1.4 billion in November. Goods-producing industries' payrolls increased $10.8 billion, in contrast to a decrease of $6.5 billion; manufacturing payrolls increased $7.4 billion, in contrast to a decrease of $6.2 billion. Services-producing industries' payrolls increased $18.3 billion, compared with an increase of $5.1 billion. Government wage and salary disbursements increased $0.4 billion in December; government wages and salaries were unchanged in November.
The other big takeaway from the report is the savings rate:
Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- decreased $5.2 billion in December, in contrast to an increase of $8.2 billion in November. PCE decreased $2.0 billion, in contrast to an increase of $11.4 billion.Personal saving -- DPI less personal outlays -- was $460.1 billion in December, compared with $407.8 billion in November. The personal saving rate -- personal saving as a percentage of disposable income -- was 4.0 percent in December, compared with 3.5 percent in November.
Read the full release here.
In the latest edition of the Marketplace Whiteboard, Paddy Hirsch explains the difference between secured and unsecured bonds. It is a lesson that may be coming a little too late to Irish taxpayers:
With Europe's leaders meeting today to take on the difficult task of righting the EU economy, Javier Solana, former General Secretary of NATO and former EU High Representative for the Common Foreign and Security Policy, weighs in at Project Syndicate. Solana argues that the devotion to austerity measures has proven to be a limited solution, at best, to the EU's problems. "Austerity at all costs is a flawed strategy," Solana writes, and he believes that all efforts at this point should go into priming the pump for growth:
Public debt, moreover, should not be demonized. It makes financial sense for states to share the cost of public investments, such as infrastructure projects or public services, with future generations, which will also benefit from them. Debt is the mechanism by which we institutionalize intergenerational solidarity. The problem is not debt, but ensuring that it finances productive investment, that it is kept within reasonable limits, and that it can be serviced with little difficulty.Yet, ominously, the same arguments that turned the 1929 financial crisis into the Great Depression are being used today in favor of austerity at all costs. We cannot allow history to repeat itself. Political leaders must take the initiative to avert an economically driven social crisis. Two actions are urgently needed.At a global level, more must be done to address macroeconomic imbalances and generate demand in surplus countries, including developed economies like Germany. Surplus emerging-market economies must understand that a prolonged contraction in the developed world creates a real danger of a global downturn at a time when they no longer retain the room for maneuver that they had four years ago.Within the eurozone, structural reforms and more efficient public spending, which are essential to sustainable long-term growth and debt levels, must be combined with policies to support demand and recovery in the short term. The steps taken in this direction by German Chancellor Angela Merkel and French President Nicolas Sarkozy are welcome but insufficient. What is needed is a grand bargain, with countries that lack policy credibility undertaking structural reforms without delay, in exchange for more room within the EU for growth-generating measures, even at the cost of higher short-term deficits.The world is facing unprecedented challenges. Never before in recent history has a deep recession coincided with seismic geopolitical change. The temptation to favor misguided national priorities could lead to disaster for all.
Read Austerity vs. Europe here.
For Adrian Wooldridge, management editor at The Economist, the top economic story of the early 21st Century is that of liberal capitalism "in crisis," and the emergence of a new model of capitalism in emerging economies. Wooldridge calls this new model "state capitalism." This is not, he points out, a return to the "bureaucratic" capitalism common in developed economies before the 1970s. Rather, today's state capitalism is more of a hybrid model, where there are strong state controls but also great appreciation for market forces. Wooldridge, better known to some of us as The Economist's Schumpeter columnist, discusses state capitalism here:
Read The Economist's special report on "state capitalism's global reach" here.
Real GDP increased 2.8 percent in the fourth quarter of 2011, according to a new report from the Bureau of Economic Analysis. For the year, real GDP rose 1.7 percent. From the report:
The increase in real GDP in the fourth quarter reflected positive contributions from private inventory investment, personal consumption expenditures (PCE), exports, residential fixed investment, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in thecalculation of GDP, increased.
The acceleration in real GDP in the fourth quarter primarily reflected an upturn in private inventory investment and accelerations in PCE and in residential fixed investment that were partly offset by a deceleration in nonresidential fixed investment, a downturn in federal government spending, an acceleration in imports, and a larger decrease in state and local government spending.
Here is a look at the ups and downs of real GDP over the last 4 years:
Real GDP increased 3.0 percent in 2010. The BEA report lists drops in inventory investment and government spending--"the annual decline was the largest decline since 1971"--as primary reasons for the slowdown.
Read the full release from the BEA here.
With President Obama making a strong push for a "rebirth for manufacturing" in his State of the Union address, there has been a fair bit of chatter about whether manufacturers can make a comeback. This morning, our friends at The Takeaway had an interesting conversation with the head of a West Virginia company that makes marbles. Peter Morici, professor of international business at the University of Maryland, also joined the conversation. Take a listen:
The National Association of Realtors Pending Home Sales Index topped 100 in November. That represented a 19-month-high for the index. So while the index edged down in December, to 96.6, the big picture is still somewhat hopeful, says NAR chief economist Lawrence Yun:
While we are not likely to look to the NAR as a primary, objective source of analysis on the state of the housing market, Yun is certainly a credible source, and the index's ups and downs do provide a helpful read on one key aspect of the economy. Read the NAR press release here.
In a compelling post for Fast Company, Shawn Parr tells us it is time for companies to stop looking at fostering a strong workplace culture as "touchy-feely," and recognize that the conditions that build a vibrant culture also build profit and sustainability. He points to some of the usual standouts like Southwest Airlines, Costco, and Zappos as models:
A vibrant culture provides a cooperative and collaborative environment for a brand to thrive in. Your brand is the single most important asset to differentiate you consistently over time, and it needs to be nurtured, evolved, and invigorated by the people entrusted to keep it true and alive. Without a functional and relevant culture, the money invested in research and development, product differentiation, marketing, and human resources is never maximized and often wasted because it's not fueled by a sustaining and functional culture.
Look at Zappos, one of the fastest companies to reach $1 billion in recent years, fueled by an electric and eclectic culture, one that's inclusionary, encouraging, and empowering. It's well-documented, celebrated, and shared willingly with anyone who wants to learn from it. Compare that to American Apparel, the controversial and prolific fashion retailer with a well-documented and highly dysfunctional culture. Zappos is thriving and on its way to $2 billion, while American Apparel is mired in bankruptcy and controversy. Both companies are living out their missions--one is to create happiness, and the other is based on self-centered perversity. Authenticity and values always win.
Read Culture Eats Strategy For Lunch here.
It looks as though interest rates will remain low for the next two years. At their January meeting, members of the Federal Open Market Committee not only kept the target federal funds rate between 0 and 1/4 percent, they, as a group, projected the next rate increase would likely not come until 2014 at the earliest. They also set the inflation target at 2%.
Here is a look at the Fed's projections for GDP and unemployment:
At his press conference following the meeting, Ben Bernanke noted that the Fed needs to remain open to measures to "provide further stimulus" if the pace of recovery slows:
Read the FOMC January statement here.
Earlier this month Sam Palmisano stepped down as CEO of IBM. Palmisano has been with Big Blue for four decades, and while IBM may have seemed more dominant back when he started in 1973, the company's lasting power can be attributed in part to its ability to reinvent itself and adapt to shifts in the marketplace like few others its size. Palmisano, who remains with IBM as chairman, spoke with Wharton School professor of management Michael Useem, and discussed his work at the company, some of his moves as CEO, and how a big company like IBM can foster innovation:
At Modeled Behavior, Karl Smith shares two graphs. He asks us to look at what happened to the output gap after 1983:
...and then at the output gap for now:
..and he asks us to consider whether we could see a rapid recovery over the next year. Smith says it si possible. Not likely, but possible. Read How Fast, Recovery here.
(Hat tip, Mark Thoma)
Adam Davidson's latest NYT Magazine column is a must read, and it highlights one of the topics we love to keep an eye on at The Watch: mobility. Historically, a high level of economic mobility in the U.S. has often meant a lot of geographic mobility. But today? Not so much interstate migration, as this NYT graphic shows:
Davidson points out that mobility requires industries that are successful and creating jobs to pull people from one state to another. And the industries that have that pull today are looking for workers with particular skills.
Part of the problem is that the country’s largest industries are in decline. In the past, it was perfectly clear where young people should go for work (Chicago in the 1870s, Detroit in the 1910s, Houston in the 1970s) and, more or less, what they’d be doing when they got there (killing steer, building cars, selling oil). And these industries were large enough to offer jobs to each class of worker, from unskilled laborer to manager or engineer. Today, the few bright spots in our economy are relatively small (though some promise future growth) and decentralized. There are great jobs in Silicon Valley, in the biotech research capitals of Boston and Raleigh-Durham and in advanced manufacturing plants along the southern I-85 corridor. These companies recruit all over the country and the globe for workers with specific abilities. (You don’t need to be the next Mark Zuckerberg to get a job in one of the microhubs, by the way. But you will almost certainly need at least a B.A. in computer science or a year or two at a technical school.) This newer, select job market is national, and it offers members of the mobile class competitive salaries and higher bargaining power.Many members of the immobile class, on the other hand, live in the America of the grim headlines. If you have no specialized skills, there’s little reason to uproot to another state and be the last in line for a low-paying job at a new auto plant or a burgeoning green-energy cluster. The surprise in the census data, however, is that the immobile work force is not limited to unskilled workers. In fact, many have a college degree.
This column has sparked an ongoing online conversation at the Planet Money blog. Read Davidson's column here. And then go to responses from Brookings demographer William Frey, here, and Northwestern economist Joseph Ferrie, here.
In his book, The Growth Map: Economic Opportunity in the BRICs and Beyond, Jim O'Neill argues that the term emerging markets no longer applies to the BRIC nations (and a few others, including Mexico and Korea). While he has long been bullish on the economies of Brazil, India, and China, O'Neil--chairman of Goldman Sachs Asset Management--has come to realize that, in many ways, these economies have earned a little more respect as strong, stable markets.
He spoke recently with Charlie Rose about the strength of the BRIC economies, and how we all need to stop regarding "growth markets" as "developing." Here is an excerpt:
Watch the full interview here.
If the economy is to pick up in 2012, we will need to see some recovery in housing markets. Forbes is featuring a slideshow of US cities that are "ripe for a rebound." Here is the list:
San Jose, CA,
Oklahoma City, OK,
Fort Worth, TX,
New Orleans, LA,
and Rochester, NY.
Note that cities like Las Vegas and Fort Myers--cities that saw home values seemingly drop off a cliff--are not on this list. The Forbes list features cities where housing didn't drop too much, as those cities simply have too far to climb to get back to level ground. Click here to roll through the slide-show and look at the data for each of the above cities. Then see what cities you would keep on this list, and what others you might add.
If eMarketer's projections are correct, we will see a big uptick in online ad spending this year. It could be a strong indication that the digital economy is in for a surge. We wonder what the overall economic impact will be, and whether we can look back in 12 months and see online ad spending as a reliable economic indicator. Here is a look at eMarketer's projections for online ad spending in the US over the next five years:
From the report:
US online ad spending will post growth well above 20% again this year to reach nearly $40 billion, eMarketer estimates, as the internet continues to prove its worth to advertisers in a tough economic climate.
“Advertisers’ comfort level with integrated marketing is greater than ever, and this is helping more advertisers—and more large brands—put a greater share of dollars online,” said David Hallerman, eMarketer principal analyst.
Double-digit growth is expected through 2014, when US online ad spending will reach $52.8 billion. In 2016, eMarketer expects advertisers to spend $62 billion online.
Read US Online Ad Spend to Close in on $40 Billion here.
The Consumer Price Index for All Urban Consumers remained flat for a second straight month in December. Once again a decrease in the energy index countered rises in the other indexes (the food index and the all items less food and energy index). Over the last year, CPI rose 3.0% (seasonally
adjusted). Here are some year-in-review details rom the Bureau of Labor Statistics release:
The energy index increased 6.6 percent in 2011, a deceleration from the 2010 increase of 7.7 percent. The gasoline index, which rose 13.8 percent in 2010, increased 9.9 percent in 2011. In contrast, the household energy index accelerated in 2011, rising 1.8 percent after a 0.8 percent increase in 2010. The fuel oil index rose 18.0 percent and the electricity index increased 2.2 percent, although the index for natural gas declined for the third straight year, falling 3.7 percent.
The index for food accelerated in 2011, rising 4.7 percent compared to a 1.5 percent increase in 2010. The index for food at home rose 6.0 percent in 2011 compared to 1.7 percent in 2010. All six major grocery store food group indexes rose in 2011, with increases ranging from 2.3 percent (fruits and vegetables) to 8.1 percent (dairy and related products). The index for food away from home rose 2.9 percent in 2011 after increasing 1.3 percent in 2010.
The index for all items less food and energy also accelerated in 2011, increasing 2.2 percent after its historical low 2010 increase of 0.8 percent. This was the largest increase since 2007. Several indexes turned up in 2011. The apparel index rose 4.6 percent after a 1.1 percent decline the previous year. Similarly, the new vehicles index rose 3.2 percent in 2011 after a slight decline in 2010. The indexes for recreation and household furnishings and operations also rose in 2011 after declining in 2010. A number of other indexes rose more quickly in 2011 than in 2010. The shelter index accelerated notably, advancing 1.9 percent in 2011 after rising only 0.4 percent the previous year. The indexes for used cars and trucks, medical care, education, and personal care also rose more quickly in 2011 than in 2010. In contrast, the indexes for tobacco and airline fare posted smaller increases in 2011 than 2010.
Here's a look at the CPI for All Urban Consumers over the last year:
The Brookings Institution's Global MetroMonitor for 2011 paints a picture of shifting strength from cities in the developed nations to Asia and South America. Not that the metro areas of the US and Western Europe are not still vital drivers of the global economy, but the growth was elsewhere in between 2010 and 2011. Note where much of the blue is on this map:
The map is a helpful supplement to the report (click here to access the interactive map). As it shows, most of the strongest performing metro areas--90%, in fact--are outside of the US and Western Europe, while almost all of the weakest are in Japan, the US, and Western Europe.
Alan Berube, director of research for the Brookings Metropolitan Policy Program and one of the authors of the report, notes some of the key takeaways from the Global MetroMonitor in this video:
Read the full report here.
Since 2008, some Latin American economies--we're looking at you, Brazil--have managed to do quite well relative to the economies in other regions. But as we see China and India losing a bit of momentum, might these Latin American nations be more vulnerable to global slowdowns? Paulo Levy of IPEA, the applied economic research institute of the Brazilian government, thinks there is a good chance that Latin American economies will have another year of strong performance. At Project Syndicate, he predicts 4% growth over the year. That's not a stunning figure, but it is likely to be well ahead of the pace elsewhere. Levy:
One reason for this prediction is that abundant liquidity in international markets and continuing high demand from China and India may prevent commodity prices – especially for agricultural products – from falling as much as they did during the 2008-2009 crisis. Gains in terms of trade have been crucial for growth in Latin America, given the region’s low domestic saving rates, because they encourage investment but have relatively little negative impact on current-account balances.Strong capital inflows, especially of foreign direct investment, and terms-of-trade recovery since 2009 have made the region less vulnerable to external shocks – that is, to recurrence of the abrupt capital-flow reversal that occurred in late 2008 and early 2009. More importantly, most Latin American countries now have in place counter-cyclical measures to mitigate any negative external impact.For example, many countries that were tightening their monetary policy when the first signs of turbulence emerged have either put interest-rate hikes on hold, or, like Brazil, have already started to reduce rates. Most Latin American countries’ recent adjustments, moreover, have prevented their budget positions and current-account deficits from becoming sources of vulnerability.This appears to be the case, for example, in Peru, where sound fiscal policies have kept deficits and inflation under control. It is also true in Colombia, where strong budget revenues could allow for a temporary spending boost to counter external risks. Noteworthy exceptions are Argentina and Venezuela, where macroeconomic tensions have reduced the scope for counter-cyclical action, and Mexico, whose fate is bound by extensive trade links to that of the United States.
Read Southern Resilience here.
Take a look at this figure from Barclays Capital:
A sign of progress? Sure. China is rapidly building more skyscrapers because of its recent economic growth.
But this could also be a sign of the bad things to come. The Barclays Capital Skyscraper Index has shown "an unhealthy correlation between construction of the next world’s tallest building and an impending financial crisis." With 14 new skyscrapers going up in China, the question we have is whether this portends bad things for China's economy or the global economy as a whole?
Hat tip BBC News.
Following New York Fed President William Dudley's call for making mortgage refinancing available to more homeowners, Joseph Tracy and Joshua Wright examined the potential impact of such a move. Writing at the NY Fed's Liberty Street Economics blog, Tracy and Wright argue that refinancing is not a "zero-sum game." Rather, they say that, lower interest rates bring about both economic growth and a more stable housing market, inlarge part because of who owns mortgage-backed securities. Take a look:
Tracy and Wright:
homeowners with fixed-rate mortgages—the vast majority of U.S. mortgage
borrowers—the reduction in monthly payments takes place when the
homeowner refinances the existing mortgage into a new mortgage at the
lower prevailing mortgage interest rate. When borrowers
refinance and free up cash to spend, there will be an offset on overall
economic activity as mortgage bonds are prepaid and investors in those
bonds need to find alternative investments at precisely those times
when other bonds are likely to offer a lower yield, reducing the
investors’ income. But we will argue that the offset is only
partial. Why? There are two reasons. First, many mortgage bonds are
held by government or foreign investors whose spending on U.S. goods
and services does not depend to any significant degree on their income
from the mortgage bonds. Moreover, the share of mortgage bonds held by
such investors has increased. Second, the remaining, domestically based
private investors are likely to cut back their spending much less than
the borrowers raise theirs. To better understand why the
offset is only partial, let’s look at the figures in a bit more detail.
As shown in the pie chart below, slightly less than 47 percent of
agency mortgage-backed securities (MBS) are held by foreign investors
and federal governmental institutions, including government-sponsored
enterprises and the Federal Reserve. In these cases, we would not
expect any domestic spending offset from a decline in the value of the
MBS securities, for the reasons discussed above. An additional 8.3
percent of MBS are held by insurance and pension funds; for these
funds, any spending effects are likely to be spread out over a
relatively long period of time.
At first glance, this argument may cause some to shake their heads and wonder if we have slipped back into 2006. Read the full post here and let us know your take.
There is a lot of political talk about the good and bad of private equity firms these days, but Paddy Hirsch steps away from the fray in this Marketplace Whiteboard to explain just what it is that private equity firms do:
Private equity explained from Marketplace on Vimeo.
Der Spiegel has a fascinating, and at times provocative, interview with Wolfgang Reitzle, one of Germany's most prominent and respected business leaders. Reitzle argues that, while he does not expect the euro zone to fall apart, he believes that the EU's leading economies, Germany in particular, need to draw some clear lines to prevent policy makers from doing too much to protect the currency. And he, like so many Germans worth a fraction of his wealth, is tired of feeling like his country has to keep propping up Greece and Italy. Here is an excerpt from the interview:
SPIEGEL: Are you saying that withdrawing from the monetary union would be advantageous for Germany?
Reitzle: No, but I believe that the German economy would have weathered such a shock within a few years, and would even become more competitive in the long run. To put it clearly: I don't think this scenario is desirable, but it also shouldn't be declared a taboo. And from a personal standpoint, I don't agree with a large share of my taxes ending up in countries that don't manage their economies responsibly.SPIEGEL: At the moment, the German economy is actually benefiting from the crisis. The weak currency and low interest rates act like an economic stimulus program.Reitzle: And we need this prosperity, because it's inevitable that we will be presented with the bill for the euro in the end. But this imbalance in the euro system must be corrected in the long term. The debt-ridden countries don't just have to reduce their debts. They also have to revamp their economies…SPIEGEL: …which is difficult, if not impossible, because they lack their own currency to devalue.Reitzle: And that's why the lack of competitiveness in the euro zone has become practically set in stone. If Italy still had the lira, it would have been devalued long ago to make the country competitive again, because wages there, as in Spain and France, have risen far too quickly -- in sharp contrast to Germany, by the way.SPIEGEL: But all of this shows that the euro brought together things that don't belong together: highly developed, industrialized nations and agricultural countries…Reitzle: …as well as different mentalities. And, most of all, countries that are dissimilar in terms of efficiency. It is evident that the euro was introduced far too soon. In retrospect, anyone can come up with the perfect explanation for why all of this couldn't possibly work. But that doesn't do us any good. Now we have to see where we stand and what steps to take so that everything doesn't fall apart. There's more to it than just muddling through. Germany is being given the leading role here, whether we like it or not. Not everyone ticks the way the Germans do, but sloppy economic management will no longer be tolerated. There will still be substantial differences, just as there are in the United States of America.SPIEGEL: Do you see the United States of Europe as a goal?Reitzle: Yes, in the long term. In 2050, the United States will still be a global power and China will probably be the dominant economic power. Europe will only be able to keep up if it manages to achieve a political unification process in addition to the monetary union, and if it includes Russia. However, if we even mess up the monetary union, Germany will be an attractive island, just as Switzerland is. But will we be relevant in the world anymore? Probably not. That's why it's worth doing everything we can.
Read the full interview here.