Sunday, September 14, 2014

Comparing North American with European Economies is a bit like comparing apples and oranges

Today, I walked along the Basilique de Sacre Coeur (Sacred Heart) at the core of Montmartre and the place was once again filled with people. People were even sticking out of the windows right below the great Dome of the basilica. Walking up to the church through the narrow cobbled roads of Montmartre, numerous small eateries can be found. When I tried to buy a few drawings of Paris as mementoes, I was politely asked to pay cash rather than credit card – ‘les artistes’ prefer cash. Not necessarily to escape bank charges (although that helps) but also sales and more important income taxes.

My farther, many years ago, ran a store in the Netherlands and he always preferred cash for the same reasons. You see, although North Americans think they live in the most free and capitalist part of the world, real anarchism finds its roots in Europe – never let us forget that. While we, North Americans, dutifully volunteer our incomes to the government, Europeans avoid the taxman like the plague. U.S. commentators often looked down on countries like Greece during the ‘European debt crisis’ because so many of its citizens were not paying taxes. ‘No wonder those countries were so deep in debt!’, was often the self-righteous outcry of those living in the center of North America's 'free world' under close scrutiny of the NSA, CIA, Homeland Security and SS… eh FBI… and many other institutions that are supposed to keep an eye on its population.

Yes, there is a lot of bureaucracy in Europe but its citizens have centuries experience avoiding it. Barter between friends and family is an exquisite skill. All those small French restaurants with 3 to 5 employees and supplied by the local grocery stores, fish halls and butchers, who can keep track of them? So much is in the underground economy. Life is in many ways so different; yes the French are not rich in monetary form. The Parisians live in tiny apartments often priced between 200,000 and 350,000 Euros (even now during a recession if you believe the economists). Many Parisians don’t have cars rather they own Vespas and Bugatti motorcycles and mopeds. But they live also all day out of house on the Paris terraces and streets. I haven’t been in a bad restaurant yet, nor have I dealt with rude waiters. The French live in style; so do the Greek and the Italians and it is just not our style.

At one point, I stated that my goal in life was to earn enough money so that I could live as well as when I was a student doing my thesis in Spain. In North America we mix up earning lots of money with lifestyle. But living in big houses, going on vacation to Hawaii, Mexico or Disneyland in summer, at Christmas and during Spring Break-up while racking up debt on lines of credit and credit cards leads more likely to a heart attack than to an enjoyable lifestyle.

With all the in uncertainties in measuring GDP, unemployment, participation rates and purchase manager indexes, comparing European economies with North American ones is in my books a fool’s game. Oh by the way, in the Netherlands GDP last quarter grew, on an annual basis 1.25% and unemployment fell to 605,000 a significant improvement over previous quarters. So, with Draghi lowering interest rates maybe it is time to buy some more European index funds. I think, over the longer term Europe is not so bad a place to invest and its stock markets are still cheap.

In spite of all the babble, Western Europe is political stable. Oh by the way, the only reason the U.K. is not a full member of the EU is that London is today Europe’s financial center and the British fear that the rest of Europe wants a say in and a share of the commissions from those markets.  By staying just a bit shy of being a full member, London thinks it can have its cake and eat it too. Cameron says he wants the U.K. out of the union. Well if Scotland breaks away, and if London loses its status as ‘financial center of Europe’ in case the U.K. steps out of the EU then England starts to look a bit thin.

Basilique du Sacred Coeur

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