The rise in taxation is driving costs higher, yet simultaneously lowering economic growth long-term We call this STAGFLATION because you get the worst of both worlds – rising prices with lower economic growth. Germany is headed into recession and their austerity policies have created massive deflation, high unemployment, and increased the pressure to cause the divide between the North and the South to explode. We should expect May/June to mark rising protests throughout Europe.
The consequences of this policy is bad loans, way overvalued Euro, noncompetitive industry and the Japanese cost of production declines with the drop in the yen on an international scale. We are now starting to see the price of massive derivative positions hit Germany undermining their banks as well. What we face is a rising dollar that will then flip the US economy by 2016 into recession. Right now, major German banks need capital.