Economics 101: France Has the Supply If You Have the Demand
We’re watching the euro get weaker by the moment and for those living or traveling based on U.S. dollars, this is a godsend. The euro is at an 11-year low against the dollar and none of us are complaining…except of course those who might be selling their French properties and needing to transfer their euros back to dollars!
I’ve been reading currency exchange articles, Web sites and publications, but currency economics can allude me. Why or how one currency is valued against another is as they say, “Greek to me” — like trying to understand some other language entirely, without a dictionary. In this particular case, the Swiss National Bank announced “that it would no longer defend the euro-Swiss franc floor at 1.2000, which was put in place back in September 2011.” This is what sent the euro “reeling” and is marked as one of the most dramatic periods in the history of currency trading. The investment world is still feeling the aftershocks.
We’re feeling a more positive aspect — a real comeback by tourists whose greenbacks will get them a whole lot further on European soil (and with a about a half-dozen other currencies, too) and property purchasers who see this as a golden opportunity to invest in a euro asset. The University of Michigan Consumer Sentiment Index published its report this month about the U.S. which says that “An increase in consumer confidence is a positive sign about the health of the economy and is bullish for the U.S. dollar.” It reported the strongest reading since 2004 at 98.2 — an increase from 93.6 in December of 2014.
What’s happening on our side of the world here is France is making the U.S. economy look even better, with France’s economic outlook still teetering. According to Focus Economics, “France is ranked 141 out of 144 countries on ‘hiring and firing practices’ according to the World Economic Forum’s Global Competitiveness Report and many critics advocate for labor market reform. Further, France’s housing market is under stress due to high prices and low market activity.”
Did you see recently that Thomas Piketty refused France’s highest honor — the Legion of Honor? He’s a professor at the École des Hautes Etudes en Sciences Sociales (EHESS) and professor at the Paris School of Economics. He’s also the economist who wrote “Capital in the 21st Century.” The French version sold over 50,000 copies, and the English version as of April 24th, 2014 sold approximately 80,000 printed copies and over 13,000 digital copies. The book reached number one on The New York Times bestselling hardcover nonfiction list in the list dated May 18, 2014. The famed economist declined the honor because, he said, “it was not the government’s role to decide who is honorable.” He believes France would do better if they would concentrate on reviving the growth instead of worrying about giving out honors. A member of the Socialist Party, he’s openly criticized President Hollande’s economic policies.
I have always joked that ENA, the Ecole Nationale d’Administration, that spits out most all of France’s politicians, doesn’t teach “Economics 101.” Of course, it’s a joke, but maybe there is some truth to it.
Created by Charles de Gaulle in 1945, the elitist school is designed to provide the training for ‘senior’ civil servants. In their 24-month program, “Economic reasoning and decision-making” is noted as part of their “multi-disciplinary program grounded in the reality of government action,” but does this one course hone in on the basics of “supply and demand?”
Nothing is more fundamental as the laws of supply and demand to the backbone of a strong economy. If France wants to decrease its joblessness, then it needs to cost the employers less and make it easier to both hire and fire. It needs to be easier and less expensive to start a business, they could reduce corporate taxes to encourage reinvestment by those businesses and provide incentives for businesses to grow. A mayor of a small town in France once told me that if they could just go back to the 39-hour work week, it would improve the economy in a flash, but the politicians who want to keep the majority vote of the large percentage of workers benefitting from the 35-hour work week simply couldn’t dare re-introduce this idea.
For those who heard Kein Cross speak last week at Parler Paris Après Midi, they learned that it was “100 times” harder to get his Cub Rayé up and running than it is was in the U.S., took much longer and his costs were much higher, particularly for employment (almost double an employee’s salary thanks to the social security costs). From one who understands this oh too well, I can say that anyone who succeeds in business in France must have a will of iron and enjoy the challenge. No doubt, it breeds tough stock.
If France wants to stir the housing market, it needs to create incentives for buyers by lowering entry taxes, reducing capital gains taxes, offering ready financing, etc. Prices have come down across the nation, but with such high unemployment, the average Frenchman has less to spend on housing. This is great for the American buyer, however, who now has more money to spend thanks to a strong economy and a better rate of exchange. It’s not what they want, but it’s what they’re going to get as long as they can’t compete.
As a capitalist who came from the land of understanding Economics 101, with a foot in each world, it is frustrating to see France flounder when the answers are so ‘right under their noses.’ I don’t want France to turn into another U.S. where capitalism has gotten the best of its citizens in many respects, just like socialism has gotten the best of its citizens in many respects here, simply because either ideology is too heavy-handed for either of their goods.
What’s funny is that France will inadvertently benefit from the strength of the U.S. economy, simply by the dollar strengthening against the euro. As long as all of you lovers of France will book your tickets to visit or consider investing in a property while prices are low, interest is low and exchange rates are in your favor, France has a fighting chance.
A la prochaine,
P.S. For all my New Orleans friends, Lisa Pasold and Bremner Duthie are hosting the Naughty Paris U.S. Book Tour with author Heather Stimmler-Hall, Sunday, January 25th at 7:00 p.m. CST featuring local and international performers including:
– A Special Burlesque Performance by Persè Fanny
– Naughty Songs sung by Bremner Duthie
– Risqué Poetry reading by Lisa Pasold
– Naughty Wit from Mrs. Dorothy Parker, as performed by Claudia Baumgarten
– See Naughty Cocktails for more information!