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Spengler

Germany is the Problem?

October 31st, 2013 - 6:47 am

According to the US Treasury, Europe’s only large, functioning economy is actually the source of the world’s problems. Germany’s current account surplus, the Treasury claimed in an Oct. 30 report to Congress, is the source of Europe’s and a good deal of the world’s woes. If only the stingy Germans would import more from other countries and export less, the world would be better off.

Excuse me? Just what is Germany supposed to import? Spanish cars, perhaps? Germany is importing tens of thousands of Spanish engineers and other skilled personnel because it can put them to productive work. Germany can’t find enough workers and is a magnet for qualified immigrants from Europe and the world.

Historical Data Chart

Europe is in trouble because its Romance-language-speaking countries increased wages by 25% or more between 2000 and 2009 and borrowed massively to pay for it, running big current account deficits to fund consumption. Germany geared its industry to export to China, where its car companies lead the market and its machine tools are found in every factory. Germany has an aging population. It has to save a great deal to fund coming retirements. Countries with aging populations and high savings requirements are supposed to export more and save the proceeds, as Nobel Laureate Robert Mundell explained a quarter-century ago.

If only Germany had followed the Keynesian policies that have proven so successful in the United States….

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All Comments   (10)
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44 weeks ago
44 weeks ago Link To Comment
Mr. Goldman meet Ms. McArdle:

"Everyone Wants to Go to Export Heaven" By Megan McArdle Oct 31, 2013
http://www.bloomberg.com/news/2013-10-31/everyone-wants-to-go-to-export-heaven.html

"But the U.S. has to complain. And I have to wonder if we don’t feel a bit guilty about our running tab with, well, the rest of the world. We’re like a drunk who wants to reform but knows he lacks the willpower, so he urges the bartenders to close down and take up haberdashery. Which is a good guide to how effective the whole thing is."
45 weeks ago
45 weeks ago Link To Comment
If only Germany had followed the Keynesian policies that have proven so successful in the United States…

I detect a hint of sarcasm here. No, I detect an overflowing bucket of sarcasm, steaming sarcasm. And why not?

At this point it's fair to say that the United States Gubmint has let loose of reality. This sad condition can be traced to declining educational standards combined with a collusive media and a federal bureaucracy stuffed with globo-socialist ideas.

There are realities, and there are fictive realities. We're surfing the latter, and it's gonna be a rough ride.
45 weeks ago
45 weeks ago Link To Comment
You are right that Germany is not to blame for the trade deficit caused depressions in Southern Europe. That's just internationalist claptrap. The obvious solution is currently being advocated by the European right and rejected by Europe's elites. As I pointed out in the American Thinker blog on October 18:

The five trade deficit countries should leave the Eurozone in order to revive their economies. Once out, their currencies and the international value of their wages would fall to trade-balancing levels and they would get much more investment in their industries. They would prosper and their unemployment rates would shrink.

Howard Richman
45 weeks ago
45 weeks ago Link To Comment
Mr. Richman, wise ideas. But if there is something like a (literally to be) punishable heresy in Germany, it is your solution and Queen Bee Madame Merkel is one of the European elites that is forcing the euro-salvation policy on So. Europe (and I cannot wait until France moves South) and Germany itself. The story is tricky (I suggest the LudwigvonMises.de.Institut where wonderfully rational and politically irrelevant essays flow out with rapidity), such that, under the influence of ECB, backed by the elite (i.e., most ruling politicians of the North, heck just about everywhere), banks are borrowing at 0.5% and buying statebonds and making a profit (thereby financing the gov. through the backdoor), not to say profiting from normal (mal)investements (>> blow bubbling up the market) whereas we "common savers (and I mean ME too) are not earning enough interest to cover the official (sic) inflation rate of ca. 1.8%/yr (the Bernanke rule rules here so much so that official inflation will not reach 2%). Puchasing power of savings is diminishing as Kenysian adepts force savers to spend now and not later or accept purchasing power loss, which purchasing power shifts to the state. It is considerations like these and the recognition that the elite want their brave new Europe under bureaucratic control that provoke the negative analyses of the newspapers I suggested below. For the moment Germany is flurishing enough, though it exploits often vilely the underpaid apprentices at say €400-/month income (= better unemployment statistics), a couple of which victims come begging to me every month (and who intend to leave Germany for greener pasteurs downunder). There is a deadly black lining in every bright cloud.
45 weeks ago
45 weeks ago Link To Comment
The heart of the problem is the EMU, which attempts the impossible trick of having a common currency between countries with radically different economies and styles of government.

The net result is that the southern countries cannot have floating exchange rates that would devalue their currency to match their economy, leaving them unable to compete internationally (which they would somewhat be able to do otherwise).
45 weeks ago
45 weeks ago Link To Comment
Meso, we agee -- Howard Richman
45 weeks ago
45 weeks ago Link To Comment
It is seldom that I would dare to disagree with David Goldman, but this time is one of them. I will not seek to argue my disagreement, rather suggest just two German newspapers whose opinions are much opposed to the glowing report of this article. What I read in the article is an analysis--based on real statistics--of an illusion (and fluffy clouds have their solid statsitics too). I suggest to anyone who can read German to seek out the weekly newspapers, the "Preußische Allgemeine Zeitung" and particularly "Die Junge Freiheit" (associated with the only "alternative" opposition party in the last election, namely the AfD) for worrisome interpretations as "Queen Bee Merkel" (as we so endearingly call her) begins to mate with the "Stinger Wasps" Social(istic) Democrats" and eventually one day with the reakky weirdo "Greens" (a cosmic mating more plausible than one thinks from abroad), a party dedicated to egalitarian lunacy and totalitarian (= Mayor Bloomberg³ regulator-tye of sizes of soda cups + obama-like² welfare) control of the masses). I suspect that such aspersions might well sound odd to David Goldman. Just try the newspapers suggested and follow leads in them (and, if possible, do as I do, i.e, blah, blah with freigthened, disappointed, sceptical "normal" Germans). Of course, Mr. Goldman knows I am making an oblique hint to him as he commands German.

Germany still can remain economically sane as a sort of post-traumatic syndrome after the superduperblockbuster inflation of 1922-23, a post WWI clamity, and the radical 1948 monetary reform (actually ordered by America--and some Germans of the left have not forgiven America for that). Syndrome or not, Germans are much inclined to pay down their debts -- and this "blessed" compulsion swarms through the background that has generated the statistics of this article. However, German subservience to the ECB and its "unlimited" support of failed So. European countries may yet be a backdoor to getting around the "debt aversion syndrome". Where Germans are sane, follow them, where not, keep a distance. The political life here is in flux direction economic paneuropean lunacy. Amen!
45 weeks ago
45 weeks ago Link To Comment
But, but, but, aren't OxBridge and Ivy educations the be-all and end-all, creating the Best and Brightest ? Surely they can't be wrong, destined to govern us all as they are.

I can't help it. My contact with these self congratulatory, well indoctrinated dron(ette)s has been less than helpful. Sorry.

Now that my bias is laid bare, I have to ask...why aren't they at least internally consistent? Because there is no rigor in their training or application!

WTF-Out.
45 weeks ago
45 weeks ago Link To Comment
My dad was a Keynesian economist and one thing I learned from him was that countries were supposed to pay back their deficit spending in good times. We are obviously not doing that and headed for serious problems. The Germans seem to be doing some things right that the US is not.
45 weeks ago
45 weeks ago Link To Comment
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