8 ms·

The World Has a Germany Problem: Debt Obsession Ate the Economy

34 points by js2 7y ago

Tomte 7y ago
In both governing parties, SPD and CDU/CSU, many people including government ministers and the chancellor-to-be are now willing to give up on "no debt"[1]. Even fiscal hawks are now playing ball with that new party line. Expect Germany to make debt again. [1] This refers to the policy of "Schwarze Null"/"black zero" which means revenue and expenditures shall be balanced. This has only been a policy statement that the former finance minister achieved for the first time in decades and the current finance minister adhered to. This must be distinguished from the "Schuldenbremse"/"Debt Brake" which is actually in our Constitution and limits the amount of new debt the state is allowed to take on.
thrill 7y ago
Here's a simple fix to getting people to not obsess over debt - eliminate debt. Recognize it as the nonlinear burden that it is, and that, unlike Krugman's belief that ignoring it makes it a'ok, that it needs to be addressed and not kicked to the next generation. Make it unacceptable for politicians to incur debt for anything other than a catastrophe, and absolutely not as a normal way of doing business. Yes, America, I'm especially criticizing you, for 20 trillion reasons and counting. After all, if it's so unimportant, then it should be trivial to eliminate.
- inflatableDodo 7y ago
  >After all, if it's so unimportant, then it should be trivial to eliminate. I think you would have to scrap nearly every piece of fintek since at least the time of Newton and completely reinvent how modern monetary systems and economies work from the ground up, to eliminate debt.
- deleted 7y ago
  [deleted]
inflatableDodo 7y ago
Germany had a Harvard problem - https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt
5partan 7y ago
Hacker News has a paywall problem.
lota-putty 7y ago
This reminds me of : Daniel: Drainage! Drainage, Eli, you boy! Drained dry. I’m so sorry. Here: if you have a milkshake, and I have a milkshake, and I have a straw — There it is. That's a straw, see? Watch it. Now my straw reaches across the room, and starts to drink your milkshake. I. Drink. Your! Milkshake! [makes a loud slurping noise] I DRINK IT UP! USA asking everyone to give up their milkshakes! World has the USA problem.
throw0101a 7y ago
Given that German bonds are in negative territory out to thirty years, the government would actually profit by issuing them: * https://www.bloomberg.com/markets/rates-bonds/government-bonds/germany https://www.bloomberg.com/markets/rates-bonds/government-bon... * https://www.reuters.com/article/eurozone-bonds/update-3-yields-across-entire-german-bond-market-dip-below-zero-for-first-time-idUSL8N24Y326 https://www.reuters.com/article/eurozone-bonds/update-3-yiel... Is there any reason not to "borrow" when you're being paid to do so?
- starbugs 7y ago
  > Is there any reason not to "borrow" when you're being paid to do so? You still have to pay it back in the future and you can live beyond your means to the point where you can't?
  - danmaz74 7y ago
    Investing in crumbling infrastructure wouldn't be 'live beyond your means'.
    - starbugs 7y ago
      I was talking about issuing debt for the sake of being incentivized to do so, because of negative interest rates. Infrastructure investments that are profitable later on are a different story. However, I live in Germany, and when I go out I don't see any crumbling infrastructure. There's certainly potential for improvements, but it's not as if we're living in a crumbling country.
      - throw0101a 7y ago
        > I was talking about issuing debt for the sake of being incentivized to do so, because of negative interest rates. I, the GGP, was not talking about borrowing just because one can. But in the context of this story--Germany being tight fisted. The Germany army has been using broomsticks in place of weapons: * https://www.independent.co.uk/news/world/europe/german-army-paints-broomsticks-black-to-resemble-machine-guns-in-nato-exercises-10054468.html https://www.independent.co.uk/news/world/europe/german-army-... See also Navy: * https://www.thedrive.com/the-war-zone/22064/ https://www.thedrive.com/the-war-zone/22064/ I'm sure there are things that need to be fixed or upgraded. There's nothing wrong with being prudent with money, but Berlin has a fetish about it; it caused all sorts of problems during the Euro crisis (2010-2011).
starbugs 7y ago
Uhm, sorry, but is the author serious? I mean, how did we come to the point where not being indebted is bad and should be condemned?
- yrro 7y ago
  Because debt issued by a soverign and denominated in its own currency is fundamentally different to debt accrued by a private entity.
  - pgeorgi 7y ago
    One design quirk of the Euro is that there is no sovereign to go with it.
    - jwieczorek 7y ago
      Yes, Euro is a disaster. It's a predominantly ideological project that economically is totally unsound. Okay, it was conceived as a way to boost the German economy (before Euro the German mark was just too strong so Germany couldn't export as much as it does now) but ends up painfully backfiring at all Euro economies. First the weaker economies (Greece and Italy) and now Germany.
      - pgeorgi 7y ago
        > it was conceived as a way to boost the German economy (before Euro the German mark was just too strong Interesting theory, but I wonder when the German economy was so strong that Germany forced the rest of Europe to agree to the Euro: When the first plans for an economic and monetary union within the EEC were brought up in 1969? Or in 1979, when European currencies were pegged against the ECU, stabilizing exchange rates (and taking large parts of monetary policy out of the member states' hands)? Maybe in 1989 when France made German reunification depend on Germany committing to the monetary union?
      - inflatableDodo 7y ago
        >Yes, Euro is a disaster. It's a predominantly ideological project that economically is totally unsound. It has been running for about 20 years, becoming the world's second most traded currency after the dollar and without it Europe would still be a mixed bag of national currencies rather than being one of the big three economic powers. If the euro is totally economically unsound, then I must say that it is doing rather well considering. Personally, I store all my wealth in a 3 ton rai stone sunk in deep water 60 km NNW off the isle of Yap. There are some limits on fungibility, but the transaction security is excellent.
hn23 7y ago
> Realistically, America has no ability to pressure Germany into changing its domestic policies. This statement is so false. US is already pressing to spend idotic amounts of money for military budged. Next time in NYT: Germany has too much debt. Us rating agency about to drop rating...
Shivetya 7y ago
Austerity, is it really? How about not increasing spending at the same pace as other countries. Many countries could be come debt free by simply keeping spending increases under the rate of inflation. Krugman was having a hissy in 2014 about Germany for similar things, yet it worked for the Swiss. They have a cap! So staying under three percent paid off for the Germans and this upsets those who subscribe to the idea that government spending is never bad, well if you never plan to pay it off in your lifetime you can borrow against the future quite easily.
- starbugs 7y ago
  This. Plus all the new money printing debases the currency eventually (even if you are the world reserve currency issuer). This is what transfers the bulk of the wealth from the bottom to the top. Wages can't keep up with inflation and the new money only arrives at the bottom once its value has been inflated away substantially already.
  - chewz 7y ago
    In principle, yes. But each and every Minister of Finance welcomes inflation as it increases budget revenues faster then expenses. And with increased revenues you can buy a lot of votes.
- Aperocky 7y ago
  Why going debt free though? What's the point of going debt free? The real economy is dictated by production and consumption, not amount of number that you have on the either side of the balance sheet. If going into debt creates a bigger economy by balancing/revitalizing production/consumption, it should be done. The debt gets larger but so does the economy.
  - toomuchtodo 7y ago
    This assumes the debt you’re incurring is going to grow the economy. This is a big “if” in most developed countries, where no amount of debt will change foundational demographic transitions (see: Japan). But as long as you control monetary policy and can inflate debt away in the future, no one today really cares as the can is kicked down the road.

34 points by js2 7y ago

In both governing parties, SPD and CDU/CSU, many people including government ministers and the chancellor-to-be are now willing to give up on "no debt"[1]. Even fiscal hawks are now playing ball with that new party line. Expect Germany to make debt again. [1] This refers to the policy of "Schwarze Null"/"black zero" which means revenue and expenditures shall be balanced. This has only been a policy statement that the former finance minister achieved for the first time in decades and the current finance minister adhered to. This must be distinguished from the "Schuldenbremse"/"Debt Brake" which is actually in our Constitution and limits the amount of new debt the state is allowed to take on.

thrill 7y ago

Here's a simple fix to getting people to not obsess over debt - eliminate debt. Recognize it as the nonlinear burden that it is, and that, unlike Krugman's belief that ignoring it makes it a'ok, that it needs to be addressed and not kicked to the next generation. Make it unacceptable for politicians to incur debt for anything other than a catastrophe, and absolutely not as a normal way of doing business. Yes, America, I'm especially criticizing you, for 20 trillion reasons and counting. After all, if it's so unimportant, then it should be trivial to eliminate.

inflatableDodo 7y ago
>After all, if it's so unimportant, then it should be trivial to eliminate. I think you would have to scrap nearly every piece of fintek since at least the time of Newton and completely reinvent how modern monetary systems and economies work from the ground up, to eliminate debt.
deleted 7y ago
[deleted]

inflatableDodo 7y ago

Germany had a Harvard problem - https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt

5partan 7y ago

Hacker News has a paywall problem.

lota-putty 7y ago

This reminds me of : Daniel: Drainage! Drainage, Eli, you boy! Drained dry. I’m so sorry. Here: if you have a milkshake, and I have a milkshake, and I have a straw — There it is. That's a straw, see? Watch it. Now my straw reaches across the room, and starts to drink your milkshake. I. Drink. Your! Milkshake! [makes a loud slurping noise] I DRINK IT UP! USA asking everyone to give up their milkshakes! World has the USA problem.

throw0101a 7y ago

Given that German bonds are in negative territory out to thirty years, the government would actually profit by issuing them: * https://www.bloomberg.com/markets/rates-bonds/government-bonds/germany https://www.bloomberg.com/markets/rates-bonds/government-bon... * https://www.reuters.com/article/eurozone-bonds/update-3-yields-across-entire-german-bond-market-dip-below-zero-for-first-time-idUSL8N24Y326 https://www.reuters.com/article/eurozone-bonds/update-3-yiel... Is there any reason not to "borrow" when you're being paid to do so?

starbugs 7y ago
> Is there any reason not to "borrow" when you're being paid to do so? You still have to pay it back in the future and you can live beyond your means to the point where you can't?
- danmaz74 7y ago
  Investing in crumbling infrastructure wouldn't be 'live beyond your means'.
  - starbugs 7y ago
    I was talking about issuing debt for the sake of being incentivized to do so, because of negative interest rates. Infrastructure investments that are profitable later on are a different story. However, I live in Germany, and when I go out I don't see any crumbling infrastructure. There's certainly potential for improvements, but it's not as if we're living in a crumbling country.
    - throw0101a 7y ago
      > I was talking about issuing debt for the sake of being incentivized to do so, because of negative interest rates. I, the GGP, was not talking about borrowing just because one can. But in the context of this story--Germany being tight fisted. The Germany army has been using broomsticks in place of weapons: * https://www.independent.co.uk/news/world/europe/german-army-paints-broomsticks-black-to-resemble-machine-guns-in-nato-exercises-10054468.html https://www.independent.co.uk/news/world/europe/german-army-... See also Navy: * https://www.thedrive.com/the-war-zone/22064/ https://www.thedrive.com/the-war-zone/22064/ I'm sure there are things that need to be fixed or upgraded. There's nothing wrong with being prudent with money, but Berlin has a fetish about it; it caused all sorts of problems during the Euro crisis (2010-2011).

starbugs 7y ago

Uhm, sorry, but is the author serious? I mean, how did we come to the point where not being indebted is bad and should be condemned?

yrro 7y ago
Because debt issued by a soverign and denominated in its own currency is fundamentally different to debt accrued by a private entity.
- pgeorgi 7y ago
  One design quirk of the Euro is that there is no sovereign to go with it.
  - jwieczorek 7y ago
    Yes, Euro is a disaster. It's a predominantly ideological project that economically is totally unsound. Okay, it was conceived as a way to boost the German economy (before Euro the German mark was just too strong so Germany couldn't export as much as it does now) but ends up painfully backfiring at all Euro economies. First the weaker economies (Greece and Italy) and now Germany.
    - pgeorgi 7y ago
      > it was conceived as a way to boost the German economy (before Euro the German mark was just too strong Interesting theory, but I wonder when the German economy was so strong that Germany forced the rest of Europe to agree to the Euro: When the first plans for an economic and monetary union within the EEC were brought up in 1969? Or in 1979, when European currencies were pegged against the ECU, stabilizing exchange rates (and taking large parts of monetary policy out of the member states' hands)? Maybe in 1989 when France made German reunification depend on Germany committing to the monetary union?
    - inflatableDodo 7y ago
      >Yes, Euro is a disaster. It's a predominantly ideological project that economically is totally unsound. It has been running for about 20 years, becoming the world's second most traded currency after the dollar and without it Europe would still be a mixed bag of national currencies rather than being one of the big three economic powers. If the euro is totally economically unsound, then I must say that it is doing rather well considering. Personally, I store all my wealth in a 3 ton rai stone sunk in deep water 60 km NNW off the isle of Yap. There are some limits on fungibility, but the transaction security is excellent.

hn23 7y ago

> Realistically, America has no ability to pressure Germany into changing its domestic policies. This statement is so false. US is already pressing to spend idotic amounts of money for military budged. Next time in NYT: Germany has too much debt. Us rating agency about to drop rating...

Shivetya 7y ago

Austerity, is it really? How about not increasing spending at the same pace as other countries. Many countries could be come debt free by simply keeping spending increases under the rate of inflation. Krugman was having a hissy in 2014 about Germany for similar things, yet it worked for the Swiss. They have a cap! So staying under three percent paid off for the Germans and this upsets those who subscribe to the idea that government spending is never bad, well if you never plan to pay it off in your lifetime you can borrow against the future quite easily.

starbugs 7y ago
This. Plus all the new money printing debases the currency eventually (even if you are the world reserve currency issuer). This is what transfers the bulk of the wealth from the bottom to the top. Wages can't keep up with inflation and the new money only arrives at the bottom once its value has been inflated away substantially already.
- chewz 7y ago
  In principle, yes. But each and every Minister of Finance welcomes inflation as it increases budget revenues faster then expenses. And with increased revenues you can buy a lot of votes.
Aperocky 7y ago
Why going debt free though? What's the point of going debt free? The real economy is dictated by production and consumption, not amount of number that you have on the either side of the balance sheet. If going into debt creates a bigger economy by balancing/revitalizing production/consumption, it should be done. The debt gets larger but so does the economy.
- toomuchtodo 7y ago
  This assumes the debt you’re incurring is going to grow the economy. This is a big “if” in most developed countries, where no amount of debt will change foundational demographic transitions (see: Japan). But as long as you control monetary policy and can inflate debt away in the future, no one today really cares as the can is kicked down the road.