8 ms·

There's nothing I enjoy more than the plight of the German Saver, who's obsession with "fiscal responsibility" has led to shitty austerity politics all across t

There's nothing I enjoy more than the plight of the German Saver, who's obsession with "fiscal responsibility" has led to shitty austerity politics all across the EU (to be fair some other northern European countries like Netherlands also share the same view) and depressed growth for the poorer southern European countries. Germany has benefited most of all from the unfinished project of the EU. Without becoming a federal union like the US, but having a common currency, Germany's exports have been artificially cheaper and thus more competitive for over 20 years. This is the natural outcome from the obsession with running fiscal surpluses. Now Germany is on the brink of recession and they're finally starting to make some noises about fiscal spending, but the politics will likely limit it to modest deficits than anything transformational. Enjoy the negative rates.

Dylan16807 7y ago
First paragraph I can agree with pretty well. But you don't need to share a currency to have artificially cheap exports, do you? Selling things at a discount is usually very easy to accomplish.
- gumby 7y ago
  Californians can buy cheap rocket parts from Alabama without worrying about exchange rate risk just as Germans can buy cheap olive oil from Greece. However fiscal transfers between the two states (I.e. taxes -> welfare payments, labor standards etc) mean that the cheaper goods are more likely to be up to standards and that Alabamans can buy California almonds and Roku boxes. (This is one way cutting welfare hurts capitalism). The EU has no such fiscal mechanism thus the process drifts out of a crisis. Germany’s Länderausgleich is actually more extensive than the US’s, which has made its economy so strong for so long, yet the country is loath to extend its benefits (much of which would flow back to Germany!) to the rest of the EU.
  - benj111 7y ago
    "labor standards" These exist EU wide you know. Additionally money is allocated to poorer regions to develop industries, not welfare payments but still wealth redistribution.
    - gumby 7y ago
      Indeed that’s why I explicitly said “The EU has no such fiscal mechanism...” Edit: oh I see that poor editing on my part implied that labour standards were part of fiscal transfers, a nonsensical connection. My apologies) As a former EU resident of two different countries I have benefitted from EU labor laws. Regional development funds are practically below the noise floor as a part of the Zone’s GDP (and are in fact EU-wide, not just eurozone-wide). Most of the money is squandered (not necessarily through corruption, just lack of macro efficacy) as it’s such a small amount it gets little attention.
  - Despegar 7y ago
    I'm amused that we're getting downvoted when our comments should be at the top of this thread.
    - gumby 7y ago
      I know, it’s not like I wrote anything unorthodox. Most criticism of the Euro from both right and left come from claims that it is not an optimal currency area primarily due to lack of fiscal integration. I assume the downvoting comes from economics being a popular topic on which people like to opine whether or not they understand it (insert joke here about economists being subject to this rule as well)
  - samsonradu 7y ago
    It has been proposed indeed, the Surplus Recycling Mechanism: https://www.yanisvaroufakis.eu/2011/02/09/what-is-a-surplus-recycling-mechanism-an-idea-going-back-to-bretton-woods/ https://www.yanisvaroufakis.eu/2011/02/09/what-is-a-surplus-...
  - michaelt 7y ago
    Seems to me it'd be tough to sell Germans on Länderausgleich to Greece without much greater European integration. After all, the US is a single country, with common news reporting, a common language, common political systems and parties, common tax enforcement and so on. I mean, if an Alabamian thinks that Californians are all surf bums he can find employment statistics for both states gathered under identical standards, read press coverage in his language, and even move there if he feels like it, as he already knows the language. It seems unlikely the EU will ever achieve that level of integration.
    - gumby 7y ago
      Remember that over the past couple of centuries the US went through several explicit processes of integration specifically to overcome the barriers (including linguistic!) you correctly describe for the EU. > It seems unlikely the EU will ever achieve that level of integration. I disagree but it's unlikely to happen in my lifetime.
    - JetSpiegel 7y ago
      > Seems to me it'd be tough to sell Germans on Länderausgleich to Greece without much greater European integration. Hopefully this threat of recession will light a fire under the correct asses.
- Despegar 7y ago
  If Germany switched back to the Deutsche Mark tomorrow, their currency would instantly shoot up in value relative to the rest of the EU. That'd make their exports less competitive and make the exports of Greece, Portugal, Spain and Italy more competitive. It's not just the currency though. The "German model" has been to keep wages depressed. That's also how their exports are "cheaper". Make no mistake the result has been to enrich German capital at the expense of labor (even German labor). https://www.economist.com/leaders/2017/07/08/why-germanys-current-account-surplus-is-bad-for-the-world-economy https://www.economist.com/leaders/2017/07/08/why-germanys-cu... https://theconversation.com/questioning-the-claim-of-germanys-employment-miracle-106895 https://theconversation.com/questioning-the-claim-of-germany...
  - Dylan16807 7y ago
    > If Germany switched back to the Deutsche Mark tomorrow, their currency would instantly shoot up in value relative to the rest of the EU. I don't see how that stops them from selling things at the same price as ever, denominated in a neutral currency. > It's not just the currency though. The "German model" has been to keep wages depressed. That's also how their exports are "cheaper". Paying your workers less does make things cheaper, so I'm not sure why you used scare quotes.
  - segmondy 7y ago
    if German wages were depressed and labor was so cheapened, how come they are still able to save more than their counterparts?
    - adventured 7y ago
      They consume less. Their economy is heavily tilted to being an export power rather than a consumer economy. Household consumption is around 52% of their GDP. For the US it's closer to 67-68%. Germany's personal savings rate is about 10.x%. The US - infamously tilted toward consumer spending - is actually not far behind at 8.x% (up from a low of 2.2% in 2005).
      - 7y ago
Ancalagon 7y ago
Jesus, this comment sounds so bitter. You’re complaining that the average person in Germany wants to save money and be fiscally responsible? Coming from my viewpoint (in the US), we could definitely use more of that.
- Despegar 7y ago
  A poor economics understanding has led people to believe that saving is somehow a virtue. Government budgets aren't the same as household budgets. The former is what I'm talking about. I don't care if any individual wants to save his/her money and consume nothing.
  - luckylion 7y ago
    > Government budgets aren't the same as household budgets. The former is what I'm talking about. Why though? The article is specifically about private savings.
    - Despegar 7y ago
      Even though certain economists and politicians know better, they ultimately reflect the political will of the people. So while at an individual level it doesn't matter that someone saves all their income and spends nothing, if that becomes the "culture" then it influences politics (which it has). Even the leftist parties in Germany don't drift far from this orthodoxy. The great thing is that negative rates are self-correcting. While the story mentions the German finance ministry is considering making it impossible for banks from passing on the negative rates to depositors, so clearly they're going to try literally everything to keep the delusion going, eventually after putting their banks at risk and realizing the negative rates aren't going away they'll figure out they need to actually spend on a national level.
      - luckylion 7y ago
        > they ultimately reflect the political will of the people That requires some proof. The German public loves to save, the German state doesn't. The German public hates bailouts with tax money, the German state loves them. Germany isn't a good example for "individual interests form policy". > Even the leftist parties in Germany don't drift far from this orthodoxy. Why would they, leftist parties love generous state spending and high debt. The somewhat surprising part in Germany is that the conservatives love spending and hate saving, too.
new2628 7y ago
Have you been reading Krugman recently?
kevin_thibedeau 7y ago
Southern Europe couldn't possibly be suffering from high corruption and a massive untaxed shadow economy.
benj111 7y ago
What the hell? Who do you think managed to maintain the Euro as a going concern? And don't forget Germany suffered quite a lot after the introduction of the Euro, and it didn't really have anyone else to bail it out. Edit: In the first paragraph in referring to the aftermath of the financial crisis, when PIIGS was an acronym, and France wasn't looking too great either. And in the second paragraph in referring to immediately after the introduction of the Euro. The Euro appreciated, German exports lost competitiveness whilst it lost the power to devalue its currency. It managed to increase its productivity per worker though and has reaped the benefits since. It too has seen the downsides of not having control of its own currency.
adrianN 7y ago
I we wanted to we could always spend almost unlimited amounts of money on reducing our GHG emissions. Now would be a good time.
- Despegar 7y ago
  Yes that would be a great use! They should also repave the Autobahn, build some gas pipelines so they aren't dependent on a geopolitical enemy, invest in a broken military, and cut taxes and increase benefits for people with a high marginal propensity to consume, that is, the poorest people who work for a wage.
  - adrianN 7y ago
    I don't think gas pipelines are good investments. Any investment into fossil fuel infrastructure creates vested interests in the continued use. Similarly, I'd prefer investments in rail infrastructure over investments in the Autobahn.
    - imtringued 7y ago
      Power to gas will be necessary for a future with 100% renewables. The existing gas infrastructure will then come in handy but coal plants and their mines probably can't be saved.
      - deleted 7y ago
        [deleted]
      - adrianN 7y ago
        The existing gas infrastructure is sufficient to distribute gas within the country. The pipelines that are currently being discussed are for transporting gas from where it's produced to Germany. Or maybe there are pipeline projects that I haven't heard about.
  - majewsky 7y ago
    > They should also repave the Autobahn People are already complaining about too many construction sites on the Autobahn. The main issue there is that we don't have enough workforce in the construction industry, mostly as a result of demographics and everyone wanting to go to university instead of learning a trade.
yborg 7y ago
Virtually nothing in this rant about German economic policy has anything to do with the article except for the expression of delight at the idea of individual Germans losing money. Germany has absorbed a large number of refugees at huge social cost precisely because they believed they could afford it. It seems disingenuous to ignore Germany's role in overall European stability and suggest that the good German burghers hoard money in order to rape the rest of the continent with cheap Volkswagens.
- number6 7y ago
  Yeah why not buy Volkswagen shares then?
- Despegar 7y ago
  It's not a rant, it's a slightly tongue in cheek but also slightly serious, analysis of the political and economic reality of Germany and the EU. Individual Germans would actually end up benefiting the most from a change in national religion about saving if their government opened up the purse strings.
- Nimitz14 7y ago
  It is absolutely relevant! The reason for these negative rates is because of Germany's fiscal and the EU's (influenced by Germany) monetary policy. This is happening because the average German does not understand that having a budget balanced is sometimes not a good thing. As this has caused a lot of misery to southern countries, I think the parent's complaints are totally valid.
  - repolfx 7y ago
    The "misery" of the southern countries is merely one of not being able to spend profligate amounts they haven't earned on sustaining unaffordable social policies. To take the most extreme example, Greece, and some problems evident when they hit the buffers a few years ago. Hairdressing and playing the trombone are/were considered dangerous professions by the government, because that allowed people to retire at 50. The pensions in question are vast and the state cannot afford it. Public sector wages rose 50 percent between 1999 and 2007. Tax evasion was rampant. Salaries were very high, industry near none existent. Its books were fraudulent - the country was only able to join the euro at all because it misrepresented the state of the economy. Attempts to fix these problems triggered riots and political chaos, much of which had explicitly anti German rhetoric. The Germans, you see, were being totally evil by not shovelling all their savings into this money furnace disguised as a developed country. What about Spain? Home of the famous airport to nowhere: https://psmag.com/economics/airport-to-nowhere-spains-costly-no-fly-zone-39797 https://psmag.com/economics/airport-to-nowhere-spains-costly... And a giant housing bubble: https://en.wikipedia.org/wiki/Spanish_property_bubble https://en.wikipedia.org/wiki/Spanish_property_bubble Has a large (>2% GDP) government deficit but raised the minimum wage by 22% last year. Germany isn't inflicting misery on southern countries, they inflict it on themselves, and it should by all rights be dramatically worse - and if it weren't for Germans sending them such huge wealth tranfers it would be much worse.
deleted 7y ago
[deleted]
chewz 7y ago
I enjoy making fun of Germans just as the next European but beware what you wish for. Other European economies suck up to German economy so at the end of the day what is good for Germany is also good for the rest of us. Germany is at the brink of recession due to prolonged weakness in Chinese economy and inability of German automotive industry transitioning into XXI century. Both engines of growth failed simultaneously and lets hope German economy can avoid crash landing. Otherwise it will drag entire Europe down into abyss.
- RobertoG 7y ago
  >>"Other European economies suck up to German economy so at the end of the day what is good for Germany is also good for the rest of us." If that was true we should be all in excellent condition because the Germany commercial balance surplus of the last years have been ridiculously high.
ur-whale 7y ago
Krugman, leave that body, I command thee!
southerndrift 7y ago
Take a look at this list of wealth per adult [1] Germany is at no 29. It's not like the median German has profited. If anybody has profited then it could be the average German, i.e. the top 1% that has made some money. That said, why do you think government spending will lead to prosperity? They can get some people off the streets, but sooner or later, resources will be misaligned to the point that the economy is not competitive anymore. Germany had a state-run economy in one part, guess which one almost vanished. [1]: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...
- Despegar 7y ago
  See my other comment in this thread about German capital benefiting from this arrangement more than German labor. I'm not saying Germany has to nationalize industries, they just need to run large fiscal deficits over a sustained period of time. One thing they could do right away that doesn't cause "resources to be misaligned", is to cut taxes and increase the benefits for the poorest German workers.
mnm1 7y ago
Why would you enjoy the suffering of others? That is truly monstrous regardless of the form that suffering manifests in. It's frankly disgusting.
AdrianB1 7y ago
So borrowing and overspending at the cost of the future generations is the way to go? Then go Greece style, default every decade until nobody will ever lend you any money?
- RobertoG 7y ago
  It's not overspending, it's investing in the future generations. The quantity of Euro it's just a number in some computer. Infrastructure, knowledge, education, and a better life in general is a real thing.
  - Inthenameofmine 7y ago
    TBH, that works as long as your demographic pyramid is healthy. For most of Europe that is not the case. On top of that, return on additional debt has been stagnant since the 90s in OECD countries. There's simply almost no place to put your money in the developed nations. IMO this is the first time since the beginning of the industrial revolution where allocative efficiency has a higher return than investment efficiency.

Dylan16807 7y ago

First paragraph I can agree with pretty well. But you don't need to share a currency to have artificially cheap exports, do you? Selling things at a discount is usually very easy to accomplish.

gumby 7y ago
Californians can buy cheap rocket parts from Alabama without worrying about exchange rate risk just as Germans can buy cheap olive oil from Greece. However fiscal transfers between the two states (I.e. taxes -> welfare payments, labor standards etc) mean that the cheaper goods are more likely to be up to standards and that Alabamans can buy California almonds and Roku boxes. (This is one way cutting welfare hurts capitalism). The EU has no such fiscal mechanism thus the process drifts out of a crisis. Germany’s Länderausgleich is actually more extensive than the US’s, which has made its economy so strong for so long, yet the country is loath to extend its benefits (much of which would flow back to Germany!) to the rest of the EU.
- benj111 7y ago
  "labor standards" These exist EU wide you know. Additionally money is allocated to poorer regions to develop industries, not welfare payments but still wealth redistribution.
  - gumby 7y ago
    Indeed that’s why I explicitly said “The EU has no such fiscal mechanism...” Edit: oh I see that poor editing on my part implied that labour standards were part of fiscal transfers, a nonsensical connection. My apologies) As a former EU resident of two different countries I have benefitted from EU labor laws. Regional development funds are practically below the noise floor as a part of the Zone’s GDP (and are in fact EU-wide, not just eurozone-wide). Most of the money is squandered (not necessarily through corruption, just lack of macro efficacy) as it’s such a small amount it gets little attention.
- Despegar 7y ago
  I'm amused that we're getting downvoted when our comments should be at the top of this thread.
  - gumby 7y ago
    I know, it’s not like I wrote anything unorthodox. Most criticism of the Euro from both right and left come from claims that it is not an optimal currency area primarily due to lack of fiscal integration. I assume the downvoting comes from economics being a popular topic on which people like to opine whether or not they understand it (insert joke here about economists being subject to this rule as well)
- samsonradu 7y ago
  It has been proposed indeed, the Surplus Recycling Mechanism: https://www.yanisvaroufakis.eu/2011/02/09/what-is-a-surplus-recycling-mechanism-an-idea-going-back-to-bretton-woods/ https://www.yanisvaroufakis.eu/2011/02/09/what-is-a-surplus-...
- michaelt 7y ago
  Seems to me it'd be tough to sell Germans on Länderausgleich to Greece without much greater European integration. After all, the US is a single country, with common news reporting, a common language, common political systems and parties, common tax enforcement and so on. I mean, if an Alabamian thinks that Californians are all surf bums he can find employment statistics for both states gathered under identical standards, read press coverage in his language, and even move there if he feels like it, as he already knows the language. It seems unlikely the EU will ever achieve that level of integration.
  - gumby 7y ago
    Remember that over the past couple of centuries the US went through several explicit processes of integration specifically to overcome the barriers (including linguistic!) you correctly describe for the EU. > It seems unlikely the EU will ever achieve that level of integration. I disagree but it's unlikely to happen in my lifetime.
  - JetSpiegel 7y ago
    > Seems to me it'd be tough to sell Germans on Länderausgleich to Greece without much greater European integration. Hopefully this threat of recession will light a fire under the correct asses.
Despegar 7y ago
If Germany switched back to the Deutsche Mark tomorrow, their currency would instantly shoot up in value relative to the rest of the EU. That'd make their exports less competitive and make the exports of Greece, Portugal, Spain and Italy more competitive. It's not just the currency though. The "German model" has been to keep wages depressed. That's also how their exports are "cheaper". Make no mistake the result has been to enrich German capital at the expense of labor (even German labor). https://www.economist.com/leaders/2017/07/08/why-germanys-current-account-surplus-is-bad-for-the-world-economy https://www.economist.com/leaders/2017/07/08/why-germanys-cu... https://theconversation.com/questioning-the-claim-of-germanys-employment-miracle-106895 https://theconversation.com/questioning-the-claim-of-germany...
- Dylan16807 7y ago
  > If Germany switched back to the Deutsche Mark tomorrow, their currency would instantly shoot up in value relative to the rest of the EU. I don't see how that stops them from selling things at the same price as ever, denominated in a neutral currency. > It's not just the currency though. The "German model" has been to keep wages depressed. That's also how their exports are "cheaper". Paying your workers less does make things cheaper, so I'm not sure why you used scare quotes.
- segmondy 7y ago
  if German wages were depressed and labor was so cheapened, how come they are still able to save more than their counterparts?
  - adventured 7y ago
    They consume less. Their economy is heavily tilted to being an export power rather than a consumer economy. Household consumption is around 52% of their GDP. For the US it's closer to 67-68%. Germany's personal savings rate is about 10.x%. The US - infamously tilted toward consumer spending - is actually not far behind at 8.x% (up from a low of 2.2% in 2005).
    - 7y ago

Ancalagon 7y ago

Jesus, this comment sounds so bitter. You’re complaining that the average person in Germany wants to save money and be fiscally responsible? Coming from my viewpoint (in the US), we could definitely use more of that.

Despegar 7y ago
A poor economics understanding has led people to believe that saving is somehow a virtue. Government budgets aren't the same as household budgets. The former is what I'm talking about. I don't care if any individual wants to save his/her money and consume nothing.
- luckylion 7y ago
  > Government budgets aren't the same as household budgets. The former is what I'm talking about. Why though? The article is specifically about private savings.
  - Despegar 7y ago
    Even though certain economists and politicians know better, they ultimately reflect the political will of the people. So while at an individual level it doesn't matter that someone saves all their income and spends nothing, if that becomes the "culture" then it influences politics (which it has). Even the leftist parties in Germany don't drift far from this orthodoxy. The great thing is that negative rates are self-correcting. While the story mentions the German finance ministry is considering making it impossible for banks from passing on the negative rates to depositors, so clearly they're going to try literally everything to keep the delusion going, eventually after putting their banks at risk and realizing the negative rates aren't going away they'll figure out they need to actually spend on a national level.
    - luckylion 7y ago
      > they ultimately reflect the political will of the people That requires some proof. The German public loves to save, the German state doesn't. The German public hates bailouts with tax money, the German state loves them. Germany isn't a good example for "individual interests form policy". > Even the leftist parties in Germany don't drift far from this orthodoxy. Why would they, leftist parties love generous state spending and high debt. The somewhat surprising part in Germany is that the conservatives love spending and hate saving, too.

new2628 7y ago

Have you been reading Krugman recently?

kevin_thibedeau 7y ago

Southern Europe couldn't possibly be suffering from high corruption and a massive untaxed shadow economy.

benj111 7y ago

What the hell? Who do you think managed to maintain the Euro as a going concern? And don't forget Germany suffered quite a lot after the introduction of the Euro, and it didn't really have anyone else to bail it out. Edit: In the first paragraph in referring to the aftermath of the financial crisis, when PIIGS was an acronym, and France wasn't looking too great either. And in the second paragraph in referring to immediately after the introduction of the Euro. The Euro appreciated, German exports lost competitiveness whilst it lost the power to devalue its currency. It managed to increase its productivity per worker though and has reaped the benefits since. It too has seen the downsides of not having control of its own currency.

adrianN 7y ago

I we wanted to we could always spend almost unlimited amounts of money on reducing our GHG emissions. Now would be a good time.

Despegar 7y ago
Yes that would be a great use! They should also repave the Autobahn, build some gas pipelines so they aren't dependent on a geopolitical enemy, invest in a broken military, and cut taxes and increase benefits for people with a high marginal propensity to consume, that is, the poorest people who work for a wage.
- adrianN 7y ago
  I don't think gas pipelines are good investments. Any investment into fossil fuel infrastructure creates vested interests in the continued use. Similarly, I'd prefer investments in rail infrastructure over investments in the Autobahn.
  - imtringued 7y ago
    Power to gas will be necessary for a future with 100% renewables. The existing gas infrastructure will then come in handy but coal plants and their mines probably can't be saved.
    - deleted 7y ago
      [deleted]
    - adrianN 7y ago
      The existing gas infrastructure is sufficient to distribute gas within the country. The pipelines that are currently being discussed are for transporting gas from where it's produced to Germany. Or maybe there are pipeline projects that I haven't heard about.
- majewsky 7y ago
  > They should also repave the Autobahn People are already complaining about too many construction sites on the Autobahn. The main issue there is that we don't have enough workforce in the construction industry, mostly as a result of demographics and everyone wanting to go to university instead of learning a trade.

yborg 7y ago

Virtually nothing in this rant about German economic policy has anything to do with the article except for the expression of delight at the idea of individual Germans losing money. Germany has absorbed a large number of refugees at huge social cost precisely because they believed they could afford it. It seems disingenuous to ignore Germany's role in overall European stability and suggest that the good German burghers hoard money in order to rape the rest of the continent with cheap Volkswagens.

number6 7y ago
Yeah why not buy Volkswagen shares then?
Despegar 7y ago
It's not a rant, it's a slightly tongue in cheek but also slightly serious, analysis of the political and economic reality of Germany and the EU. Individual Germans would actually end up benefiting the most from a change in national religion about saving if their government opened up the purse strings.
Nimitz14 7y ago
It is absolutely relevant! The reason for these negative rates is because of Germany's fiscal and the EU's (influenced by Germany) monetary policy. This is happening because the average German does not understand that having a budget balanced is sometimes not a good thing. As this has caused a lot of misery to southern countries, I think the parent's complaints are totally valid.
- repolfx 7y ago
  The "misery" of the southern countries is merely one of not being able to spend profligate amounts they haven't earned on sustaining unaffordable social policies. To take the most extreme example, Greece, and some problems evident when they hit the buffers a few years ago. Hairdressing and playing the trombone are/were considered dangerous professions by the government, because that allowed people to retire at 50. The pensions in question are vast and the state cannot afford it. Public sector wages rose 50 percent between 1999 and 2007. Tax evasion was rampant. Salaries were very high, industry near none existent. Its books were fraudulent - the country was only able to join the euro at all because it misrepresented the state of the economy. Attempts to fix these problems triggered riots and political chaos, much of which had explicitly anti German rhetoric. The Germans, you see, were being totally evil by not shovelling all their savings into this money furnace disguised as a developed country. What about Spain? Home of the famous airport to nowhere: https://psmag.com/economics/airport-to-nowhere-spains-costly-no-fly-zone-39797 https://psmag.com/economics/airport-to-nowhere-spains-costly... And a giant housing bubble: https://en.wikipedia.org/wiki/Spanish_property_bubble https://en.wikipedia.org/wiki/Spanish_property_bubble Has a large (>2% GDP) government deficit but raised the minimum wage by 22% last year. Germany isn't inflicting misery on southern countries, they inflict it on themselves, and it should by all rights be dramatically worse - and if it weren't for Germans sending them such huge wealth tranfers it would be much worse.

deleted 7y ago

[deleted]

chewz 7y ago

I enjoy making fun of Germans just as the next European but beware what you wish for. Other European economies suck up to German economy so at the end of the day what is good for Germany is also good for the rest of us. Germany is at the brink of recession due to prolonged weakness in Chinese economy and inability of German automotive industry transitioning into XXI century. Both engines of growth failed simultaneously and lets hope German economy can avoid crash landing. Otherwise it will drag entire Europe down into abyss.

RobertoG 7y ago
>>"Other European economies suck up to German economy so at the end of the day what is good for Germany is also good for the rest of us." If that was true we should be all in excellent condition because the Germany commercial balance surplus of the last years have been ridiculously high.

ur-whale 7y ago

Krugman, leave that body, I command thee!

southerndrift 7y ago

Take a look at this list of wealth per adult [1] Germany is at no 29. It's not like the median German has profited. If anybody has profited then it could be the average German, i.e. the top 1% that has made some money. That said, why do you think government spending will lead to prosperity? They can get some people off the streets, but sooner or later, resources will be misaligned to the point that the economy is not competitive anymore. Germany had a state-run economy in one part, guess which one almost vanished. [1]: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...

Despegar 7y ago
See my other comment in this thread about German capital benefiting from this arrangement more than German labor. I'm not saying Germany has to nationalize industries, they just need to run large fiscal deficits over a sustained period of time. One thing they could do right away that doesn't cause "resources to be misaligned", is to cut taxes and increase the benefits for the poorest German workers.

mnm1 7y ago

Why would you enjoy the suffering of others? That is truly monstrous regardless of the form that suffering manifests in. It's frankly disgusting.

AdrianB1 7y ago

So borrowing and overspending at the cost of the future generations is the way to go? Then go Greece style, default every decade until nobody will ever lend you any money?

RobertoG 7y ago
It's not overspending, it's investing in the future generations. The quantity of Euro it's just a number in some computer. Infrastructure, knowledge, education, and a better life in general is a real thing.
- Inthenameofmine 7y ago
  TBH, that works as long as your demographic pyramid is healthy. For most of Europe that is not the case. On top of that, return on additional debt has been stagnant since the 90s in OECD countries. There's simply almost no place to put your money in the developed nations. IMO this is the first time since the beginning of the industrial revolution where allocative efficiency has a higher return than investment efficiency.