6 ms·

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

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.
    - DiogenesKynikos 7y ago
      Are you aware of the schwarze Null? Germany has had a balanced budget for many years. It's almost a political religion in Germany.
      - luckylion 7y ago
        I am aware of it. I'm also aware of the fact that it's a lot of bookkeeping, i.e. not counting bank bailout costs, pension guarantees etc, the implicit public debt looks very differently. And keep in mind that the last few years with little to no new debt (on the federal level) were during record tax income and strong growth that is now turning into a recession. With explicit public debt hovering around 65% of GDP, Germany is pretty average in both the world and Europe.
        DiogenesKynikos 7y ago
        In this environment, talking about the German government as if it were spending money carelessly seems to me to not reflect the reality. People are willing to pay money for the privilege of lending money to the German government. Yet the German government, including the supposedly left-wing SPD, is still holding to the schwarze Null ("black zero," meaning a balanced budget). A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus. Instead, they're dogmatically holding to the zero-deficit policy.
        luckylion 7y ago
        Look at Germany's spending, and then predict how it will be financed a year or two into a recession, especially with falling exports. Since it's hard to cut the expenses, you either increase taxes, or you increase debt. Taxes are already pretty high and unpopular. The "balanced" budget has been a thing since 2012, but hasn't in the past 50 years before that. It's not like it's virtually unknown for Germany to take on debt. As for the SPD being left-wing: traditional political categories quickly break down when applied to Germany, the continuum is "far left, nothing, nothing, the super majority in the center, nothing, nothing, far right". There's very little actual difference between the "conservative" CDU, "social democrat" SPD, the socially progressive Green party and the "free markets will take care of that, whatever it is" FDP when it comes down to policies, which is also why Germany's policies don't change a lot when the government changes (the conservatives removed the military draft, the social democrats cut back the social system, and the pacifist Greens & social democrats went to war in Kosovo). > A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus. In a time of growth, record tax income, strong-ish inflation (thank god for cellphones and smart tvs or it would shoot up like crazy)?
  - rsync 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." I cannot believe that we are this far through this discussion, with 80+ points and 120+ comments and not one person has mentioned the underlying cause that is deeper than the "german culture of savings". None of them had any kids. Their birthrate is well below replacement.[1] You can't produce an inflationary environment when households aren't being established and the major, overriding driver of consumption has been removed from the lives of so many Germans. There is a reason they have all this money to save ... [1] https://en.wikipedia.org/wiki/Demographics_of_Germany https://en.wikipedia.org/wiki/Demographics_of_Germany "The total fertility rate was rated at 1.57 in 2017." (vs. a replacement rate of 2.1 ...)
    - Despegar 7y ago
      While the demographic time bomb is a long-term issue for a lot of advanced economies like Japan (but also China), it's kind of a separate issue than what's happening in the EU today (and has been for the life of it). Ideally there'd be enough political will to finish the EU project, but that's even more of a long shot than Germany seeing the light on fiscal spending. Then there'd be actual transfer payments between rich and poor EU members, but barring that, Germany and the other rich EU members need to spend. All the single Germans should probably start taking more vacations in Greece and Spain and the rich ones should buy some Ferraris.
      - michaelt 7y ago
        Rsync isn't talking about the demographic time bomb. What they mean is: Consumers having children directly causes higher consumer spending, because the child needs food, clothes, shoes, transport, education, medical care, furniture, holidays, sport, childcare and suchlike. And less directly they might want more bedrooms, a safer neighbourhood, a safer car, a stay-at-home parent, and so on. USDA figures [1] put the costs of having a child at 12% to 24% of household income (for richer and poorer families respectively) while some UK estimates [2] have put it as high as 38% Of course a childless couple can build savings like crazy, if they've got as much income as their peers who are parents, but their outgoings are that much lower! [1] https://en.wikipedia.org/wiki/Cost_of_raising_a_child#Dual-Parent_Family_-_USDA_Average_Spending_per_Child_(not_the_basic_cost_of_raising) https://en.wikipedia.org/wiki/Cost_of_raising_a_child#Dual-P... [2] https://www.lv.com/about-us/press/cost-of-a-child-2016 https://www.lv.com/about-us/press/cost-of-a-child-2016
tonyedgecombe 7y ago
Yet the PIGSS have been struggling under a mountain of debt. Government budgets might not be the same as household budgets but you can’t borrow endlessly.
- mdemare 7y ago
  Because Germans prefer saving money to buying exports of Italy or Spain or Greece, or go on holiday there.
  - samsonradu 7y ago
    Ironically, for the time being, the British do all of the above.
- ebalit 7y ago
  PIGSS is the european version of "fly-over states", a derogatory term that should be avoided. States or nations that are not doing has well economically deserve respect and help or we should stop calling ourselves a Union.
  - barry-cotter 7y ago
    This is ridiculous. Flyover states is about contempt for people and a culture, PIIGS is about poor economic and financial decision making. Germans, Danes and Czechs don’t think the Irish, Italians and Spanish are racists who might assault a trans person or an Indian if they see them whereas some Californians do think that way about Texas or Wyoming.
- RobertoG 7y ago
  Government budgets of sovereign nations that own their own currency are not the same that households and can borrow endlessly, in fact they don't need to borrow at all. The countries in the Eurozone don't own the Euro: for all effects is a foreign currency. Their finances work like a household.
samsonradu 7y ago
What you're missing is that the EUR is not the reserve currency of the world and by running a massive deficit the markets will penalise you. (much higher yields, debt spiral, inflation etc.)
- the_why_of_y 7y ago
  The ECB can put an end to that if it wants to, as it did in July 2012 when Draghi uttered the magic words "whatever it takes".

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.
  - DiogenesKynikos 7y ago
    Are you aware of the schwarze Null? Germany has had a balanced budget for many years. It's almost a political religion in Germany.
    - luckylion 7y ago
      I am aware of it. I'm also aware of the fact that it's a lot of bookkeeping, i.e. not counting bank bailout costs, pension guarantees etc, the implicit public debt looks very differently. And keep in mind that the last few years with little to no new debt (on the federal level) were during record tax income and strong growth that is now turning into a recession. With explicit public debt hovering around 65% of GDP, Germany is pretty average in both the world and Europe.
      - DiogenesKynikos 7y ago
        In this environment, talking about the German government as if it were spending money carelessly seems to me to not reflect the reality. People are willing to pay money for the privilege of lending money to the German government. Yet the German government, including the supposedly left-wing SPD, is still holding to the schwarze Null ("black zero," meaning a balanced budget). A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus. Instead, they're dogmatically holding to the zero-deficit policy.
        luckylion 7y ago
        Look at Germany's spending, and then predict how it will be financed a year or two into a recession, especially with falling exports. Since it's hard to cut the expenses, you either increase taxes, or you increase debt. Taxes are already pretty high and unpopular. The "balanced" budget has been a thing since 2012, but hasn't in the past 50 years before that. It's not like it's virtually unknown for Germany to take on debt. As for the SPD being left-wing: traditional political categories quickly break down when applied to Germany, the continuum is "far left, nothing, nothing, the super majority in the center, nothing, nothing, far right". There's very little actual difference between the "conservative" CDU, "social democrat" SPD, the socially progressive Green party and the "free markets will take care of that, whatever it is" FDP when it comes down to policies, which is also why Germany's policies don't change a lot when the government changes (the conservatives removed the military draft, the social democrats cut back the social system, and the pacifist Greens & social democrats went to war in Kosovo). > A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus. In a time of growth, record tax income, strong-ish inflation (thank god for cellphones and smart tvs or it would shoot up like crazy)?
- rsync 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." I cannot believe that we are this far through this discussion, with 80+ points and 120+ comments and not one person has mentioned the underlying cause that is deeper than the "german culture of savings". None of them had any kids. Their birthrate is well below replacement.[1] You can't produce an inflationary environment when households aren't being established and the major, overriding driver of consumption has been removed from the lives of so many Germans. There is a reason they have all this money to save ... [1] https://en.wikipedia.org/wiki/Demographics_of_Germany https://en.wikipedia.org/wiki/Demographics_of_Germany "The total fertility rate was rated at 1.57 in 2017." (vs. a replacement rate of 2.1 ...)
  - Despegar 7y ago
    While the demographic time bomb is a long-term issue for a lot of advanced economies like Japan (but also China), it's kind of a separate issue than what's happening in the EU today (and has been for the life of it). Ideally there'd be enough political will to finish the EU project, but that's even more of a long shot than Germany seeing the light on fiscal spending. Then there'd be actual transfer payments between rich and poor EU members, but barring that, Germany and the other rich EU members need to spend. All the single Germans should probably start taking more vacations in Greece and Spain and the rich ones should buy some Ferraris.
    - michaelt 7y ago
      Rsync isn't talking about the demographic time bomb. What they mean is: Consumers having children directly causes higher consumer spending, because the child needs food, clothes, shoes, transport, education, medical care, furniture, holidays, sport, childcare and suchlike. And less directly they might want more bedrooms, a safer neighbourhood, a safer car, a stay-at-home parent, and so on. USDA figures [1] put the costs of having a child at 12% to 24% of household income (for richer and poorer families respectively) while some UK estimates [2] have put it as high as 38% Of course a childless couple can build savings like crazy, if they've got as much income as their peers who are parents, but their outgoings are that much lower! [1] https://en.wikipedia.org/wiki/Cost_of_raising_a_child#Dual-Parent_Family_-_USDA_Average_Spending_per_Child_(not_the_basic_cost_of_raising) https://en.wikipedia.org/wiki/Cost_of_raising_a_child#Dual-P... [2] https://www.lv.com/about-us/press/cost-of-a-child-2016 https://www.lv.com/about-us/press/cost-of-a-child-2016

tonyedgecombe 7y ago

Yet the PIGSS have been struggling under a mountain of debt. Government budgets might not be the same as household budgets but you can’t borrow endlessly.

mdemare 7y ago
Because Germans prefer saving money to buying exports of Italy or Spain or Greece, or go on holiday there.
- samsonradu 7y ago
  Ironically, for the time being, the British do all of the above.
ebalit 7y ago
PIGSS is the european version of "fly-over states", a derogatory term that should be avoided. States or nations that are not doing has well economically deserve respect and help or we should stop calling ourselves a Union.
- barry-cotter 7y ago
  This is ridiculous. Flyover states is about contempt for people and a culture, PIIGS is about poor economic and financial decision making. Germans, Danes and Czechs don’t think the Irish, Italians and Spanish are racists who might assault a trans person or an Indian if they see them whereas some Californians do think that way about Texas or Wyoming.
RobertoG 7y ago
Government budgets of sovereign nations that own their own currency are not the same that households and can borrow endlessly, in fact they don't need to borrow at all. The countries in the Eurozone don't own the Euro: for all effects is a foreign currency. Their finances work like a household.

samsonradu 7y ago

What you're missing is that the EUR is not the reserve currency of the world and by running a massive deficit the markets will penalise you. (much higher yields, debt spiral, inflation etc.)

the_why_of_y 7y ago
The ECB can put an end to that if it wants to, as it did in July 2012 when Draghi uttered the magic words "whatever it takes".