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Do you know about the behaviour of German savers? It is fundamentally different to America, the UK, most other countries in Europe. The only similar nation anyw

Do you know about the behaviour of German savers? It is fundamentally different to America, the UK, most other countries in Europe. The only similar nation anywhere is Japan...and even then, still significant differences. The ECB is making a huge push, without any kind of democratic consent, towards a finance-based, American/UK-style financial system. This won't work because German savers have virtually no experience of such a system. All that will happen is: banks go bust (more bust, most German banks are insolvent), and savers lose all their money. Either they hold their money in banks or they take it out and lose it all doing stuff they know nothing about (if we don't have an immediate recession, you will see French investment banks swarm Germany...French bankers have some kind of innate ability to produce bullshit derivatives aimed at savers with a conservative bank-led culture of saving). It is kind of insane that we have got to the point where policymakers actively ignore markets. All that matters are the textbooks. But this doesn't work. You can't just transplant economic policies from another context and expect them to work the same. That said, it will be nice to see Germany return to the early 2000s. Objectively, Germany has one of the most vulnerable and poorly functioning economies in the G10. Combine this with utterly insufferable, self-important policymakers and you have quite a nice example of natural justice.

krilly 7y ago
Could you elaborate on how the behaviour of German savers differs to those in other countries?
- JumpCrisscross 7y ago
  > Could you elaborate on how the behaviour of German savers differs to those in other countries? European finance is bank based. Banks make most of the loans. Bank managers decide which projects get financed and which don’t. Investors put money in banks and let the banks make decisions. American finance is market based. Bond buyers make most of the loans. Bond (and stock) investors decide which projects get financed and which don’t. Investors themselves make decisions. Broadly speaking, the European bank-based model is moribund. It concentrates risks and is too conservative. The ECB is trying to change this, but it involves changing a social contract around how investors behave. This has happened without a broader debate, because Europe, and now we’re seeing a backlash in Germany.
  - fauigerzigerk 7y ago
    I don't think the ECB is trying to change anything fundamental. It is merely acting within its mandate to keep inflation from falling too far below 2%. That is what democratically elected politicians told it to do. Inflation forecasts are far below target: https://www.ecb.europa.eu/stats/ecb_surveys/survey_of_professional_forecasters/html/table_hist_hicp.en.html https://www.ecb.europa.eu/stats/ecb_surveys/survey_of_profes... It's not the ECB that is being unreasonable here. It's Germany. Why on earth would you run a balanced budget while getting paid for borrowing? That is just irrational beyond belief. Fiscal policy is a national matter. It is Germans who need to have that debate you're talking about without constantly blaming the ECB for their own failings.
    - luckylion 7y ago
      > Why on earth would you run a balanced budget while getting paid for borrowing? You still need to pay the money back after you invested it. If those investments don't make a profit, you're in trouble. I mean, they could park it in ... maybe bonds? Oh wait.. ;) There also no telling what the future brings. Borrowing to the limit while times are good leaves you no room when times are bad. A recession is on the horizon, it sounds foolish to shoot your powder before it hits.
      - fauigerzigerk 7y ago
        >Borrowing to the limit while times are good leaves you no room when times are bad Times are bad. Germany is very likely in a recession right now and they have fallen back technologically. Now is the time to spend some money and it was never cheaper.
        majewsky 7y ago
        Exactly. And if we don't spend it on a proper Energiewende and to fix our crumbling infrastructure, we will pay it back 20-fold in a few decades.
        luckylion 7y ago
thecleaner 7y ago
It would be great for German investors to stop being such cowards when it comes to risk taking. I am not sure where this culture even came from.
- scotch_drinker 7y ago
  If only we had a clue where it came from: https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
  - javert 7y ago
    You're saying that the less Germans learned from hyperinflation in the Weimar Republic is to hold lots of fiat money? Sounds backwards.
    - scotch_drinker 7y ago
      What they learned is that solving problems with debt is bad. So they try to not have debt by saving a lot. The fact they do it with the same fiat currency system is another matter. But that history lesson is one the OP seems to be ignorant of.
  - rexgallorum2 7y ago
    Currency reform in 1948 also produced winners and losers. Worth a read.
- SquishyPanda23 7y ago
  People get to decide what to do with their property in a lot of countries.
Nimitz14 7y ago
If the ECB doesn't do so Europe is doomed. Since the inception of the Euro it's been clear to anyone with an economics education (not me, but this is the impression I've gotten reading commentary from anyone respectable), that Europe has some serious flaws (from a financial perspective) that will take decisive action to fix. One of those things is that Germany needs to start spending more. Unfortunately I don't see it happening. But I'm crossing my fingers than Macron can somehow pull a miracle.
- rawland 7y ago
  > One of those things is that Germany needs to > start spending more. Why? Especially on the individual - many will ask: Why spend, when you save for "bad times" or your kids' future? And more recently: Why spend, when you want to reduce your footprint on this planet?
  - bitL 7y ago
    This was more in context that Germany is underpaying its employees, i.e. the salaries are similar to France with much higher productivity, average pensioner gets less than somebody in Italy would get, and even Austria has higher wages now; not to mention Switzerland where wages are usually 2x higher. The theory was that if Germans were allowed to earn more, that would in turn propel economy; instead they are forced to save for worse times, companies/banks are super conservative in the time of expansion and not sharing any wealth, keeping their export advantage with stabilized cost of labor, leading to unnecessary suppression of growth that could have happened with increased domestic consumption.
    - ChuckNorris89 7y ago
      >This was more in context that Germany is underpaying its employees Yep, at least in tech, German salaries are stupidly close to Eastern Europe now. All this because in EE the free market kicked in and did it's thing, forcing employers to compete for talent while German companies artificially cap salaries to fixed grids while complaining there's a talent shortage and pushing for immigration instead of wage increases.
rexgallorum2 7y ago
Years ago I had an elderly neighbour here in Germany who fell victim to financial fraud, wiring most of his his life savings--over $200k--to some dodgy bank account in Hong Kong. He thought he was buying shares in some kind of gold mine or something. He asked me for help because most of the information he had was in English. I quickly figured out that he'd been scammed, and very gently broke the news to him. He took it remarkably well. This happened during the Euro crisis some years ago, and at the time it seemed that Germans with any kind of savings were desperately looking for safe places to put it. Lacking much in the way of financial literacy, many undoubtedly fell victim to professional crooks. It's hardly any surprise that property markets across Germany started heating up around that time. Property is widely viewed as a safe bet. They call it 'Betongold' or 'concrete gold' for a reason. I know that isn't the only factor behind the vast increase in property values in many areas, but it's undoubtedly a major one, and I think we can expect this situation with interest rates to further inflate what is beginning to look like a bubble. Nominal property values in the mid-sized city where I live have more than doubled in a decade--seems like a wild party after decades of relatively flat (real) property values. It's something of a shock, given that earnings have hardly budged during the same period. One could argue that Germany was abnormally cheap 10 years ago in terms of both consumer goods and real estate, and it might be true, but the reality on the ground is pretty disheartening, particularly in light of political developments in places such as Saxony. I'm afraid the squeeze on people in the middle is going to fuel more political instability, or could at the very least be used to stir up trouble.
duxup 7y ago
>This won't work because German savers have virtually no experience of such a system. What do you mean by that? The incentive is just the same either way. So if they move it from say savings to some investment... not sure that requires huge experience. Most american's aren't savvy investors.
- MandieD 7y ago
  While some of us in Germany have betriebliche Altersvorsorge (employer old-age savings), it's nothing like an American 401k. Up to a certain limit much lower than a US 401k, I decide how much I want to contribute pre-tax, my employer tells me how it's generally being invested and what minimum rate I can expect, and I can decide at what point between ages 62 and 67 I want to start taking withdrawals (which are only in one lump sum or five tranches), but I have absolutely no control past that. There are other retirement savings vehicles, but they're pretty much all annuities. Most Germans, including well-earning engineers like my husband, can't imagine receiving post-retirement income in anything other than a monthly pension; perhaps rent on apartments or houses they've managed to buy along the way. Remember that less than half of German adults live in home they own; renting the same apartment for 40 years is not unusual here. Germans tend to be more skeptical about the stock market than Americans are. To balance this, they are also far more hesitant to borrow for consumption - my husband's family were slightly horrified that I'd financed the full cost of my car, on top of owing student loans. I didn't mention the credit card debt it took me a couple of years to finish off! (Me: American who grew up watching my parents always make their payments, but pretty much always have a car loan and who took out some of the student loans I paid back because they absolutely had no discretionary savings. Husband: German who grew up watching his parents buy 3-5 year old cars with bank drafts once their old one started spending too much time at the shop, and then gave him a bunch of their savings as a university graduation present that sat in his bank account until we bought our house 15 years later)

krilly 7y ago

Could you elaborate on how the behaviour of German savers differs to those in other countries?

JumpCrisscross 7y ago
> Could you elaborate on how the behaviour of German savers differs to those in other countries? European finance is bank based. Banks make most of the loans. Bank managers decide which projects get financed and which don’t. Investors put money in banks and let the banks make decisions. American finance is market based. Bond buyers make most of the loans. Bond (and stock) investors decide which projects get financed and which don’t. Investors themselves make decisions. Broadly speaking, the European bank-based model is moribund. It concentrates risks and is too conservative. The ECB is trying to change this, but it involves changing a social contract around how investors behave. This has happened without a broader debate, because Europe, and now we’re seeing a backlash in Germany.
- fauigerzigerk 7y ago
  I don't think the ECB is trying to change anything fundamental. It is merely acting within its mandate to keep inflation from falling too far below 2%. That is what democratically elected politicians told it to do. Inflation forecasts are far below target: https://www.ecb.europa.eu/stats/ecb_surveys/survey_of_professional_forecasters/html/table_hist_hicp.en.html https://www.ecb.europa.eu/stats/ecb_surveys/survey_of_profes... It's not the ECB that is being unreasonable here. It's Germany. Why on earth would you run a balanced budget while getting paid for borrowing? That is just irrational beyond belief. Fiscal policy is a national matter. It is Germans who need to have that debate you're talking about without constantly blaming the ECB for their own failings.
  - luckylion 7y ago
    > Why on earth would you run a balanced budget while getting paid for borrowing? You still need to pay the money back after you invested it. If those investments don't make a profit, you're in trouble. I mean, they could park it in ... maybe bonds? Oh wait.. ;) There also no telling what the future brings. Borrowing to the limit while times are good leaves you no room when times are bad. A recession is on the horizon, it sounds foolish to shoot your powder before it hits.
    - fauigerzigerk 7y ago
      >Borrowing to the limit while times are good leaves you no room when times are bad Times are bad. Germany is very likely in a recession right now and they have fallen back technologically. Now is the time to spend some money and it was never cheaper.
      - majewsky 7y ago
        Exactly. And if we don't spend it on a proper Energiewende and to fix our crumbling infrastructure, we will pay it back 20-fold in a few decades.
      - luckylion 7y ago

thecleaner 7y ago

It would be great for German investors to stop being such cowards when it comes to risk taking. I am not sure where this culture even came from.

scotch_drinker 7y ago
If only we had a clue where it came from: https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
- javert 7y ago
  You're saying that the less Germans learned from hyperinflation in the Weimar Republic is to hold lots of fiat money? Sounds backwards.
  - scotch_drinker 7y ago
    What they learned is that solving problems with debt is bad. So they try to not have debt by saving a lot. The fact they do it with the same fiat currency system is another matter. But that history lesson is one the OP seems to be ignorant of.
- rexgallorum2 7y ago
  Currency reform in 1948 also produced winners and losers. Worth a read.
SquishyPanda23 7y ago
People get to decide what to do with their property in a lot of countries.

Nimitz14 7y ago

If the ECB doesn't do so Europe is doomed. Since the inception of the Euro it's been clear to anyone with an economics education (not me, but this is the impression I've gotten reading commentary from anyone respectable), that Europe has some serious flaws (from a financial perspective) that will take decisive action to fix. One of those things is that Germany needs to start spending more. Unfortunately I don't see it happening. But I'm crossing my fingers than Macron can somehow pull a miracle.

rawland 7y ago
> One of those things is that Germany needs to > start spending more. Why? Especially on the individual - many will ask: Why spend, when you save for "bad times" or your kids' future? And more recently: Why spend, when you want to reduce your footprint on this planet?
- bitL 7y ago
  This was more in context that Germany is underpaying its employees, i.e. the salaries are similar to France with much higher productivity, average pensioner gets less than somebody in Italy would get, and even Austria has higher wages now; not to mention Switzerland where wages are usually 2x higher. The theory was that if Germans were allowed to earn more, that would in turn propel economy; instead they are forced to save for worse times, companies/banks are super conservative in the time of expansion and not sharing any wealth, keeping their export advantage with stabilized cost of labor, leading to unnecessary suppression of growth that could have happened with increased domestic consumption.
  - ChuckNorris89 7y ago
    >This was more in context that Germany is underpaying its employees Yep, at least in tech, German salaries are stupidly close to Eastern Europe now. All this because in EE the free market kicked in and did it's thing, forcing employers to compete for talent while German companies artificially cap salaries to fixed grids while complaining there's a talent shortage and pushing for immigration instead of wage increases.

rexgallorum2 7y ago

Years ago I had an elderly neighbour here in Germany who fell victim to financial fraud, wiring most of his his life savings--over $200k--to some dodgy bank account in Hong Kong. He thought he was buying shares in some kind of gold mine or something. He asked me for help because most of the information he had was in English. I quickly figured out that he'd been scammed, and very gently broke the news to him. He took it remarkably well. This happened during the Euro crisis some years ago, and at the time it seemed that Germans with any kind of savings were desperately looking for safe places to put it. Lacking much in the way of financial literacy, many undoubtedly fell victim to professional crooks. It's hardly any surprise that property markets across Germany started heating up around that time. Property is widely viewed as a safe bet. They call it 'Betongold' or 'concrete gold' for a reason. I know that isn't the only factor behind the vast increase in property values in many areas, but it's undoubtedly a major one, and I think we can expect this situation with interest rates to further inflate what is beginning to look like a bubble. Nominal property values in the mid-sized city where I live have more than doubled in a decade--seems like a wild party after decades of relatively flat (real) property values. It's something of a shock, given that earnings have hardly budged during the same period. One could argue that Germany was abnormally cheap 10 years ago in terms of both consumer goods and real estate, and it might be true, but the reality on the ground is pretty disheartening, particularly in light of political developments in places such as Saxony. I'm afraid the squeeze on people in the middle is going to fuel more political instability, or could at the very least be used to stir up trouble.

duxup 7y ago

>This won't work because German savers have virtually no experience of such a system. What do you mean by that? The incentive is just the same either way. So if they move it from say savings to some investment... not sure that requires huge experience. Most american's aren't savvy investors.

MandieD 7y ago
While some of us in Germany have betriebliche Altersvorsorge (employer old-age savings), it's nothing like an American 401k. Up to a certain limit much lower than a US 401k, I decide how much I want to contribute pre-tax, my employer tells me how it's generally being invested and what minimum rate I can expect, and I can decide at what point between ages 62 and 67 I want to start taking withdrawals (which are only in one lump sum or five tranches), but I have absolutely no control past that. There are other retirement savings vehicles, but they're pretty much all annuities. Most Germans, including well-earning engineers like my husband, can't imagine receiving post-retirement income in anything other than a monthly pension; perhaps rent on apartments or houses they've managed to buy along the way. Remember that less than half of German adults live in home they own; renting the same apartment for 40 years is not unusual here. Germans tend to be more skeptical about the stock market than Americans are. To balance this, they are also far more hesitant to borrow for consumption - my husband's family were slightly horrified that I'd financed the full cost of my car, on top of owing student loans. I didn't mention the credit card debt it took me a couple of years to finish off! (Me: American who grew up watching my parents always make their payments, but pretty much always have a car loan and who took out some of the student loans I paid back because they absolutely had no discretionary savings. Husband: German who grew up watching his parents buy 3-5 year old cars with bank drafts once their old one started spending too much time at the shop, and then gave him a bunch of their savings as a university graduation present that sat in his bank account until we bought our house 15 years later)