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Could you elaborate on how the behaviour of German savers differs to those in other countries?
by 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 agoI 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 agoExactly. 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 agoTimes are starting to look bad ... but that's my point: don't burn all your wood on the first day of winter when you'll likely still have months ahead.
- dragonwriter 7y ago> don't burn all your wood on the first day of winter when you'll likely still have months ahead. The analogy doesn't hold since burning wood doesn't help shorten winter.
- fauigerzigerk 7y agoDon't forget that recessions have a self-reinforcing, psychological element that winters don't have. Money spent earlier may have a significant multiplier effect. Also, I think spending money is too slow anyway, especially if it is spent on infrastructure, technology development, retooling an obsolete auto and energy sector, etc. In my view, they are already very very late.
- wbl 7y agoGermany has enormous borrowing capacity especially in a recession. Governments are not households.
- QuesnayJr 7y ago
- Paradigma11 7y ago"Why on earth would you run a balanced budget while getting paid for borrowing?" Because later you will have to refinance your debt on worse terms.