6 ms·

> ... when the German Saver is who would benefit if they decided tomorrow to run deficits for the next 10 years. The German Saver knows better than most that i

by aazaa 7y ago

> ... when the German Saver is who would benefit if they decided tomorrow to run deficits for the next 10 years. The German Saver knows better than most that inflation destroys savings. Inflation benefits debtors by allowing them to pay back their loans in depreciated currency. Germany isn't exactly a nation of debtors, although most of Europe is. This is a looming political issue that's only just beginning.

Despegar 7y ago
>The German Saver knows better than most that inflation destroys savings. Yeah this is not the outcome Germany or the EU needs to worry about. It's experiencing Japanese deflation for 20 years. >This is a looming political issue that's only just beginning. Yes there's been plenty of hard money cranks that have said this for 10 years since the Great Financial Crisis in the US. Zero Hedge, gold bugs, hedge fund managers, etc have all been sounding the alarm about "money printing" and the deficit. There's no inflation in sight.
- deleted 7y ago
  [deleted]
- yorwba 7y ago
  > It's experiencing Japanese deflation for 20 years. GDP per capita (PPP) in Japan has more than doubled over the past 30 years. https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=JP&view=chart https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat... Slow growth is only a problem if you rely on investing to generate your income. Otherwise, even no growth at all is fine.
  - AWildC182 7y ago
    Have there been any major issues with declining QOL in Japan? It might be a cultural barrier but aside from the deflation stories making the rounds, I don't hear much about them suffering because of it.
    - raxxorrax 7y ago
      They probably don't and economic analysts are probably just bad or lying.
- samsonradu 7y ago
  Japanese deflation is brought up a lot. However it didn’t really strike me as a troubled economy when visiting - on the contrary, things looked quite well. Can someone elaborate on why deflation is so bad?
  - toss1 7y ago
    Deflation is bad because it is a self-reinforcing slowdown in the economy. The money gets more valuable and the assets get cheaper. so the incentive in every micro-decision is to hoard money and not spend. Why spend when the same thing will get cheaper tomorrow/next week/month/year...? So, the key factor of the Velocity of Money declines, and the entire economy either grinds or crashes to a (relative) halt. My understanding is that deflation is also very hard to get out of. Requires massive liquidity injections, and doing that without creating a crisis of confidence by overshooting is tough. For the current situation, my working conjecture (w/o running hard numbers/models) is that the Great Recession 11yrs ago destroyed so much wealth/value, and was so deflationary, that the central banks may never soon fill the hole with new liquidity. The evidence is that despite nearly continuous quantitative easing and other CB programs, over a decade later, we're still seeing this kind of phenomena - they just can't create & maintain even minimal inflation. Not sure what to do about it, but that's what I see... (edit: typos)
    - chii 7y ago
      Deflationary problems seems to me a overblown issue, and the cure may be worse than the disease. Inflation prevents low income earners from saving, but they aren't in a position to take risk and invest. Therefore, it causes their networth to drop in relation to the wealthy (who can take risks to keep up by investing). Inflation also keep wages down, as it's easier to pay the same wage , and any increase must be above inflation rate to remain at the same purchasing power. Inflation also leads to speculation, rather than to invest in productivity increases. With deflation, you end up not spending as much on discretionary/luxury goods, and only spend the minimum necessary. The prevailing theory is that this leads to slowdown in the economy - but I say it leads to low to zero mal-investments. If you have a high chance that your capital is going to have more purchasing power later, you would only invest in good, known ventures that is not speculative (e.g., building basic infrastructure that has a sound business model, rather than building fad apps).
- llcoolv 7y ago
  There is no inflation? You haven't seen the insanely skyrocketing property prices in pretty much every major EU city? And because rent/mortgage took the lion's share in increased cost in other products it manifested as shrinkflation - https://en.wikipedia.org/wiki/Shrinkflation https://en.wikipedia.org/wiki/Shrinkflation.
- raxxorrax 7y ago
  The Japan is failing meme is astonishing. It might have some slight demographic problems, but the solution of increasing the workforce without limits is more a failure of economic analysts than the economy of Japan. Many countries would kill to have these problems, which might just be completely irrelevant. The numbers from Japan look pretty good. Deflation isn't inherently good, inflation isn't inherently good. Most popular economic indicators are probably trash.
wefarrell 7y ago
What good is the EU if its wealthier members are unwilling to subsidize the poorer ones? Germans want the benefits of federation without the drawbacks.
- rusk 7y ago
  It allows DE to have an artificially devalued currency which benefits their exports.
- petre 7y ago
  The EMU is about the federalisation of Europe through the back door. https://m.youtube.com/watch?v=5TPpuIslzG4 https://m.youtube.com/watch?v=5TPpuIslzG4
- mamon 7y ago
  EU isn't really subisidizing anyone - the actual flow of money is from poor towards the wealthy: https://www.politico.eu/article/what-rich-countries-get-wrong-about-the-eu-budget-east-west-euroskeptic-cohesion-policy/ https://www.politico.eu/article/what-rich-countries-get-wron...
  - luckylion 7y ago
    This confuses public subsidies with private money flows.
    - mamon 7y ago
      Not confuses, just gives fuller picture - the whole deal between old and new EU members was: open up your markets, and we'll give you access to our "cohesion funds" from EU budget. Now you can see who won and who lost on this deal.
      - luckylion 7y ago
        Again, it's taxes vs private money. And "the whole deal" really was about a politically unified Europe, the "purely economic union" wasn't a thing anymore when the east expansion happened. That certainly was parts of it, but let's not create alternative history. Besides, "lost and won" is terribly weird when you just look at money flows but exclude goods. Hey, sell me your $30k car for $1000, you'll be the winner, because you get $1000 from me and we'll not look at the car. Not saying that that's an accurate description of EU-trade, just that it's weird to only look at money flows. Another problem with that in general is that it's not just about old and new EU members. Luxembourg is an old member, is the tax oasis that works hard to help companies evade taxes in France and Germany, and is also leeching EU subsidies, not contributing to the EU funds.
blazespin 7y ago
Savers are bad for the economy at large though because they don't invest in high risk businesses, but rather in low risk assets (RE, bonds, etc) that do nothing for no one. They're like scrooge mcduck swimming in their pile of gold.
- Aperocky 7y ago
  Savers are bad for business because liquidity stops when money hits them. US has such a strong economy because barely anyone save. Japan had so much savings that they literally need exports to survive, there’s no home market to speak of because everyone save so much. Once export tanks, their economy tank.
  - econcon 7y ago
    Exports account for 25% of Japan's GDP. So in all - it has strong local market.
- ksdale 7y ago
  Savers may not invest in high risk businesses, but the opposite of saving is not investing, it's spending, generally on consumer goods rather than on anything "productive". There's a different conversation to be had about how much consumer spending benefits those high risk businesses, but only a fraction of income earned by a business gets reinvested into plant and equipment in any case.
  - vraivroo 7y ago
    investing is a type of spending
- rusk 7y ago
  All well and good when youve strong economic growth, but all that stored capital comes in handy when there’s a shock. It provides a way to make money from your less well prepared neighbours ... But seriously, there’s no harm damping things a bit. Runaway growth can have its issues too. I reckon best is to keep your inflation just ahead of population growth.
LeoTinnitus 7y ago
I'd normally agree but I think I just have more faith in Keysnian economics. You basically pay for today with the future. If you no longer can afford the future, you still have the infrastructure or asset that exists. Normally it isn't a 0 valued item (unless we're talking bankrupt securities, worthless commodities, or education) so even in an economic crisis, there is something tangible that came be used as collateral.
eecc 7y ago
Exactly. It seems that we have unfortunately fixated on over-protecting winners, those that can take their rewards and reinvest them in something that is increasingly reducing to a financial scheme, debt in fact; over-protected, “low risk” and ethically enshrined. Which is metaphorically like rewarding couch-potatoes. Rather that letting the winners enjoy their success, while wiping it out in the long term if it’s not funneled towards material investments that can benefit also the “non winners”, with jobs and quality of life improvement. Seems like the narcissistic Randians are at the steering wheel, and no stepping down in sight
QuesnayJr 7y ago
Running deficits is not the same as inflation. There's no place for Germans to save, and its because the German government won't borrow. A sensible policy would be for the German government to borrow and invest heavily in infrastructure. Instead Germany has opted for policies that will cause it to teeter on the edge of recession for decades.
- conanbatt 7y ago
  > A sensible policy would be for the German government to borrow and invest heavily in infrastructure. Or reduce taxation and make everyone but government richer.
  - QuesnayJr 7y ago
    That would also work.
- dx034 7y ago
  There are places for Germans to save but they really dislike investments or any type of risk. Sure, Germany could borrow more and issue bonds but I doubt this would change yields for those bonds so much that investing in them is worth it for retail investors. The demand by institutional investors (insurances, pension funds) easily outweigh retail demand. Also, how would Germany invest in infrastructure if order books at construction companies are filled 1-2 years in advance? If anything, they'd fuel inflation and price out private investment.
  - QuesnayJr 7y ago
    Germans have three choices -- either they invest in risky assets, they increase deficit spending to increase the supply of safe assets, or they accept permanently low interest rates and hoard euros.

by aazaa 7y ago

Despegar 7y ago

>The German Saver knows better than most that inflation destroys savings. Yeah this is not the outcome Germany or the EU needs to worry about. It's experiencing Japanese deflation for 20 years. >This is a looming political issue that's only just beginning. Yes there's been plenty of hard money cranks that have said this for 10 years since the Great Financial Crisis in the US. Zero Hedge, gold bugs, hedge fund managers, etc have all been sounding the alarm about "money printing" and the deficit. There's no inflation in sight.

deleted 7y ago
[deleted]
yorwba 7y ago
> It's experiencing Japanese deflation for 20 years. GDP per capita (PPP) in Japan has more than doubled over the past 30 years. https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=JP&view=chart https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat... Slow growth is only a problem if you rely on investing to generate your income. Otherwise, even no growth at all is fine.
- AWildC182 7y ago
  Have there been any major issues with declining QOL in Japan? It might be a cultural barrier but aside from the deflation stories making the rounds, I don't hear much about them suffering because of it.
  - raxxorrax 7y ago
    They probably don't and economic analysts are probably just bad or lying.
samsonradu 7y ago
Japanese deflation is brought up a lot. However it didn’t really strike me as a troubled economy when visiting - on the contrary, things looked quite well. Can someone elaborate on why deflation is so bad?
- toss1 7y ago
  Deflation is bad because it is a self-reinforcing slowdown in the economy. The money gets more valuable and the assets get cheaper. so the incentive in every micro-decision is to hoard money and not spend. Why spend when the same thing will get cheaper tomorrow/next week/month/year...? So, the key factor of the Velocity of Money declines, and the entire economy either grinds or crashes to a (relative) halt. My understanding is that deflation is also very hard to get out of. Requires massive liquidity injections, and doing that without creating a crisis of confidence by overshooting is tough. For the current situation, my working conjecture (w/o running hard numbers/models) is that the Great Recession 11yrs ago destroyed so much wealth/value, and was so deflationary, that the central banks may never soon fill the hole with new liquidity. The evidence is that despite nearly continuous quantitative easing and other CB programs, over a decade later, we're still seeing this kind of phenomena - they just can't create & maintain even minimal inflation. Not sure what to do about it, but that's what I see... (edit: typos)
  - chii 7y ago
    Deflationary problems seems to me a overblown issue, and the cure may be worse than the disease. Inflation prevents low income earners from saving, but they aren't in a position to take risk and invest. Therefore, it causes their networth to drop in relation to the wealthy (who can take risks to keep up by investing). Inflation also keep wages down, as it's easier to pay the same wage , and any increase must be above inflation rate to remain at the same purchasing power. Inflation also leads to speculation, rather than to invest in productivity increases. With deflation, you end up not spending as much on discretionary/luxury goods, and only spend the minimum necessary. The prevailing theory is that this leads to slowdown in the economy - but I say it leads to low to zero mal-investments. If you have a high chance that your capital is going to have more purchasing power later, you would only invest in good, known ventures that is not speculative (e.g., building basic infrastructure that has a sound business model, rather than building fad apps).
llcoolv 7y ago
There is no inflation? You haven't seen the insanely skyrocketing property prices in pretty much every major EU city? And because rent/mortgage took the lion's share in increased cost in other products it manifested as shrinkflation - https://en.wikipedia.org/wiki/Shrinkflation https://en.wikipedia.org/wiki/Shrinkflation.
raxxorrax 7y ago
The Japan is failing meme is astonishing. It might have some slight demographic problems, but the solution of increasing the workforce without limits is more a failure of economic analysts than the economy of Japan. Many countries would kill to have these problems, which might just be completely irrelevant. The numbers from Japan look pretty good. Deflation isn't inherently good, inflation isn't inherently good. Most popular economic indicators are probably trash.

wefarrell 7y ago

What good is the EU if its wealthier members are unwilling to subsidize the poorer ones? Germans want the benefits of federation without the drawbacks.

rusk 7y ago
It allows DE to have an artificially devalued currency which benefits their exports.
petre 7y ago
The EMU is about the federalisation of Europe through the back door. https://m.youtube.com/watch?v=5TPpuIslzG4 https://m.youtube.com/watch?v=5TPpuIslzG4
mamon 7y ago
EU isn't really subisidizing anyone - the actual flow of money is from poor towards the wealthy: https://www.politico.eu/article/what-rich-countries-get-wrong-about-the-eu-budget-east-west-euroskeptic-cohesion-policy/ https://www.politico.eu/article/what-rich-countries-get-wron...
- luckylion 7y ago
  This confuses public subsidies with private money flows.
  - mamon 7y ago
    Not confuses, just gives fuller picture - the whole deal between old and new EU members was: open up your markets, and we'll give you access to our "cohesion funds" from EU budget. Now you can see who won and who lost on this deal.
    - luckylion 7y ago
      Again, it's taxes vs private money. And "the whole deal" really was about a politically unified Europe, the "purely economic union" wasn't a thing anymore when the east expansion happened. That certainly was parts of it, but let's not create alternative history. Besides, "lost and won" is terribly weird when you just look at money flows but exclude goods. Hey, sell me your $30k car for $1000, you'll be the winner, because you get $1000 from me and we'll not look at the car. Not saying that that's an accurate description of EU-trade, just that it's weird to only look at money flows. Another problem with that in general is that it's not just about old and new EU members. Luxembourg is an old member, is the tax oasis that works hard to help companies evade taxes in France and Germany, and is also leeching EU subsidies, not contributing to the EU funds.

blazespin 7y ago

Savers are bad for the economy at large though because they don't invest in high risk businesses, but rather in low risk assets (RE, bonds, etc) that do nothing for no one. They're like scrooge mcduck swimming in their pile of gold.

Aperocky 7y ago
Savers are bad for business because liquidity stops when money hits them. US has such a strong economy because barely anyone save. Japan had so much savings that they literally need exports to survive, there’s no home market to speak of because everyone save so much. Once export tanks, their economy tank.
- econcon 7y ago
  Exports account for 25% of Japan's GDP. So in all - it has strong local market.
ksdale 7y ago
Savers may not invest in high risk businesses, but the opposite of saving is not investing, it's spending, generally on consumer goods rather than on anything "productive". There's a different conversation to be had about how much consumer spending benefits those high risk businesses, but only a fraction of income earned by a business gets reinvested into plant and equipment in any case.
- vraivroo 7y ago
  investing is a type of spending
rusk 7y ago
All well and good when youve strong economic growth, but all that stored capital comes in handy when there’s a shock. It provides a way to make money from your less well prepared neighbours ... But seriously, there’s no harm damping things a bit. Runaway growth can have its issues too. I reckon best is to keep your inflation just ahead of population growth.

LeoTinnitus 7y ago

I'd normally agree but I think I just have more faith in Keysnian economics. You basically pay for today with the future. If you no longer can afford the future, you still have the infrastructure or asset that exists. Normally it isn't a 0 valued item (unless we're talking bankrupt securities, worthless commodities, or education) so even in an economic crisis, there is something tangible that came be used as collateral.

eecc 7y ago

Exactly. It seems that we have unfortunately fixated on over-protecting winners, those that can take their rewards and reinvest them in something that is increasingly reducing to a financial scheme, debt in fact; over-protected, “low risk” and ethically enshrined. Which is metaphorically like rewarding couch-potatoes. Rather that letting the winners enjoy their success, while wiping it out in the long term if it’s not funneled towards material investments that can benefit also the “non winners”, with jobs and quality of life improvement. Seems like the narcissistic Randians are at the steering wheel, and no stepping down in sight

QuesnayJr 7y ago

Running deficits is not the same as inflation. There's no place for Germans to save, and its because the German government won't borrow. A sensible policy would be for the German government to borrow and invest heavily in infrastructure. Instead Germany has opted for policies that will cause it to teeter on the edge of recession for decades.

conanbatt 7y ago
> A sensible policy would be for the German government to borrow and invest heavily in infrastructure. Or reduce taxation and make everyone but government richer.
- QuesnayJr 7y ago
  That would also work.
dx034 7y ago
There are places for Germans to save but they really dislike investments or any type of risk. Sure, Germany could borrow more and issue bonds but I doubt this would change yields for those bonds so much that investing in them is worth it for retail investors. The demand by institutional investors (insurances, pension funds) easily outweigh retail demand. Also, how would Germany invest in infrastructure if order books at construction companies are filled 1-2 years in advance? If anything, they'd fuel inflation and price out private investment.
- QuesnayJr 7y ago
  Germans have three choices -- either they invest in risky assets, they increase deficit spending to increase the supply of safe assets, or they accept permanently low interest rates and hoard euros.