3 ms·

The usual stopgap is a vast expansion of consumer credit. But I guess that phase has already passed in Germany as well.

by jahaja 6y ago

mschuster91 6y ago
That doesn't work too much here for two reasons: 1. German consumers are notoriously averse to debt ("Schwäbische Hausfrau"). Most transactions pre-covid were in hard cash or using debit cards, credit cards are rare and American-style revolving credit cards even rarer (the debt incurred on a standard German CC will be fully deducted on the third workday of the month, no partial payments or payment targets). Consumer debt is mostly real estate, cars and financing for big-ticket purchases such as furniture or expensive computers). 1a. Additionally, German consumers and companies are even more averse to risk. Going bankrupt with a company (or personally) is seen as deeply shameful and something that is only reserved for the lower classes of society (which also explains, next to a lack of venture capital, the lack of successful global scale start-ups from Europe), and many shy away from stock markets and capital investment... it wasn't widespread even before the dot-com burst, but that essentially killed everything involving stocks as an investment methods to this day, so rather than to invest in ETFs people prefer to "safely lose money" in zero-interest "saving plans". And as 2/3rds of Germans don't have anything left over to save after making rent and food and Germany being a "renter market" instead of an "owner market" in real estate, they also cannot build up equity over the decades and generations. 2. Credit requirements: the European "Basel 2" requirements on credit are enormously restrictive. It's extremely hard to get approved for loans and to make it worse, it doesn't make any difference if you have done business with the bank as a known customer even for decades, the decision to grant a loan or not must be purely statistic/math based. This royally screwed e.g. farmers who suddenly had to put up their farm / equipment as collateral for loans for seeds, but also prevents lower classes from using (consumer) credit to invest in either outright consumption or into furthering their position in society (e.g. by starting their own company).
- jahaja 6y ago
  Thanks for very informative reply. 1. I hope that this stays this way, a needy public may be very susceptible to credit marketing. 2. I find it a bit odd that this doesn't seem to apply here in Sweden. Predatory loans are a plague on society atm. At the level where commercial breaks are almost exclusively gambling and payday loans.
  - mschuster91 6y ago
    Gambling regulation is individual for each country, it's a loophole used by e.g. Maltese web casinos advertising to German consumers.
    - jahaja 6y ago
      Yeah, I know. Just added the gambling bit to emphasize how cynical it is.
- chalst 6y ago
  Germany has traditionally had a political culture that was debt-averse, mainly because where in other countries the parliamentary left was Keynesian, the SPD favoured Ordoliberalism [1]. This resulted in the infamous constitutional amendment that governments had to balance every budget. I think, though, that this is now beginning to be seen as a mistake and the attitude to debt is thawing. The requirement to balance public spending was suspended for the Covid measures: I think this would not have happened before the Eurozone crisis. I'm talking about 'elite' opinion, where you are talking about public and business opinion, but I am guessing that the changes will spread if the Covid measures are seen as a success, which if the comparison is made to the US they are very likely to be. [1]: https://en.wikipedia.org/wiki/Ordoliberalism https://en.wikipedia.org/wiki/Ordoliberalism
Unsimplified 6y ago
Debt only delays the inevitable failure of get-a-job freestyle capitalism as we know it.

The usual stopgap is a vast expansion of consumer credit. But I guess that phase has already passed in Germany as well.

by jahaja 6y ago

The usual stopgap is a vast expansion of consumer credit. But I guess that phase has already passed in Germany as well.

That doesn't work too much here for two reasons: 1. German consumers are notoriously averse to debt ("Schwäbische Hausfrau"). Most transactions pre-covid were in hard cash or using debit cards, credit cards are rare and American-style revolving credit cards even rarer (the debt incurred on a standard German CC will be fully deducted on the third workday of the month, no partial payments or payment targets). Consumer debt is mostly real estate, cars and financing for big-ticket purchases such as furniture or expensive computers). 1a. Additionally, German consumers and companies are even more averse to risk. Going bankrupt with a company (or personally) is seen as deeply shameful and something that is only reserved for the lower classes of society (which also explains, next to a lack of venture capital, the lack of successful global scale start-ups from Europe), and many shy away from stock markets and capital investment... it wasn't widespread even before the dot-com burst, but that essentially killed everything involving stocks as an investment methods to this day, so rather than to invest in ETFs people prefer to "safely lose money" in zero-interest "saving plans". And as 2/3rds of Germans don't have anything left over to save after making rent and food and Germany being a "renter market" instead of an "owner market" in real estate, they also cannot build up equity over the decades and generations. 2. Credit requirements: the European "Basel 2" requirements on credit are enormously restrictive. It's extremely hard to get approved for loans and to make it worse, it doesn't make any difference if you have done business with the bank as a known customer even for decades, the decision to grant a loan or not must be purely statistic/math based. This royally screwed e.g. farmers who suddenly had to put up their farm / equipment as collateral for loans for seeds, but also prevents lower classes from using (consumer) credit to invest in either outright consumption or into furthering their position in society (e.g. by starting their own company).

jahaja 6y ago
Thanks for very informative reply. 1. I hope that this stays this way, a needy public may be very susceptible to credit marketing. 2. I find it a bit odd that this doesn't seem to apply here in Sweden. Predatory loans are a plague on society atm. At the level where commercial breaks are almost exclusively gambling and payday loans.
- mschuster91 6y ago
  Gambling regulation is individual for each country, it's a loophole used by e.g. Maltese web casinos advertising to German consumers.
  - jahaja 6y ago
    Yeah, I know. Just added the gambling bit to emphasize how cynical it is.
chalst 6y ago
Germany has traditionally had a political culture that was debt-averse, mainly because where in other countries the parliamentary left was Keynesian, the SPD favoured Ordoliberalism [1]. This resulted in the infamous constitutional amendment that governments had to balance every budget. I think, though, that this is now beginning to be seen as a mistake and the attitude to debt is thawing. The requirement to balance public spending was suspended for the Covid measures: I think this would not have happened before the Eurozone crisis. I'm talking about 'elite' opinion, where you are talking about public and business opinion, but I am guessing that the changes will spread if the Covid measures are seen as a success, which if the comparison is made to the US they are very likely to be. [1]: https://en.wikipedia.org/wiki/Ordoliberalism https://en.wikipedia.org/wiki/Ordoliberalism

Unsimplified 6y ago

Debt only delays the inevitable failure of get-a-job freestyle capitalism as we know it.