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It helps to pause and think about the fundamentals in a simple way. For the first time since 1991, Germany is in a situation where the value of all goods and se

It helps to pause and think about the fundamentals in a simple way. For the first time since 1991, Germany is in a situation where the value of all goods and services imported exceeded the value of all goods and services exported. Is this a bad thing? Depends. Germany is a manufacturing heavy economy where energy prices are obviously a major part of input costs. So there is certainly an argument that at some level, this is unsustainable. In the long term, if the economic growth within Germany is able to offset the additional "expense" incurred , then it will not matter a lot. The US routinely runs a trade deficit, but the US economy is one that the world holds at envy for the reasons that it is able to do so. There is plenty of domestic consumption and growth that offsets the massive trade deficits and in a simplified way, the US imports deflationary prices from the rest of the world and exports technology (I said highly simplified) For Germany, they don't have the luxuries that the US does. The question that is crucial now is how long can Germany sustain these deficits while their domestic economy re adjusts or is able to find deflationary forces from energy security etc. If they are unable to do so, then, by definition, they are fucked.

lumost 4y ago
I’m a little suspicious the next set of stories will be about the US and overreliance on now expensive international labor. We keep talking about interest rates and monetary policy, when the reality may be that we need to look at all aspects of policy.
- DisjointedHunt 4y ago
  The composition of the US economy is very different with manufacturing taking a smaller role. The US imports deflation from China through cheap manufacturing. Not necessarily labor alone. The US also is a NET EXPORTER of energy and is not hostage to energy suppliers as much as Germany is due to their economy being reliant on Natural gas that can’t be easily replaced in the short term and even in the long term has immense transportation costs compared to cheap pipelines in geographic proximity. The thing to watch here is, the knockover effects and 2nd, 3rd order effects. When there is a gas shortage in Germany. . . Everyone suffers. A much higher portion of their GDP goes to compensate. When gas prices go up in the US, a section of the population “suffer”, but there is a lot more economic tolerance built in.
  - lumost 4y ago
    My point was more that the economic composition of the US is not immune to similar effects. The US is highly dependent on Asian manufacturing, which in turn is dependent on global energy prices rather than local energy prices. The price of labor in Asia is also increasing substantially (something that should be celebrated). Arguably, there is no economic zone in the world which is internally well balanced today. This will translate into unique and difficult to navigate problems across the globe due to deferred consequences of past crises, geopolitical conflict, global climate change, and changing demographics.

lumost 4y ago

I’m a little suspicious the next set of stories will be about the US and overreliance on now expensive international labor. We keep talking about interest rates and monetary policy, when the reality may be that we need to look at all aspects of policy.

DisjointedHunt 4y ago
The composition of the US economy is very different with manufacturing taking a smaller role. The US imports deflation from China through cheap manufacturing. Not necessarily labor alone. The US also is a NET EXPORTER of energy and is not hostage to energy suppliers as much as Germany is due to their economy being reliant on Natural gas that can’t be easily replaced in the short term and even in the long term has immense transportation costs compared to cheap pipelines in geographic proximity. The thing to watch here is, the knockover effects and 2nd, 3rd order effects. When there is a gas shortage in Germany. . . Everyone suffers. A much higher portion of their GDP goes to compensate. When gas prices go up in the US, a section of the population “suffer”, but there is a lot more economic tolerance built in.
- lumost 4y ago
  My point was more that the economic composition of the US is not immune to similar effects. The US is highly dependent on Asian manufacturing, which in turn is dependent on global energy prices rather than local energy prices. The price of labor in Asia is also increasing substantially (something that should be celebrated). Arguably, there is no economic zone in the world which is internally well balanced today. This will translate into unique and difficult to navigate problems across the globe due to deferred consequences of past crises, geopolitical conflict, global climate change, and changing demographics.