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> There is another way to look at this, which is to say that the German economy is really weak, but the weakness of the economy was hidden by the introduction o
by lispm 12y ago
> There is another way to look at this, which is to say that the German economy is really weak, but the weakness of the economy was hidden by the introduction of the euro,
In the meanwhile Germany added 20 million people from a collapsed country/economy...
> which created a huge market for German capital goods, which gave Germany a big export surplus.
Germany had an huge export surplus before, during and after it.
> Germany came out the big winner of the euro, therefore its export industry is strong, therefore industry can still engage in long-term investments in its workers
Germany did that before the Euro and is still doing it.
> and the labor unions in Germany are very strong, so they can force corporations to spend on training programs.
The companies are more than willing to train their workers. No unions necessary.
> Germany does a good job training its workers, and therefore the Germany economy is strong, is probably wrong on at least 2 counts:
> 1.) it probably reverses cause and effect
There is no 'cause and effect'. It makes much more sense to model economy as a system with multiple feedback loops.
The education and training systems constantly creates new workers with relatively high skill sets. You can guess the effects from that and you can also easily guess why the companies are doing this.
> 2.) the German economy is not really strong
That would not make any sense to say. 80+ million people, fourth largest economy in the world.
- antimagic 12y agoIt depends a bit on what you mean by strength. At the moment, Germany's economy is very dependant on the strong export performance of the economy. But exports don't just depend on the quality of the goods produced, they also depend on customers being able to pay for those goods. If the customers stop being able to pay - something which is outside of Germany's control, then Germany will find itself in real trouble. This is the sense in which it's economy is weak. It's kind of like judo - the economy is out of balance and vulnerable to shocks applied in the right place.
- lispm 12y ago> At the moment, Germany's economy is very dependant on the strong export performance of the economy. Not 'at the moment' - Germany has been a strong exporter for almost five decades now... > then Germany will find itself in real trouble. Since Germany runs this model since a long time, it has a lot of experience dealing with its effects.
- james1071 12y agoYou are completely wrong. Germany has not had anything like this level of current account surplus before. It is entirely due to mistakes in macro economics (wrong parity within the Euro and a refusal to boost domestic demand). Sadly Germans seem unable to understand that their surplus is not a sign of economic success, but the result of misguided policies that keep the rest of Europe in recession.
- angersock 12y agoSadly Germans seem unable to understand that their surplus is not a sign of economic success, but the result of misguided policies that keep the rest of Europe in recession. ...which in turn strengthens the German position, right? In turn giving them de facto economic success?
- james1071 12y agoThe surplus is used to accumulate claims on other countries (i.e. Germany is lending foreigners money). Unfortunately, Germany is not going to be repaid in full, so the policy is utterly stupid.
- lispm 12y ago> Germany has not had anything like this level of current account surplus before That has a simple reason: Germany is a larger country in a unified Europe now. After recovering from the effects of the reunification, you have now a stronger and larger economy with more and larger trading partners. For the larger export success are a few simple reasons responsible: * the east european market directly next to Germany is now larger and easier to access. Poland. * Germany is no 33% larger than before the reunification. Once the added economy started to recover from the effects of reunification and many investments in East Germany were done, the now larger economy, contcentrated back on the european and world market. * globalization has nicely enhanced the reach of even small companies in rural Germany to trade with even remote locations > It is entirely due to mistakes in macro economics That's entirely wrong.
- musername 12y ago> 80+ million people, fourth largest economy in the world. Based on what, GDP? Than it'd better be called efficient or sumsuch.
- james1071 12y agoNo, Germany has not always had a huge export surplus. http://www.tradingeconomics.com/charts/germany-current-account-to-gdp.png?s=deuca2gdp&d1=19950101&d2=20141231 http://www.tradingeconomics.com/charts/germany-current-accou... The current surplus is not a feature of German productivity but the result of having an undervalued Euro and depressed domestic demand.
- this_user 12y agoLots of Germany's main trading partners (e.g. France) are Eurozone countries too. If this were not the case, the DEM would have appreciated against their currencies by now but instead there is effectively a currency peg supporting German exports.
- james1071 12y agoYes, DM undervalued within the Euro.
- lispm 12y agoThat's a very short view. Look back more. > The current surplus is not a feature of German productivity but the result of having an undervalued Euro and depressed domestic demand. The Euro is not really undervalued. The current surplus is a feature of Germany's long term export oriented industry.
- the_why_of_y 12y agoThe Euro is the currency of a wide range of fiscally independent countries which have had very different economic developments during the time since they adopted the Euro; its value is perhaps an adequate average of those countries, but nevertheless it is at the same time under-valued in Germany as it is over-valued in Spain.
- lispm 12y ago> under-valued in Germany as it is over-valued in Spain. How can the Euro be 'under-valued' in Germany?