4 ms·

It's like an algae bloom in an ocean, the German economy is strangling the rest of the Euro zone. If all countries were to exit Euro Zone, Euro would probably b

by Ygg2 12y ago

It's like an algae bloom in an ocean, the German economy is strangling the rest of the Euro zone. If all countries were to exit Euro Zone, Euro would probably be echanged for 30-50% more than it's currently worth and then German economy would tank. > Every article seems to suggest that German economists are a bunch of amateurs who don't know what they are doing. But from my layman's point of view, it certainly doesn't look that way. They aren't amateurs. In same manner, people running Ponzi Schemes aren't dimwitted. It's a great system it benefits German export economy greatly but it does so at expense of others. Quick explanation: If you have weak currency, it's great for export, since stuff produced here is cheaper than elsewhere. And if currency is strong, then that favors imports, because your currency buys more in outsider market than in yours. However the more you export, the more valued currency becomes and the more you can buy with your currency, which leads to increased import. But Germany doesn't need to ever grow its imports, because they have other countries like Greece, Italy, etc. to drag the value down. What Germany is doing is eating its cake, having it too, at expense of other states and then blaming them for not having any cake. Because Germany doesn't import enough, other countries can't recover and to make matters worse, they can't export since German products based on Euro and of higher quality and equal price.

lispm 12y ago
> Quick explanation: If you have weak currency, it's great for export, since stuff produced here is cheaper than elsewhere. And if currency is strong, then that favors imports, because your currency buys more in outsider market than in yours. Germany has been running an export surplusses for decades. With the Euro and without.
- Ygg2 12y ago
  Yes, and I had a 97 degree temperature, for a long time before it started rising to 104. In essence, yes they had, but not as growing as this one.
  - lispm 12y ago
    German exports were growing before. Germany was the world's largest exporter for several years. Now it's no longer. > In essence, yes they had, but not as growing as this one. Germany got more people now after reunification, built brand new production facilities in East Germany, built new production in Eastern Europe, got new markets, ...
    - Ygg2 12y ago
      Didn't they also took a nose dive during `91, based on this data: http://www.tradingeconomics.com/germany/balance-of-trade http://www.tradingeconomics.com/germany/balance-of-trade
      - lispm 12y ago
        Balance of Trades is not 'exports'.
    - cyphunk 12y ago
      I would be happy for more data that supports the positive effect from reunification. as someone living in east Germany the general feeling is that production was shattered in the east upon reunification as factories and infrastructure less modern were scrapped. most companies took on massive debts in the new economy and the majority resulted in closure. This narrative is one I question and would be happy for data points that suggest something other than a massive collapse post unification.
jpfr 12y ago
Since the introduction of the Euro, many EU states got money a lot cheaper than they should have, due to their association to the stronger neighbouring economies. That started a completely irresponsible spending frenzy that was well-received by the voting public. Germany is trying to save the Euro zone, not tank it. The US-based economists claim that it is possible to spend money (take on debt) to kick-start an economy and then recoup that money by increased tax earnings. It turns out that doesn't work any longer. Plus, many contries worldwide are already paying interest on their debt with new debt. And they have zero margin to increase taxes. Some countries (including Germany, but not including the US) can still make it out of that downwards spiral. The question is no longer, whether the EU will tank. The question is which of the EU, the US or China will default first on their debt. The results will be devastating and capital will flee to the non-defaulted economic blocks. This is a big political game played over decades. And media-based support of one or the other school of economics is part of it.
- Gibbon1 12y ago
  That problem with you, is your so reflexively focused on government debt that you can't get your head around the fact that most of the Southern countries in trouble DIDN'T HAVE LARGE GOVERNMENT DEFICITS. They had large and growing public debt most of it related to borrowing to buy private assets. And unsupportable wage inflation. Go look it up, the governments of Italy, Spain, etc except for Greece weren't borrowing beyond their means. What they were suffering from was out of control inflows of cash. Inflows of cash in a country with it's own currency tends to be self limiting, because as money flows in the exchange rate adjusts making investments less attractive. (A country with a well run central bank will actively adjust the exchange rate to prevent the inevitable panic and flight that happens at the end of a bubble, or you have a bubble and it sucks for a while) Part of the problem with the Euro is weaker member countries can't control the flow of capital into and out of the country. Yet they are on the hook for the mal effects that result. This is wrong.
  - jpfr 12y ago
    How does the twin deficits hypothesis fit into your world view? [1] Capital inflow is due to a trade deficit, that is to a large part financed by government debt (taking in money from abroad). [1] http://en.wikipedia.org/wiki/Twin_deficits_hypothesis http://en.wikipedia.org/wiki/Twin_deficits_hypothesis
restalis 12y ago
"If all countries were to exit Euro Zone, Euro would probably be echanged for 30-50% more than it's currently worth" This kind of things are easily solved by quantitative easing. You can always print more money in order to down-keep a currency to what may be considered "the right price". The real problem is not a currency's rise, it's its fall.
- DoubleMalt 12y ago
  Tell this to the Swiss national bank. They desperately tried to keep the franc down. When they finally saw that the position became untenable, it gained over 20% on the Euro overnight (and so did many public and private loans in Austria and other European countries that had banked on the low interest rate of loans in Switzerland)
  - restalis 12y ago
    Switzerland is special in this regard. They did not had the ambition to profit from the all thing because well, they benefit from the very idea of impersonating a party that won't take advantage of one's finance in such a callous manner! In other words, they had a condition that would not go well with the quantitative easing thing, they had to choose between keeping a long maintained image/tradition or profit in short term, and they made their choice.
deleted 12y ago
[deleted]

by Ygg2 12y ago

lispm 12y ago

> Quick explanation: If you have weak currency, it's great for export, since stuff produced here is cheaper than elsewhere. And if currency is strong, then that favors imports, because your currency buys more in outsider market than in yours. Germany has been running an export surplusses for decades. With the Euro and without.

Ygg2 12y ago
Yes, and I had a 97 degree temperature, for a long time before it started rising to 104. In essence, yes they had, but not as growing as this one.
- lispm 12y ago
  German exports were growing before. Germany was the world's largest exporter for several years. Now it's no longer. > In essence, yes they had, but not as growing as this one. Germany got more people now after reunification, built brand new production facilities in East Germany, built new production in Eastern Europe, got new markets, ...
  - Ygg2 12y ago
    Didn't they also took a nose dive during `91, based on this data: http://www.tradingeconomics.com/germany/balance-of-trade http://www.tradingeconomics.com/germany/balance-of-trade
    - lispm 12y ago
      Balance of Trades is not 'exports'.
  - cyphunk 12y ago
    I would be happy for more data that supports the positive effect from reunification. as someone living in east Germany the general feeling is that production was shattered in the east upon reunification as factories and infrastructure less modern were scrapped. most companies took on massive debts in the new economy and the majority resulted in closure. This narrative is one I question and would be happy for data points that suggest something other than a massive collapse post unification.

jpfr 12y ago

Since the introduction of the Euro, many EU states got money a lot cheaper than they should have, due to their association to the stronger neighbouring economies. That started a completely irresponsible spending frenzy that was well-received by the voting public. Germany is trying to save the Euro zone, not tank it. The US-based economists claim that it is possible to spend money (take on debt) to kick-start an economy and then recoup that money by increased tax earnings. It turns out that doesn't work any longer. Plus, many contries worldwide are already paying interest on their debt with new debt. And they have zero margin to increase taxes. Some countries (including Germany, but not including the US) can still make it out of that downwards spiral. The question is no longer, whether the EU will tank. The question is which of the EU, the US or China will default first on their debt. The results will be devastating and capital will flee to the non-defaulted economic blocks. This is a big political game played over decades. And media-based support of one or the other school of economics is part of it.

Gibbon1 12y ago
That problem with you, is your so reflexively focused on government debt that you can't get your head around the fact that most of the Southern countries in trouble DIDN'T HAVE LARGE GOVERNMENT DEFICITS. They had large and growing public debt most of it related to borrowing to buy private assets. And unsupportable wage inflation. Go look it up, the governments of Italy, Spain, etc except for Greece weren't borrowing beyond their means. What they were suffering from was out of control inflows of cash. Inflows of cash in a country with it's own currency tends to be self limiting, because as money flows in the exchange rate adjusts making investments less attractive. (A country with a well run central bank will actively adjust the exchange rate to prevent the inevitable panic and flight that happens at the end of a bubble, or you have a bubble and it sucks for a while) Part of the problem with the Euro is weaker member countries can't control the flow of capital into and out of the country. Yet they are on the hook for the mal effects that result. This is wrong.
- jpfr 12y ago
  How does the twin deficits hypothesis fit into your world view? [1] Capital inflow is due to a trade deficit, that is to a large part financed by government debt (taking in money from abroad). [1] http://en.wikipedia.org/wiki/Twin_deficits_hypothesis http://en.wikipedia.org/wiki/Twin_deficits_hypothesis

restalis 12y ago

"If all countries were to exit Euro Zone, Euro would probably be echanged for 30-50% more than it's currently worth" This kind of things are easily solved by quantitative easing. You can always print more money in order to down-keep a currency to what may be considered "the right price". The real problem is not a currency's rise, it's its fall.

DoubleMalt 12y ago
Tell this to the Swiss national bank. They desperately tried to keep the franc down. When they finally saw that the position became untenable, it gained over 20% on the Euro overnight (and so did many public and private loans in Austria and other European countries that had banked on the low interest rate of loans in Switzerland)
- restalis 12y ago
  Switzerland is special in this regard. They did not had the ambition to profit from the all thing because well, they benefit from the very idea of impersonating a party that won't take advantage of one's finance in such a callous manner! In other words, they had a condition that would not go well with the quantitative easing thing, they had to choose between keeping a long maintained image/tradition or profit in short term, and they made their choice.

deleted 12y ago

[deleted]