German Efficiency?

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We hear all the time how Germany is the model economy . 

 

They run a massive (illegal under EU rules) trade surplus, they have relatively low headline unemployment and the government 'balances' its fiscal position usually. That 'balance' is really a mirage though as the German Federal govt. uses state bank credit creation to hide what would normally be considered state investment spending if it were in the 'budget' statements.

 

But under the surface what is the real state of the German economy?

 

The Hartz reforms, largely credited with creating the German 'miracle' have seen an explosion in 'mini-jobs' that pay very low part time wages with little to no extra benefits, poverty has increased markedly, states and local authorities are struggling and social cohesion is under strain again.

 

Der Spiegel:

Significant numbers of financially destitute people are now resorting to collecting discarded glass and plastic bottles … But whereas the majority of those collecting used to be the homeless, alcoholics and drug addicts, more recently it is Berlin’s pensioners and long-term unemployed who are increasingly turning to the practice in order to make ends meet.

Go further and we find that state investment has been low for over a decade as pressures to balance the budget have manifested themselves in cuts to infrastructure when social programmes were politically difficult.

 

So what has this focus on balancing the budget rather than investment brought?

 

A CNBC report said that:

Crumbling bridges and traffic jams are staining Germany’s global reputation for efficiency. The infrastructure in Europe’s largest economy — as in the United States — has been slowly deteriorating from a lack of investment over the past few decades …

In 2006, Germany ranked third in the World Economic Forum’s Global Competitiveness Report for the overall quality of its transport infrastructure. This year, it has slipped to 11th place, while the United States ranked 13th.

 

The German Institute of Urban Affairs estimated that 15 percent of Germany’s municipal road bridges need to be completely rebuilt. German railway company Deutsche Bahn said new measures to increase train punctuality will take several years. Last year, 1 in 4 long-distance trains on the network did not run on time, in part because of construction efforts.

 

A recent report in the Handelsbltatt Global (May 25, 2017) – A Rusty Bridge Too Far – reported that:

Leverkusen Bridge in Cologne, for example, is host to an almost perpetual traffic jam, its steel so rusty that trucks are no longer allowed to use it. The chaos on this bridge across the River Rhine is so bad that it was a factor in the defeat of the North Rhine-Westphalia government of Social Democrats and Greens in recent state elections …

Leverkusen Bridge is beyond repair and experts refuse to predict how long before it collapses. The cost of replacing it is pegged at around €600 million – only a fraction of the tens of billions needed across the country.

 

Still think austerity is good policy and the Germans practice sensible economics? Fiscal conservatism is a recession cult.

Comments

George N Romey Added Aug 11, 2017 - 6:01pm
I have no doubt that European business executives have become more like CEOs here in America.  I deal with a bunch of French executives.  They believe in the 35 hour work week and no email after 6 but for themselves.  Everyone else is a slave.  Europe is as neoliberalism as the US.
 
Theyve taken our practices of financial hocus pocus.
John G Added Aug 11, 2017 - 6:05pm
Indeed. The EU is a neoliberal wonderland. Socialism is verboten. German economists are some of the worst in the world.
Who else could have thought up expansionary contraction?
Stone-Eater Friedli Added Aug 12, 2017 - 5:34am
John
 
Good one, true one.
 
Dino Manalis Added Aug 12, 2017 - 9:34am
Germany should invest more in its people and economy to improve lives and produce more jobs.  Fiscal discipline is necessary, but not austerity!  They need wiser pro-business pro-growth policies.
Maureen Foster Added Aug 12, 2017 - 10:25am
How do you figure Germany’s trade surplus is illegal?  The German economy is by far better than the rest of Europe and big reason for that is fiscal responsibility.  If you want to see crumbling infrastructure, one only needs to witness what’s happening outside of Germany. And things in these other countries would be far worse if it wasn’t for the fact Germany was propping up the Euro.   
Stone-Eater Friedli Added Aug 12, 2017 - 11:10am
The German economy is by far better than the rest of Europe
 
Because its profits base on millions of bad paid part-time workers. Unlike France, which has strong unions which prevent exploitation far better, Germany relies on those 1to5 Eurro jobs.
 
And when the automobil sector is taken off, there's ain't too much left. The US knows that. That's why they sanction Germany indirectly through their sanctions against Russia. As they do the rest of Europe.
 
And what does Europe do ? NADA. We're a bunch of gutless cowards to accept that !
John G Added Aug 12, 2017 - 4:00pm
Foster. The trade surpluses are larger than allowed under EU rules.
Can you explain why you think so called fiscal responsibility is the cause of Germany's relative success?
John G Added Aug 12, 2017 - 5:27pm
Oh and while you're at it, Foster, please explain how Germany 'props up the euro'.
Stone-Eater Friedli Added Aug 12, 2017 - 6:35pm
Maureen
 
The Euro is not in Germany's hands. If it were, they wouldn't have a) allowed it to happen because the DM was strong and b) they would not allow to bleed our countries like Greece.
 
You know why the southern flank of NATO, as Greece or Portugal, are largely in the hands of Germany (Euro) fiscally ? Because Germany is not an independent country. It's not even a country as per law.
 
https://www.geopolitica.ru/en/article/germany-not-sovereign-state
 
https://books.google.ch/books?id=imPYAwAAQBAJ&pg=PA28&lpg=PA28&dq=germany+is+not+a+sovereign+country&source=bl&ots=OsUXHd0Nxc&sig=wAj8Awpx0NJsDJV-mUaMhruJip8&hl=de&sa=X&ved=0ahUKEwjCh_6-39LVAhXpKcAKHR4ICIU4ChDoAQhXMAY#v=onepage&q=germany%20is%20not%20a%20sovereign%20country&f=false
 
Deutschland ist kein Land
 
Now this is what we know. And we know a lot more, because wir verstehen das Ganze.
 
OK ?
 
John G Added Aug 13, 2017 - 3:45am
Old-age poverty risk in Germany on the rise
 
Besides the changing labor market dynamics, the study authors also blame the continuing decline in pension payments for impoverishing the old. They cite the transforming demographic conditions and pension policies, underlining that the private pension plans recommended by the government do not offer a comprehensive solution to the issue.
Coral Atlas Added Aug 13, 2017 - 10:19am
I can state this.
Deutsche Bank is the most powerful, corrupt, ruthless entity on the face of the planet. This is a publicly known fact.
I had a mortgage they owned.
Enough said.
Stone-Eater Friedli Added Aug 13, 2017 - 10:22am
Coral
 
Links ? Do you think they are worse than the US Fed or Goldman Sachs ? They all are in the same club.
Coral Atlas Added Aug 13, 2017 - 12:36pm
Stone, over years in addition to my own personal experiences I have gleaned from numerous unrelated sources many negative comments about the Deutsche bank's scruples which are little to none. I would take any USA institution over those heartless cold bastards at Deutsche bank.
Stone-Eater Friedli Added Aug 13, 2017 - 12:40pm
Coral
 
I'm not in favor of any bank or the interest-on-interest and Hedgefund shit of the whole banking system which produces hot air and is able to virtually sell it.
 
But to me all the banks are related and connected. There's no difference. They ARE ONE club. I don't have a savings account because I don't have savings. I have my values in land in Africa. And the risk is no greater than on a bank account or in shares....
John G Added Aug 13, 2017 - 5:57pm
Deutsche bank is no worse than several US based banks. 
Maureen Foster Added Aug 14, 2017 - 6:58am
I did some research and found nothing supporting your assertion that a trade surplus is illegal. 
 
Because of German fiscal health, she is likely to honor her future financial obligations.  The same can’t be said for many EU countries, which is why we have the debt crisis and the frequent runs on their banks.  Do you honestly believe a country can run a deficit without there being negative ramifications?  Have you seen what happened in Greece?
 
Every time a Euro country gets in trouble what gets them out of trouble is bailouts.  The money for those bailouts is mostly German money.  All those financially unstable countries in the EU can’t help as they are either struggling themselves or too small to be able to provide the necessary bailout funds.  This is why the Euro would fail if it weren’t for Germany.  For whatever it’s worth, I believe Germany will exit the Euro.  The only reason they haven’t already is because of the eerie reminders of of the last World War.    
Stone-Eater Friedli Added Aug 14, 2017 - 1:05pm
Maureen
 
Do you honestly believe a country can run a deficit without there being negative ramifications?  Have you seen what happened in Greece?
 
The banks were bleeding Greece out. The Germans used them to polish their own banking system and save it by ordering Greece to get huge loans in order to "get the sheets in balance" while calculating huge interest on those loans.
 
In order to repay that interest on the loans they demanded them to play the austerity game, means get even more poor by putting thousands out of job.
 
The same happens in Africa. It's the World Bank/IMF system. Take as much as you can first, indebt them after and then put the pressure on.
 
 
Stone-Eater Friedli Added Aug 14, 2017 - 1:07pm
BTW: You know why the Euro doesn't work and never will ? Because those idiots who created the EU and the € did not consider different mentalities, different systems of running a country and different purchasing power possibilities.
 
It's like trying to bring the US and Brazil under one hat.
Stone-Eater Friedli Added Aug 14, 2017 - 1:10pm
BTW2: The EU was NOT created to avoid future wars within Europe. It was created in order to have a better economic and military control over Europe (easier when "united") by some obscure circles.....;-)
John G Added Aug 14, 2017 - 2:10pm
MF.I did some research and found nothing supporting your assertion that a trade surplus is illegal. 
Well your research methods are deficient. The Commission proscribes trade surplus over 6%.
The same can’t be said for many EU countries, which is why we have the debt crisis and the frequent runs on their banks.  Do you honestly believe a country can run a deficit without there being negative ramifications? 
Do you believe that two countries eg Greece and Germany can both run trade surpluses with each other?
Have you seen what happened in Greece.
Yes they had a trade deficit and used an external currency called the euro. A macroeconomic recipe for disaster.
 The money for those bailouts is mostly German money. 
No it isn't. It is credit created out of thin air by the ECB.
 
Ric Wells Added Aug 14, 2017 - 8:01pm
Let's see. German efficiency. They lost. Twice as I recall. Perfect record.
John G Added Aug 14, 2017 - 9:08pm
 Do you honestly believe a country can run a deficit without there being negative ramifications?
What in your mind should happen to the countries that run deficits?
Stone-Eater Friedli Added Aug 15, 2017 - 2:48pm
What in your mind should happen to the countries that run deficits?
 
Hmmm....who has the biggest deficit although he can print as much as he wants ? Error at 4b6c8e3a.
John G Added Aug 15, 2017 - 4:13pm
She was talking about trade deficits. 
Stone-Eater Friedli Added Aug 15, 2017 - 5:29pm
Yep. And the US has about the biggest. Ask China....time to change that by starting a new war that pays off.
John G Added Aug 15, 2017 - 5:37pm
That's not the point. For every surplus there must be a deficit. People like Foster seem to think it is possible (and moral) for every country to run a trade surplus.
Stone-Eater Friedli Added Aug 15, 2017 - 6:02pm
A trade surplus always means that one side has a 2 on the back. It should be leveled out somewhat. When Germany has cheap T-Shirts they import for a buck to the store they can sell for 10$ after it means the producing side loses - not in profits because they exploit their workers to the max......a friend of mine in Cameroôn worked at PHP Penja on the fields for 30'000 CFA a month (about 60$), while a kilo of meat costs 2'000....
John G Added Aug 15, 2017 - 6:12pm
No, you're confusing micro and macro. They don't work the same way.
Thomas Napers Added Aug 17, 2017 - 6:05am
Based on your logic on trade, you must think America is the most moral country, seeing we run the largest trade deficit by far and have for decades.  
John G Added Aug 17, 2017 - 9:24pm
I have no 'moral' view. Can you read? Or comprehend what you read?
Stone-Eater Friedli Added Aug 18, 2017 - 10:20am
John
 
Macro goes micro and the profit goes back to macro.
John G Added Aug 18, 2017 - 5:51pm
No. Macro is a zero sum.
Flying Junior Added Sep 5, 2017 - 3:10am
A trade deficit is surely not a bad thing.  Clinton did not initiate the most-favored nation trading status agreement with Communist China in the hopes of trading equally.  We benefit from them producing cheap goods for us.  (I might note that the dirt cheap luxury goods of the late 1990s are no longer available at low prices.)  China benefits from a rising tide.  The U.S. runs a trade deficit with most of its trading partners.  That's because we have more money and produce a greater GDP.
 
Our trade with Mexico, however, is a stellar example of shared production.  It is not easy to define a trade surplus for Mexico, or a trade deficit for the U.S.  Both countries benefit.  Mexico, our friendly neighbor to the south.
 
Dammit, if that psychotic bully Trump fucks up NAFTA and destroys our trade agreements with Mexico there will be hell to pay.  Mexican beer is the best in the world.  I have also heard from a friend that many Mexican Fender guitars are of exceptional quality.
 
And that most successful of all inclusive American companies, Ford Motor Company also needs its Mexican partners.
 
But Germany.  What the hell do I know?  Have not been there for forty years.  Thanks for the article, John.
John G Added Sep 7, 2017 - 1:08am
Yeah, you might want to learn some macroeconomics one day.

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