That's a good thing. They've been violating the Euro treaties by running a surplus against other countries in a common currency area, but no one dared to say a word.
My guess is that Germany still has a surplus against other euro countries, instead the money is flowing to oil and gas exporting countries. So that wouldn't help.
Yes, and thus at some level, is unsustainable. ie, There is a point at which they could be running all the surplus they could wish for against the rest of the EU, but the cost of those surpluses offsets any gains to economic growth.
> but the cost of those surpluses offsets any gains to economic growth.
In the export destinations like Greece. For Germans it means supressed wages because they have to compete against Greek wages which means Germany has to sacrifice its productivity gains to provide low priced goods, effectively giving those productivity gains away for free the moment the export destination country predictably must go bankrupt.
Can you explain this in more depth? I'm not that familiar with EU laws and treaties. Is it illegal to run a trade surplus? How does that work, functionally?
What specific harm is being done here though? Krugman has a tendency to take a lot of underlying assumptions for granted without actually enumerating them. I’m looking to understand why Germany should have to manage its economy based on the aims of the rest of the EU and not their own, which seems to be what’s implied here.
Put simply, Germany wants (or wanted - we don't talk about the euro crisis much anymore even though it was never really resolved) everyone in the EU to a) trade mostly with other EU members, b) run a trade surplus. This is obviously impossible, but Germans don't want to hear that in a modern economy, for Germany to have no debts means someone else must. They sent moralists to do an economist's job.
That being said I have no idea what the OP was on about, it's not illegal, it's just stupid.
“* I’m looking to understand why Germany should have to manage its economy based on the aims of the rest of the EU and not their own*”
Because Germany has renounced part of its independence and sovereignty by joining the EU, so now it has to do the patriotic thing and think of that larger collective. As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country. As was pointed out many times during the crisis years of 2008-2013, many of the problems in the EU exist because of its partial and unfinished integration. It is very difficult to have a unified currency without also having a unified fiscal policy. As others have pointed out, the EU cannot survive in its current state, either it breaks up or it deepens its integration and becomes a United States of Europe.
>Because Germany has renounced part of its independence and sovereignty by joining the EU, so now it has to do the patriotic thing and think of that larger collective.
Is this enumerated in a treaty? Which law says this?
>As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country.
I live in the United States and I have never, ever, heard of this question being asked. Which thing is New York sacrificing for the rest of the United States?
"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."
I read somewhere that europeans agreed to an open market and common currency that included Germany only if German's export surplus were contained. I dont know if they are part of the treaties of not.
The idea being, why would Italy, France and Greece agree to open their market and give up their currencies (ie ability to devalue) in the face of the German juggernaut? A joint market would destroy French and Italian industry and in-debt Greece - as happened.
<rant> The Euro zone was a mistake. Its premise was solid - the europeans no longer had the ability to have colonies to steal resources from, so they sought to create a large enough market to be relevant and muscle themselves into decent prices.
It failed because the US quickly made sure the euro never seriously challenged the USD. Also, a continent that makes < 1.5 children/woman is not a going concern so no one has ever taken them seriously. Finally, the rise of China and India sealed the EU's fate. </rant>
> The idea being, why would Italy, France and Greece agree to open their market and give up their currencies (ie ability to devalue) in the face of the German juggernaut?
Because they couldn’t manage their currencies and always dreamt of low inflation, in a few words: they wanted the Mark. Calling it Mark would have upset the nationalists, so they made the Euro.
> The Euro zone was a mistake.
Outside of the eurozone, Italy would have gone bankrupt in the mid 2000s, Greece a few years later.
To reindustrialise, whatever it is supposed to mean for a country like Italy, has nothing to do with debasing a currency, unless the plan is to surreptitiously cut real salaries and hope nobody will ask for pay rises. They have been doing that in the UK since 2007, all they got is lower salaries.
Instead they got hush money to keep rotting away their industrial base and make sure that the best thing they have is German products consumers. I am forever angry at German "high politics", how did they think this is going to turn out? And they didn't even have the guts to say to their citizens "Hey you know all this EU-growth? It is because we suppress the periphery"
I hear this quite a lot. Italy received free money, but that was a secret plan of the Germans to take over the country, because they know that Italians are stupid and would destroy their industry and buy lots of Audis. But this eventually destroyed Italy and now nobody is buying Audis.
This implies that Italians are dumb and that Germans are still in the business of making evil plans that fail at the end, because good always triumphs.
I mean that Italy, especially the north, has one of the strongest industrial sectors in the EU. It’s not a country that has to reindustrialise and even if it were, it would be doing it by debasing its currency.
Germany doesn't cut salaries because it's not the Soviet Union where salaries are centrally planned nor a lady that can change prices turning a knob. Besides, salaries in Germany have been increasing every year in the past 20 years (bar 2020, for obvious reasons).
Typical Northern Protestant bigotry. As if Italians and Greeks don't have economics courses in college.
Italians, Greeks, etc would purposely devalue their currencies to effectively lower wages (which are sticky) wrt to international markets, making their exports competitive while manufactured imports more expensive. The French created the CFA (under the bayonet) to have a larger economic mass to play with (the most egregious post WW2 colonial abuse by Europe).
of course this policy results in (very well managed) inflation which results in the middle class saving through real estate, hence these countries' high rates of home ownership (Greece in particular).
So the single market (ie no protective tariffs) and a single currency are poison to Southern Europe's industry so why should the agree to it? They agreed under the condition that Germany's industrial appetites wouldn't be rapacious. Which was a great plan, after all when has Germany ever tried to swallow its neighbors? /sarcasm
> Typical Northern Protestant bigotry. As if Italians and Greeks don't have economics courses in college.
For your information I am Italian, I won’t reply to the rest of your fantasy, but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites.
> They agreed under the condition that Germany's industrial appetites wouldn't be rapacious.
So you are saying that when Italy joined the euro, they asked the Germans to slow down research and development and to artificially reduce the productivity of its industry? Or does “rapacious” mean that the Germans send assassins to kill good Italian managers? Are you implying that Italians are inherently less productive than Germans?
So was I until I grew out of it. What's your point?
"Are you implying that Italians are inherently less productive than Germans?"
... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.
I didnt venture an explanation as to why Neapolitans make less cars, nor do I care. The role of Rome, or any government, is to represent the interest of its citizens.
If Napoli makes less cars because there's less capital invested or because they all get sick during the world cup is of secondary concern to me. My primary concern is that the internal market ensures my citizens are employed in a dignified labor (and not that story of a woman offered 200euros/month to work 6 days a week as a cashier)
"but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites."
The CFA is not a conspiracy theory, ask Congo (or Gaddafi. Or do a HN search in the bottom of this page), and you'll find websites in all languages talking about it. Especially French, but Ive read websites in Spanish, and in English.
The only language I haven't read about the CFA is in Italian, but the Italian internet is... dull.
"Or does “rapacious” mean that the Germans send assassins to kill good Italian managers?"
I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.
"So you are saying that when Italy joined the euro, they asked...."
Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.
> So was I until I grew out of it. What's your point?
That I’m not Nordic nor Protestant.
> ... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.
So, is it a racial thing? The Italian is inherently less productive because he doesn’t have the German spirit?
> The CFA is not a conspiracy theory, ask Congo (or Gaddafi.
I’m not sure Gaddafi opinion would be relevant.
> I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.
So the Germans are back at the Reich thing and Frau Merkel is a cover up because we are scared of people with moustaches.
> Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.
So you read it on a blog and you think it makes lots of sense but you can’t explain how? What are these safeguards supposed to be? If Audi makes too many Audis than Frau Merkel has to drive a Fiat Punto?
> Also, a continent that makes < 1.5 children/woman is not a going concern so no one has ever taken them seriously.
So much wrong with that sentence.
The birth rate went that low (and lower!) but has been going up recently[0]. But even if total population was halving every generation, that’s only a concern if it’s sustained for many generations, and population forecasting (especially this simplistic) has never been particularly accurate over such periods.
Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3].
"The birth rate went that low (and lower!) but has been going up recently[0]. But even if total population was halving every generation, that’s only a concern if it’s sustained for many generations, and population forecasting (especially this simplistic) has never been particularly accurate over such periods."
Who cares what the halving period is? You still have an inverted population pyramid. Have fun paying pensions. Even if you started popping 3 kids per woman today you still have 30 years before they become productive (debauchery during an Erasmus is not a productive use of time). How's Europe going to pay bills until then?
Btw, 3 kids / woman in Europe is a laugh - 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so. But why would you if you have the qualifications to move abroad?
"Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3]."
I really dont understand how your point about nuclear weapons is germane to this discussion. Ill have to ask the French and Brits? Naw, Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.
As to Europe's post war relevance - Europe has no resources and the Asians have caught up, and surpassed, technologically. Where's Europe's competitive advantage?
Europe's GDP is not impressive. Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery. On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.
Europe is not a going concern. Heck Im expecting a new debt crisis in the EU this year
As does the USA and China, with fertility rates of 1.7 (according to Google).
> Have fun paying pensions.
Pension ages are increasing. Germany is also encouraging immigration, but that's only going to affect Germany as a million across Germany is economically relevant but the same million across the entire continent isn't.
But, we also have improving tech for old age care as everyone saw this coming since the Japanese did it first, and anti-aging in lab rats is now at the "huh interesting" stage. Nothing's guaranteed of course, this is just to illustrate that everything can radically change for reasons you don't consider. Like a global pandemic or a land war in Asia.
> 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so.
And as the population goes down, everyone still around gets more space.
> But why would you if you have the qualifications to move abroad?
Where? Europe is very varied from one country to another, but overall it's better than most places worldwide — while not as much as the USA, the USA doesn't seem to want immigrants, and conversely much better than China and India which you previously described with the sentence "Finally, the rise of China and India sealed the EU's fate".
> Ill have to ask the French and Brits?
Both of which have only enough to deter outside forces from destroying them, they didn't have enough military power to e.g. keep their empires.
> Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.
The modern state of Germany literally only exists because of the fall of the decline and fall of Soviet Union, allowing reunification. They felt safe for fairly obvious reasons, but that postdates the only period of European weakness since the age of exploration.
> Where's Europe's competitive advantage?
This is the only relevant question. I don't have an answer (software engineer not economist), but everything else you've said either doesn't matter or can't be treated as a long-term trend.
> Europe's GDP is not impressive.
The EU alone being the third largest on the planet isn't impressive? As you sometimes write of the continent and sometimes of the EU, I will also add that if Brexit had not happened the EU alone would be above China right now, and you can add another trillion for the EFTA. The biggest economic issue the continent has right now is that Russia and Ukraine are both in the continent, and each is likely to see order-of trillion dollar costs.
> Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery.
"Everyone else is catching up" is not a bad thing. If all else was equal, every nation would have a share of GDP equal to their share of population, which would put Europe at double the GDP of the USA and China at four times the GDP of the USA.
> On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.
Tertiary sector includes tourism, but isn't limited to it. Tourists is 10% of EU GDP. Tourism includes museums.
Other things in the tertiary sector include education, IT, FIRE, management consulting, and public health.
It's generally seen as a good thing, and is more than half of both China's and India's GDP.
“europeans agreed to an open market and common currency that included Germany only if [Germany makes a certain concession]”
It was rather the other way round: Germany was made to agree to the euro project as a concession for reunification.[1]
All in all, this seems to have been beneficial for a majority of normal people in the countries getting a stronger currency and for a minority of people in Germany, who export: Consequently, Germany’s wealth distibution tends to be the most unequal in the euro zone,[2] and its median wealth is slightly below that of Slovenia and significantly below that of France, Italy and Spain.[3]
"It was rather the other way round: Germany was made to agree to the euro project as a concession for reunification."
So the Germans accept the Euro in exchange for re-unification (France's biggest mistake IMO) Thats one negotiating point.
Second negotiating point: who's in charge of the Euro? Who's industrial interests are represented by the ECB? Germany needs cheap imports (strong currency) or its industry screeches to a halt.
Germany needs a currency that is too strong for its direct neighbors and too weak vs the world economy. Something like shouldn't even be possible yet this entire HN submission is about how Germany should continue distorting the markets.
"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."
Not just a common currency area, most of the world, but is there anything wrong with that? Somebody has to have savings to stand up to the corporates. Its what Obama's Diesel-gate was all about! Obama (remember him?) was telling Merkel to run a trade deficit, but stepping back, what you have are different countries dictating policy to other countries, in this case the US dictating to Deutschland how to spend their money. The meme being pushed in financial circles is "debt is money", when what they really want to say is the biggest borrowers get to dilute their currency the most and dilute, which can be read as weaken, the purchasing power of other people. So you see countries like the UK ramping up house prices, mortgages creating new money in the absence of the UK actually making anything of any worth, shelter is also on the lower tiers of Maslow's Hierarchies of Needs , the British Media pumping out thousands of hours of property porn to reinforce Asch conformity, is all in all a highly intelligent way to control people using stealth means!
I mean, the US saves very little money and yet was able to stand up to VW Group, so I'm not sure what "has to have savings" has to do with your example.
Obama's observation was that you can't run a trade surplus with Southern Europe for decades and then get all surprised when they run out of money to pay you with. In a similar vein, you can't have EU cross-border banks without a EU cross-border insurance deposit scheme, because then one bank can potentially drown a small country, which is what happened during the Eurozone crisis.
Debt dilutes the currency because money is created every time someone takes on debt, it means your overseas creditors ie other countries get their money back, but its worthless today than in the past, because this is monetary inflation, not to be confused with the man on the streets inflation which is price rises. At the end of the day its just an intellectuals way of keeping the plates spinning and the uneducated in their place. Now it also happens this is a way for banks to wrestle power away from the politicians, just like stock market listed companies can put a ban on recruitment when a new political party comes to power, increasing unemployment. Its hard for Govt's to prove this, because legislation isnt the brightest, in fact, legislation can create fake science. Its a massively complex subject and education is the first step in divide and conquer.
That's an extremely naive thing to say. Do you think the root cause of this does not apply to other European countries? Namely, faltering supply chains in Asia, skyrocketing energy prices?
Why? Materials get imported from outside the EU all the time and exports can also go across EU borders. It's not like Americans pay their BMWs with euros.
No country has a trade surplus/deficit of exactly 0, or even near 0. There's always at least half a billion going either way. If you know of any treaties that put limits on these numbers, I'd like to know what they are because I'm very curious about the intentions behind the people who would draft something like that.
Going by https://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_... (link says 2013, but document says Q1 2022), Germany had an intra-EU trade surplus of about 0.2 billion euros. Germany is the closest to a perfect balance within the eurozone in the entire EU except for Bulgaria. Their surplus is almost entirely extra-EU, which isn't a problem for EU members.
>It's not like Americans pay their BMWs with euros.
The Greeks do hence they are massively in debt. No, they can't export their way out of debt because that would mean Germany has to export less and import more. Germany is supposed to be the workplace country and Greece must remain soulless suburbia with no job opportunities.
The Greeks are in massive debt because of years of financial mismanagement and fraud, as well as cooking their books to get into the EU to make their economy look more stable than it really was.
Greece can export to any country it wishes, if it has goods or resources that other countries want. If Greece can produce the Germans really want, they'll export to Germany all the way to an internal German trade deficit.
The entire EU would be quite happy if Greece turned into a workers' paradise tomorrow, but no other country is going to pay to fix the mess corrupt Greek governments have left behind unless the Greek situation threatens the stability of their own economies.
No, this is completely in line with everything that the EU is all about. I'm not sure where you got the belief that Euro countries are not allowed to have internal trade deficits, it's inevitable in fact.
I rememember in an econ book that we think that exports have the "world" to serve. But in reality most countries trade the most with those closest to them. I wouldn't be surprised if that was the case for the majority of EU countries
Yes, but don't underestimate the exports that Germany is generating, between all of the high tech there and the car companies you are looking at a substantial exporter.
China is #1, the USA (all of it) is #2 and Germany (just Germany, not the EU) is #3. Have a look at their relative populations and appreciate that fully.
Asia is exporting too (Japan, China, Korea). Australia is exporting. The only ones not exporting, i.e. importing is Africa and South America and eastern Europe including Russia if you ignore their oil exports.
This is deeply ideological, and wrong. You're using arguments levied at Trump years ago that applied to the US, a mostly services-based economy, and applying them to Germany.
Except Germany is a manufacturing- and export-based economy. Take that away, and you have a recipe for economic collapse.
Or, read what Stratfor (if you have a subscription) has been predicting for a decade now: Germany's slow decline, to be replaced as Europe's power center by Poland.
Germany was already facing a worker shortage and inflation. Now the government is discussing rationing gas allocated to German businesses. Beyond the ideological arguments, it's clear that this is going to be a crisis for Germany, and for all Eurozone economies; and their reactions will determine "how bad it gets". We are looking at a probable recession across Europe.
By the way, I warned months ago that sanctions against Russia would have a backfire effect: Russia is mostly unscathed, their oil and gas revenues are soaring; meanwhile Germany is talking about rationing. Sanctions don't work in an interconnected economy.
Trade deficits are bad for an economy whose entire strength relies on exports.
edit: Germany's exports are 48% of GDP for context. And this trade deficit reflects increased import costs, which will hurt businesses since Germany is poor in raw resources. I.e., this is a problem for both the German government & German businesses, and for their whole economy.
Mark Blyth, who I find to be a cynical but entertaining economist, would say (paraphrasing):
An export-based economy just means you let someone else consume the excess you produce.
In exchange, you receive an increment to an arbitrary number stored in a computer somewhere. This might be a reasonable model for a household, but governments can print money making the value of said number somewhat fluffy. In a sense, the US got away with QE (for as long as it did) because other countries exercised tight fiscal policy. In the aftermath of 2008, the ECB was as conservative as ever and Europe relied on American $'s for liquidity. Or another way of thinking of it: so long and thanks for all the BMW's :)
I'm a Blyth fan but you are missing out a critical component of the right to print money, which is that the US dollar is the reserve currency of the planet. The petro dollar (offshore) is not backed by the FDIC the onshore US dollar is.
The vast US military is arguably primarily to protect the right to print the world's currency. (The day Iraq started to sell oil in euros the US attacked it for example)
As Blyth knows and talks about the ECB is in dire straits versus the reserve currency dollar. The EU has a difficult road ahead having completely screwed up their energy policy and are now creating food shortages in Holland and elsewhere to add to the global inflation nightmare.
It's hard to tell if the US federal (it's not, it's private banks) reserve (they don't have any) are willfully incompetent or master tactical strategists...
There's no food shortage at all. This is about farmers protesting future measures against global warming, which might partially shutdown livestock production.
I was aware of that happening (though that not necessarily leading to significant food shortages), which is why I added the "especially ones caused by the EU". Though re-reading now I guess you weren't talking about energy policy there and instead refer to the Natura 2000 areas it selected (though not really recently)?
> The day Iraq started to sell oil in euros the US attacked it for example
This stupid meme needs to die.
Iraq's switch to the Euro was not some rogue act of defiance. It happened under the UN's Food for Oil-for-Food program and was authorised by the Security Council: https://www.un.org/depts/oip/background/chron.html
If it really was such a significant risk to the dollar hegemony, the US could have simply vetoed it. The switch happened in late 2000 but Iraq wasn't invaded till March 2003.
> US federal (it's not, it's private banks) reserve
Preceding the 'oil for food' historical fig leaf was the Iranian oil bourse, an attempt to get the petroeuro off the ground. That was headed off and nipped in the bud pretty fast by the petrodollar mercenaries...
The FR is a federal board 'overseeing' 12 private chartered regional banks. This contraption was organized in deep secrecy in 1910 at Jekyll Island as I expect you are aware.
> Or, read what Stratfor (if you have a subscription) has been predicting for a decade now: Germany's slow decline, to be replaced as Europe's power center by Poland.
The Polish GDP per capita is 30-40% lower than the German. Assuming it will ever happen, it will take decades for Poland to replace Germany.
German GDP is ~$3.8T to Poland's ~$600B, a roughly 6x difference. And there is hardly any trajectory change in the last 15 years, so color me skeptical Poland will overtake Germany economically anywhere in the next 50 years.
I think what you're referring more concretely is the difference between Balance of trade vs. Balance of payments, the latter being the addition of tertiary/financial sector.
For an export driven economy like Japan, Germany or China - balance of trade could be bad. How big is the German software & banking industry to offset some of this default in the long haul?
> Or, read what Stratfor (if you have a subscription) has been predicting for a decade now: Germany's slow decline, to be replaced as Europe's power center by Poland.
As a Pole, I cannot help but laugh at that. Why would that ever be the case?
Feel free to read Stratfor's site (I named an extension that allows full free access) or George Friedman's "The Next 100 Years" book.
Stratfor employs many ex-US-intelligence-agency people who use the same geopolitical analysis methods for a corporate audience (though without classified data) and their views are a close approximation of the thinking of the US's intelligence community; in that sense, they are significant.
Friedman sometimes has some interesting takes but is often dramatically and laughably wrong. I would hesitate to take much of what they say as having much predictive accuracy at all.
They do state it with an air of authority and "high caliber top secret intelligence" but still laughable.
If you post nonsense replies you are just disincentivizing anyone thoughtful from posting here.
To reply (though you were perfectly capable of this thought yourself):
Obviously; but it gives us a frame to understand geopolitical behavior by the US as it happens, and before it happens.
Edward Gibbon described “secret intrigues of the palace” (palace intrigue) as “those trifling but decisive causes which so often influence the fate of empires.” Stratfor is the Pentagon's palace intrigue (several steps removed).
If you've ever read Stratfor you know they expect, and plan for, the disintegration of Russia and China into smaller republics; and you can tell I don't believe in that.
It is merely an indication that the US likely now sees Germany as a second-rate ally, irrelevant to its geopolitical future; and therefore doesn't care about the sanctions' effect on Germany. That is the only reason I brought it up.
Just like simply eating at a McDonalds once doesn’t make me an expert on Burgers. . .
Similarly, holding the passport of a country doesn’t automatically make someone a geopolitical expert
I mean no offense at all, I’ve simply observed way too many instances of online discourse beginning with “as a citizen of ____” to establish credibility in areas that don’t really benefit from citizenship.
I kind of agree with you in a way: saying Poland will overtake Germany is as laughable as saying Canada will overtake the US as the economic leader in north America. You don't even need to be Canadian to know how ridiculous of a claim this is.
In my reading, the point of 'as a Pole' is to say 'look I bear no ill will towards Poles, I want the best for Poland as much as the next citizen', it's not claiming authority, it's disclaiming bias against.
> to be replaced as Europe's power center by Poland
Not gonna lie, you had me in the first half.
Poland has had an anemic demography for years (1.38 child per woman in 2021, the lowest in Eastern Europe after Ukraine and Moldova), a massive brain (and workforce more generally) drain since the fall of the Eastern Block.
Its GDP per capita is even 30% lower than Czech Republic and less than a third of German's GDP.
German's economy is going to face troubles, but Poland isn't even remotely close to taking any kind of economic leadership. And it won't happen until Poland fixes their natality issue (and even then, it would take them another fifty years).
That is completely wrong. Germany exports by indebting other nations and the only way to further indebt other nations is by lending to them at even lower interest rates.
it’s an unhealthy habit to endorse a very complicated topic by referring to an introductory website . that’s a flimsier approach than most religions even
It would be better to articulate the gist of an on-topic thought in the confines of a HN post, rather than sending people off to go read something. If something in the article is wrong, let's address that exact thing in the comment. If you have understood your own beliefs well and can articulate them, then you can make great impact on a thread that way.
"Just read this link" on a complex and controversial topic may be comparable to "Just read this religious tract".
Incoherent response. tonymet (OP) protested that it was a “complicated topic”, not that economics itself is bunk. In fact saying that it is a complicated topic implies that one should respect the field.
You can’t arbitrarily denigrate one side of the argument because economics is a religion when both sides take it as a given that economics is a rational field of study.
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.
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.
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.
> Germany has recorded its first monthly trade deficit [€1bn] since 1991 [the year of reunification] amid soaring inflation and supply chain disruption weighing on the country’s industrial base.
Then from Wikipedia:
> In 2016, Germany recorded the highest trade surplus in the world, worth $310 billion. ...
So it's not just the magnitude of the trade balance (negative) but the velocity (sharply downward) that should get attention.
The US has run persistent trade deficits (now ~ $50 billion) for years. This brought cheap goods but eviscerated the manufacturing base. You could call it a tradeoff. What the US has going for it though is: (a) the ability to print its own money; (b) the ability to print the world's reserve currency; and (c) the demographics to support a consumption-led economy.
Germany has none of these things going for it. The situation is not sustainable. The article implies that the change is not structural (increased competition from elsewhere, for example), but if it is things could get weird real fast.
There are other issues with this number that also comes with a surge in imports, just to mention one of the other hidden factors that are making everything extremely unstable.
>Germany has none of these things going for it. The situation is not sustainable.
What? Balanced trade is inherently sustainable. If Germany exported for the last few decades then it is going to import for a few decades at some point. That is how balanced trade works.
> If Germany exported for the last few decades then it is going to import for a few decades at some point
not necessarily. A situation like this could easily and quickly spiral out of control. High inflation could wipe out decades of trade surpluses and germany cant even control their own inflation, because its using €, which is controlled by the European Central Bank.
As a german citizen I'm hopeful that its only temporary however and that our economy recovers at least somewhat over the next few years.
Many businesses currently have severe supply issues. Prizes for computer chips are 100 times higher in some cases. The situation is a bit better now but many could not produce as much as they wanted in the past quarters. Now many businesses run extra work shifts because there are massive back orders. My company could send sales into holiday until mid 2023, they currently basically sell stuff that doesn't exist...
But computer chips are just a small part, inflation is mainly driven by energy prices right now. Germany's economy is also heavily globalized and any conflicts or reduced global trade will hit the economy pretty hard.
Still, exports totally were just reduced by ~ .5% while imports increased by 2.7%. But these small percentages already create an imbalance.
This is to be understood under the high oil and gas prices and supply shortage.
Germany has a huge industrial organic chemistry complex. In comes the oil and gas, which get vapocracked, distilled into base molecules; out goes fertilizers, plastics, medecines, precursors, etc
It is so integrated that pipes run from one factory to another. Changes in the input will affect the whole chain.
No, that’s a valid point you make, but sadly, not relevant in the present context.
The constituent factors of the trade imbalance being spoken about here is a sharp rise in energy costs. For decades, Germany has led the EU in repressive energy security policies including a heavy focus on shutting down existing Nuclear facilities that typically have >90% uptime in favor of cyclic sources.
Sorry, but your comment is misinformed and just wrong and the sources are intentionally misleading.
In H1 2022 >50% of German energy consumption was from renewables [1] and Germany has currently significantly lower spot-market prices than France, which went full-on nuclear [2].
The sharp rise in energy costs has nothing to do with nuclear (at least not now - if the society 20-30 years ago had invested more in nuclear, things could've turned out differently. Now, nuclear is neither feasible nor economically viable..) and everything to do with gas prices, which dominate energy costs due to the merit order. Coal is currently actually still used below capacity while gas plants are running at record utilization, thanks to profit-maximizing utility companies exploiting this.
Unfortunately, Germany had a government for the last 16 years that cared a lot for preserving the status quo for incumbents (cheap gas!) and neither companies nor consumers were willing to pay a premium for energy security/resilience. We're now paying the bill for that.
If you look at (the very few) recent nuclear projects in western countries, you will notice that a) they take very long to build (longer than to bridge any gap from gas and coal and longer than we have due to global warming), b) they are way more expensive than (over-provisioned) solar/wind PLUS energy storage to make renewables "stable", even when not fully factoring in implied state-guarantees (nuclear is still uninsurable and thus dependent on heavy subsidies that are almost never accounted for by advocates + the problem of longterm storage has also never been solved and is not covered by most cost calculations) and c) the energy companies don't even have enough trained/experienced staff left to extend the life of the last 3 german nuclear power plants.
Yeah, nuclear superficially sounds like a good solution, but I am always surprised that most proponents havbe never looked into the details. Just ask yourself why China, where "irrational" nuclear fear plays no role at all, never went full-on nuclear (~5% of chinese electricity comes from nuclear and even with all planned new projects it will be max 15% by 2050). The reason is they did the math....
> If you look at (the very few) recent nuclear projects in western countries, you will notice that a) they take very long to build (longer than to bridge any gap from gas and coal and longer than we have due to global warming),
That's not always the case, and it's mostly due to regulations which we can revisit. There is a ton of regulatory overhead on nuclear that is based on nothing but fear. More importantly, we don't have any other option to substitute gas and coal in ANY timeframe if not with nuclear.
> they are way more expensive than (over-provisioned) solar/wind PLUS energy storage to make renewables "stable", even when not fully factoring in implied state-guarantees (nuclear is still uninsurable and thus dependent on heavy subsidies that are almost never accounted for by advocates + the problem of longterm storage has also never been solved and is not covered by most cost calculations)
Let's unpack this a little bit. Yes, there is no solution for long term storage, but it is also not a huge problem. Even if all our energy came from nuclear, we could safely store all waste produced from it in a very small space. Again, compare it to the alternatives: the waste from coal and gas is released in the atmosphere, causing thousands of direct deaths due to pollution, and potentially billions due to climate change.
Now for the first part. Nuclear is not heavily subsidized at all - renewables have way more subsidies, and let's not even talk about coal and gas -, nor is there any issue getting it insured except cost. In fact this is a major factor in how costly it is, because nuclear providers usually have to contract private insurance [0].
> the energy companies don't even have enough trained/experienced staff left to extend the life of the last 3 german nuclear power plants.
This is a German problem, not a global problem. And in the time it takes to get these plants running, we could easily train staff. Again, not an issue except cost.
> Just ask yourself why China, where "irrational" nuclear fear plays no role at all, never went full-on nuclear (~5% of chinese electricity comes from nuclear and even with all planned new projects it will be max 15% by 2050). The reason is they did the math....
Yes, they did. Which is why in China 10 years ago nuclear energy was only 1% instead of 5%, and 10 years before that it was 0.1% [1]. And they plan to double it to 10% by 2035 [2]. In other words, China is the perfect example of my point, not yours.
But let's address the elephant in the room. What is your proposed alternative to nuclear?
I just read (literally published right now) that 49% of the energy that has been produced in Germany during the first half of this year is from renewables. 6% more than last year.
3 Reactors have just been shut down 6 months ago and probably could be temporarily restarted within months. Building SMRs does not take 20 years. Getting people to accept the truth apparently can take decades though.
Most obvious explanation: the amount of money spent by Germany for energy imports, especially gas being bought on the sport market, has skyrocketed. That is a lot of money going to the balance without requiring the exports to be reduced - which they probably have been too. A lot of German industry depends on parts from Ukraine, like VW getting their cable trees from Ukraine manufacturers.
I can't help having a bit of freudenschade. The mighty Germans F it up. They didn't want to break eggs with Turkey and get advantage of the SE Med gas reserves. They didn't like nuclear after bashing it for so long. And of course, they got dragged into a war that they are too small for.
Sad thing is that 1. Whole EU has to suffer because of this 2. You can't stop thinking "What it would be like if Germany actually stepped up to lead with understanding"
>And of course, they got dragged into a war that they are too small for.
There is no inherent reason why Germany cannot singlehandedly support/fund Ukraine's war with a country with an economy 40% Germany's size.
That it cannot is a condemnation of every German government over the past 30 years. (That NATO's European members cannot do so either, and that the US is providing the bulk of the Ukraine aid, is correspondingly a condemnation of every member government over the past 30 years, although the newer members get a pass because they are a) small, b) poor, and c) actually meet the NATO 2%-of-GDP guideline.)
IMO, you severely underestimate how difficult wars are now. Russia has not even general mobilization active, Moscow is running "business as usual" (AFAIK). Taking any "modern" military completely out is a guaranteed war of attrition at this point (and a MAD in itself)
Most countries have better things to do than perpetually going to war and meddling in the affairs of other countries. So on the contrary, there is no reason - inherent or otherwise - why Western Europe would get at all involved in this war. It’s a catastrophe for WE and by extension also for EE.
The US do have an interest and they’re dragging/pushing WE into the fire while EE are jumping head first with barely any encouragement.
If anything the EU has proven that the East-West rift cannot be overcome and that they do not have strategic independence.
>There is no inherent reason why Germany cannot singlehandedly support/fund Ukraine's war with a country with an economy 40% Germany's size.
There certainly is an inherent reason, which is that Germany and the German economy is dependent on Russian oil and gas as well as fertilizer and a whole host of other natural resources. This inherent reason will initially be felt only economically as factories and industries shut down without the resources need to continue production. In a few months when the temperature starts dropping this inherent reason will be felt in a much more interpersonal way as the German people start freezing to death when they can not afford to heat their homes or find the fuel to do so.
I guess you are a warmongering american? "And of course they got dragged into a war" is like the most stupid shit I read this entire year. Maybe you should stop invading every country and stop forcing Europeans into wars, that they don't want to fight.
The parent comment had few valid points. As a fellow EU citizen, from Finland, I'm quite sadden how badly the Germans have handled the post-Ukrainian invasion, from energy perspective and from leadership point-of-view. The latter will have long lasting effect on the whole of EU.
I don't know why you disagree with me. Thats exactly my point. Whole EU got dragged into a long war by US, that could have been avoided if EU had any real strength behind it. Whole EU is at fault for being sleepy, thinking that US protection is coming for free.
France tried repeatedly (for their own benefit but thats a given) to arm EU. Germany was comfortable so they turn it down (or at least hide behind US opposition).
> France tried repeatedly (for their own benefit but thats a given) to arm EU. Germany was comfortable so they turn it down (or at least hide behind US opposition).
It wasn't Germany blocking an EU wide army but the UK. Maybe you should get your facts straight.
>And of course, they got dragged into a war that they are too small for.
What? Since when is making nuclear weapons obsolete a noble goal? I am really confused. Rheinmetall is heavily investing into autonomous AI for ground vehicles. The drone swarm memes are starting to get real, except flying drones were a stupid fantasy fueled by cheap imported plastic drones rather any any capability that they offer.
>Sad thing is that 1. Whole EU has to suffer because of this 2. You can't stop thinking "What it would be like if Germany actually stepped up to lead with understanding"
I think that demonstrates the typical issue of not having leadership change for a long period of time. Under Merkel - who grew up in socialist East Germany - the Germany got a lot of structural characteristics of a socialist economy, in particular being dominated by large manufacturers who have been getting preferential treatment from the government, and losing the ability to adjust and maneuver. She also didn't have that gut check of dealing with Russia and has put all the Germany's eggs into one basket which has been held by Putin. Thus what happens right now is a light form of shock-therapy of getting adjusted back to the new reality of the current global economy. Their leadership still seems to hope that some form of the old trade relationship with Russia will survive. The faster they ditch that hope the faster the shock-therapy will get completed. Germany needs to bite the bullet and massively build the LNG terminals (one would expect that North Stream 2 landing point has all the connection into the infrastructure to take it in). The second best thing Germany can do for its economy is to supply Ukraine with a lot of weapons. Germany naturally has significant hesitancy to meddle into Ukraine war, yet the faster, stronger and earlier Russia stopped - the better for everybody, including Germany. Russia getting onto the Poland border is much worse than Russia forcefully stopped where for example it is now. Germany for now has been very slow at supplying weapons to Ukraine and thus prolonging the chances of Russia moving closer to Europe.
Best thing Germany could do is stop supplying weapons to Ukraine and convince Zelensky to agree to Russia's terms. EU gets it's buffer state and cheap gas, Russia gets it's buffer state and peace of mind , Ukraine.. Well, Ukraine gets ripped apart . Revolutions fail every so often, this will be one of such cases
The next 'buffer state' after hypothetical UA fall is Poland, and make no mistakes about it - Poles will move to blowing up German infrastructure in retaliation this time around. You can pull Ribbentrop-Molotov only once. Majority of Poles know where Schroder is now and who he has been working for the last 25 years.
So Yes, Germany can dream of appeasing Russia by risking internal EU war with Poland.
>Under Merkel - who grew up in socialist East Germany
Something never talked about is how her parents moved from West to East Germany when she was a baby.
>Germany got a lot of structural characteristics of a socialist economy, in particular being dominated by large manufacturers who have been getting preferential treatment from the government, and losing the ability to adjust and maneuver. She also didn't have that gut check of dealing with Russia and has put all the Germany's eggs into one basket which has been held by Putin.
It's amazing how many gullible still say that Merkel was always against German dependence on Russian gas but could not do anything about it. For 16 years!
I would be surprised, but not shocked, if we learn someday that Merkel is a long-term Russian intelligence asset, recruited in her youth.
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[ 6.4 ms ] story [ 277 ms ] threadIn the export destinations like Greece. For Germans it means supressed wages because they have to compete against Greek wages which means Germany has to sacrifice its productivity gains to provide low priced goods, effectively giving those productivity gains away for free the moment the export destination country predictably must go bankrupt.
https://archive.nytimes.com/krugman.blogs.nytimes.com/2010/0...
Of course, you could make the argument that it violated the spirit of the treaties.
That being said I have no idea what the OP was on about, it's not illegal, it's just stupid.
Because Germany has renounced part of its independence and sovereignty by joining the EU, so now it has to do the patriotic thing and think of that larger collective. As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country. As was pointed out many times during the crisis years of 2008-2013, many of the problems in the EU exist because of its partial and unfinished integration. It is very difficult to have a unified currency without also having a unified fiscal policy. As others have pointed out, the EU cannot survive in its current state, either it breaks up or it deepens its integration and becomes a United States of Europe.
Is this enumerated in a treaty? Which law says this?
>As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country.
I live in the United States and I have never, ever, heard of this question being asked. Which thing is New York sacrificing for the rest of the United States?
https://www.intereconomics.eu/contents/year/2018/number/3/ar...
"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."
The idea being, why would Italy, France and Greece agree to open their market and give up their currencies (ie ability to devalue) in the face of the German juggernaut? A joint market would destroy French and Italian industry and in-debt Greece - as happened.
<rant> The Euro zone was a mistake. Its premise was solid - the europeans no longer had the ability to have colonies to steal resources from, so they sought to create a large enough market to be relevant and muscle themselves into decent prices.
It failed because the US quickly made sure the euro never seriously challenged the USD. Also, a continent that makes < 1.5 children/woman is not a going concern so no one has ever taken them seriously. Finally, the rise of China and India sealed the EU's fate. </rant>
Because they couldn’t manage their currencies and always dreamt of low inflation, in a few words: they wanted the Mark. Calling it Mark would have upset the nationalists, so they made the Euro.
> The Euro zone was a mistake.
Outside of the eurozone, Italy would have gone bankrupt in the mid 2000s, Greece a few years later.
This implies that Italians are dumb and that Germans are still in the business of making evil plans that fail at the end, because good always triumphs.
Go look at the econ stats circa 2000 of Veneto, Lombardy and Piedmont and compare them to Germany's.
Typical Northern Protestant bigotry. As if Italians and Greeks don't have economics courses in college.
Italians, Greeks, etc would purposely devalue their currencies to effectively lower wages (which are sticky) wrt to international markets, making their exports competitive while manufactured imports more expensive. The French created the CFA (under the bayonet) to have a larger economic mass to play with (the most egregious post WW2 colonial abuse by Europe).
of course this policy results in (very well managed) inflation which results in the middle class saving through real estate, hence these countries' high rates of home ownership (Greece in particular).
So the single market (ie no protective tariffs) and a single currency are poison to Southern Europe's industry so why should the agree to it? They agreed under the condition that Germany's industrial appetites wouldn't be rapacious. Which was a great plan, after all when has Germany ever tried to swallow its neighbors? /sarcasm
For your information I am Italian, I won’t reply to the rest of your fantasy, but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites.
> They agreed under the condition that Germany's industrial appetites wouldn't be rapacious.
So you are saying that when Italy joined the euro, they asked the Germans to slow down research and development and to artificially reduce the productivity of its industry? Or does “rapacious” mean that the Germans send assassins to kill good Italian managers? Are you implying that Italians are inherently less productive than Germans?
So was I until I grew out of it. What's your point?
"Are you implying that Italians are inherently less productive than Germans?"
... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.
I didnt venture an explanation as to why Neapolitans make less cars, nor do I care. The role of Rome, or any government, is to represent the interest of its citizens.
If Napoli makes less cars because there's less capital invested or because they all get sick during the world cup is of secondary concern to me. My primary concern is that the internal market ensures my citizens are employed in a dignified labor (and not that story of a woman offered 200euros/month to work 6 days a week as a cashier)
"but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites."
The CFA is not a conspiracy theory, ask Congo (or Gaddafi. Or do a HN search in the bottom of this page), and you'll find websites in all languages talking about it. Especially French, but Ive read websites in Spanish, and in English.
The only language I haven't read about the CFA is in Italian, but the Italian internet is... dull.
"Or does “rapacious” mean that the Germans send assassins to kill good Italian managers?"
I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.
"So you are saying that when Italy joined the euro, they asked...."
Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.
That I’m not Nordic nor Protestant.
> ... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.
So, is it a racial thing? The Italian is inherently less productive because he doesn’t have the German spirit?
> The CFA is not a conspiracy theory, ask Congo (or Gaddafi.
I’m not sure Gaddafi opinion would be relevant.
> I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.
So the Germans are back at the Reich thing and Frau Merkel is a cover up because we are scared of people with moustaches.
> Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.
So you read it on a blog and you think it makes lots of sense but you can’t explain how? What are these safeguards supposed to be? If Audi makes too many Audis than Frau Merkel has to drive a Fiat Punto?
I don’t think you should continue with this.
So much wrong with that sentence.
The birth rate went that low (and lower!) but has been going up recently[0]. But even if total population was halving every generation, that’s only a concern if it’s sustained for many generations, and population forecasting (especially this simplistic) has never been particularly accurate over such periods.
Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3].
[0] https://www.macrotrends.net/countries/eur/europe/fertility-r...
[1] https://www.reference.com/geography/many-cities-world-c25cce... and https://en.m.wikipedia.org/wiki/List_of_states_with_nuclear_...
[2] https://en.wikipedia.org/wiki/Economy_of_the_European_Union
[3] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
I think the data you linked is prediction from year 2020 onwards, and there is no observed increase from 2013.
Who cares what the halving period is? You still have an inverted population pyramid. Have fun paying pensions. Even if you started popping 3 kids per woman today you still have 30 years before they become productive (debauchery during an Erasmus is not a productive use of time). How's Europe going to pay bills until then?
Btw, 3 kids / woman in Europe is a laugh - 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so. But why would you if you have the qualifications to move abroad?
"Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3]."
I really dont understand how your point about nuclear weapons is germane to this discussion. Ill have to ask the French and Brits? Naw, Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.
As to Europe's post war relevance - Europe has no resources and the Asians have caught up, and surpassed, technologically. Where's Europe's competitive advantage?
Europe's GDP is not impressive. Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery. On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.
Europe is not a going concern. Heck Im expecting a new debt crisis in the EU this year
As does the USA and China, with fertility rates of 1.7 (according to Google).
> Have fun paying pensions.
Pension ages are increasing. Germany is also encouraging immigration, but that's only going to affect Germany as a million across Germany is economically relevant but the same million across the entire continent isn't.
But, we also have improving tech for old age care as everyone saw this coming since the Japanese did it first, and anti-aging in lab rats is now at the "huh interesting" stage. Nothing's guaranteed of course, this is just to illustrate that everything can radically change for reasons you don't consider. Like a global pandemic or a land war in Asia.
> 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so.
And as the population goes down, everyone still around gets more space.
> But why would you if you have the qualifications to move abroad?
Where? Europe is very varied from one country to another, but overall it's better than most places worldwide — while not as much as the USA, the USA doesn't seem to want immigrants, and conversely much better than China and India which you previously described with the sentence "Finally, the rise of China and India sealed the EU's fate".
> Ill have to ask the French and Brits?
Both of which have only enough to deter outside forces from destroying them, they didn't have enough military power to e.g. keep their empires.
> Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.
The modern state of Germany literally only exists because of the fall of the decline and fall of Soviet Union, allowing reunification. They felt safe for fairly obvious reasons, but that postdates the only period of European weakness since the age of exploration.
> Where's Europe's competitive advantage?
This is the only relevant question. I don't have an answer (software engineer not economist), but everything else you've said either doesn't matter or can't be treated as a long-term trend.
> Europe's GDP is not impressive.
The EU alone being the third largest on the planet isn't impressive? As you sometimes write of the continent and sometimes of the EU, I will also add that if Brexit had not happened the EU alone would be above China right now, and you can add another trillion for the EFTA. The biggest economic issue the continent has right now is that Russia and Ukraine are both in the continent, and each is likely to see order-of trillion dollar costs.
> Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery.
"Everyone else is catching up" is not a bad thing. If all else was equal, every nation would have a share of GDP equal to their share of population, which would put Europe at double the GDP of the USA and China at four times the GDP of the USA.
> On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.
Tertiary sector includes tourism, but isn't limited to it. Tourists is 10% of EU GDP. Tourism includes museums.
Other things in the tertiary sector include education, IT, FIRE, management consulting, and public health.
It's generally seen as a good thing, and is more than half of both China's and India's GDP.
It was rather the other way round: Germany was made to agree to the euro project as a concession for reunification.[1]
All in all, this seems to have been beneficial for a majority of normal people in the countries getting a stronger currency and for a minority of people in Germany, who export: Consequently, Germany’s wealth distibution tends to be the most unequal in the euro zone,[2] and its median wealth is slightly below that of Slovenia and significantly below that of France, Italy and Spain.[3]
[1] https://voxeurop.eu/en/you-get-unification-we-get-the-euro/
[2] https://www.reuters.com/article/us-germany-wealth-idUSBREA1P...
[3] https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...
So the Germans accept the Euro in exchange for re-unification (France's biggest mistake IMO) Thats one negotiating point.
Second negotiating point: who's in charge of the Euro? Who's industrial interests are represented by the ECB? Germany needs cheap imports (strong currency) or its industry screeches to a halt.
https://www.intereconomics.eu/contents/year/2018/number/3/ar...
"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."
init(clever);
Obama's observation was that you can't run a trade surplus with Southern Europe for decades and then get all surprised when they run out of money to pay you with. In a similar vein, you can't have EU cross-border banks without a EU cross-border insurance deposit scheme, because then one bank can potentially drown a small country, which is what happened during the Eurozone crisis.
Barring an economy from running a surplus seems like a terrible trade deal to me, so I wonder why the Germans would ever agree to such a rule.
If Germans are allowed to have a permament surplus, than someone MUST always have a deficit.
No country has a trade surplus/deficit of exactly 0, or even near 0. There's always at least half a billion going either way. If you know of any treaties that put limits on these numbers, I'd like to know what they are because I'm very curious about the intentions behind the people who would draft something like that.
Going by https://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_... (link says 2013, but document says Q1 2022), Germany had an intra-EU trade surplus of about 0.2 billion euros. Germany is the closest to a perfect balance within the eurozone in the entire EU except for Bulgaria. Their surplus is almost entirely extra-EU, which isn't a problem for EU members.
The Greeks do hence they are massively in debt. No, they can't export their way out of debt because that would mean Germany has to export less and import more. Germany is supposed to be the workplace country and Greece must remain soulless suburbia with no job opportunities.
Greece can export to any country it wishes, if it has goods or resources that other countries want. If Greece can produce the Germans really want, they'll export to Germany all the way to an internal German trade deficit.
The entire EU would be quite happy if Greece turned into a workers' paradise tomorrow, but no other country is going to pay to fix the mess corrupt Greek governments have left behind unless the Greek situation threatens the stability of their own economies.
China is #1, the USA (all of it) is #2 and Germany (just Germany, not the EU) is #3. Have a look at their relative populations and appreciate that fully.
Except Germany is a manufacturing- and export-based economy. Take that away, and you have a recipe for economic collapse.
Read the FT's article, which includes much more statements from politicians and economists. https://www.ft.com/content/6f325773-bf8a-4e28-9fc1-6bc986ee9... Use the Bypass Paywalls Clean extension if you need to.
Or, read what Stratfor (if you have a subscription) has been predicting for a decade now: Germany's slow decline, to be replaced as Europe's power center by Poland.
Germany was already facing a worker shortage and inflation. Now the government is discussing rationing gas allocated to German businesses. Beyond the ideological arguments, it's clear that this is going to be a crisis for Germany, and for all Eurozone economies; and their reactions will determine "how bad it gets". We are looking at a probable recession across Europe.
By the way, I warned months ago that sanctions against Russia would have a backfire effect: Russia is mostly unscathed, their oil and gas revenues are soaring; meanwhile Germany is talking about rationing. Sanctions don't work in an interconnected economy.
Ok so what is correct then? I’m not seeing the reason trade deficits are inherently bad anywhere in your comment.
edit: Germany's exports are 48% of GDP for context. And this trade deficit reflects increased import costs, which will hurt businesses since Germany is poor in raw resources. I.e., this is a problem for both the German government & German businesses, and for their whole economy.
https://en.wikipedia.org/wiki/Mark_Blyth
The vast US military is arguably primarily to protect the right to print the world's currency. (The day Iraq started to sell oil in euros the US attacked it for example)
As Blyth knows and talks about the ECB is in dire straits versus the reserve currency dollar. The EU has a difficult road ahead having completely screwed up their energy policy and are now creating food shortages in Holland and elsewhere to add to the global inflation nightmare.
It's hard to tell if the US federal (it's not, it's private banks) reserve (they don't have any) are willfully incompetent or master tactical strategists...
etc.
dutch farmers are spraying manure at the bureaucrats buildings
This stupid meme needs to die.
Iraq's switch to the Euro was not some rogue act of defiance. It happened under the UN's Food for Oil-for-Food program and was authorised by the Security Council: https://www.un.org/depts/oip/background/chron.html
If it really was such a significant risk to the dollar hegemony, the US could have simply vetoed it. The switch happened in late 2000 but Iraq wasn't invaded till March 2003.
> US federal (it's not, it's private banks) reserve
Eye-roll.
The FR is a federal board 'overseeing' 12 private chartered regional banks. This contraption was organized in deep secrecy in 1910 at Jekyll Island as I expect you are aware.
The Polish GDP per capita is 30-40% lower than the German. Assuming it will ever happen, it will take decades for Poland to replace Germany.
For an export driven economy like Japan, Germany or China - balance of trade could be bad. How big is the German software & banking industry to offset some of this default in the long haul?
As a Pole, I cannot help but laugh at that. Why would that ever be the case?
Stratfor employs many ex-US-intelligence-agency people who use the same geopolitical analysis methods for a corporate audience (though without classified data) and their views are a close approximation of the thinking of the US's intelligence community; in that sense, they are significant.
They do state it with an air of authority and "high caliber top secret intelligence" but still laughable.
Which means in that sense it will be very likely ridicously wrong?!
To reply (though you were perfectly capable of this thought yourself):
Obviously; but it gives us a frame to understand geopolitical behavior by the US as it happens, and before it happens.
Edward Gibbon described “secret intrigues of the palace” (palace intrigue) as “those trifling but decisive causes which so often influence the fate of empires.” Stratfor is the Pentagon's palace intrigue (several steps removed).
If you've ever read Stratfor you know they expect, and plan for, the disintegration of Russia and China into smaller republics; and you can tell I don't believe in that.
It is merely an indication that the US likely now sees Germany as a second-rate ally, irrelevant to its geopolitical future; and therefore doesn't care about the sanctions' effect on Germany. That is the only reason I brought it up.
https://www.bbc.com/news/world-europe-26079957
Similarly, holding the passport of a country doesn’t automatically make someone a geopolitical expert
I mean no offense at all, I’ve simply observed way too many instances of online discourse beginning with “as a citizen of ____” to establish credibility in areas that don’t really benefit from citizenship.
Not gonna lie, you had me in the first half.
Poland has had an anemic demography for years (1.38 child per woman in 2021, the lowest in Eastern Europe after Ukraine and Moldova), a massive brain (and workforce more generally) drain since the fall of the Eastern Block.
Its GDP per capita is even 30% lower than Czech Republic and less than a third of German's GDP.
German's economy is going to face troubles, but Poland isn't even remotely close to taking any kind of economic leadership. And it won't happen until Poland fixes their natality issue (and even then, it would take them another fifty years).
Yes, it is a recipe for collapse because imbalanced trade is inherently unsustainable.
Whether trade deficits are good, or bad depends on your monetary policy.
In case of Germany, it was definitely bad after them having such low interest rates for so long.
It was Germany's pride — it's manufacturing industry which took damage from low rates the most.
2. Trade deficits are not inherently bad
Which claim sounds more “flimsy”?
"Just read this link" on a complex and controversial topic may be comparable to "Just read this religious tract".
That’s a ridiculous and unhinged comparison.
You can’t arbitrarily denigrate one side of the argument because economics is a religion when both sides take it as a given that economics is a rational field of study.
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.
We keep talking about interest rates and monetary policy, when the reality may be that we need to look at all aspects of policy.
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.
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.
Then from Wikipedia:
> In 2016, Germany recorded the highest trade surplus in the world, worth $310 billion. ...
https://en.wikipedia.org/wiki/Economy_of_Germany
So it's not just the magnitude of the trade balance (negative) but the velocity (sharply downward) that should get attention.
The US has run persistent trade deficits (now ~ $50 billion) for years. This brought cheap goods but eviscerated the manufacturing base. You could call it a tradeoff. What the US has going for it though is: (a) the ability to print its own money; (b) the ability to print the world's reserve currency; and (c) the demographics to support a consumption-led economy.
Germany has none of these things going for it. The situation is not sustainable. The article implies that the change is not structural (increased competition from elsewhere, for example), but if it is things could get weird real fast.
https://www.bloomberg.com/news/articles/2022-07-04/germany-h...
[1]https://www.macrotrends.net/countries/USA/united-states/trad...
What? Balanced trade is inherently sustainable. If Germany exported for the last few decades then it is going to import for a few decades at some point. That is how balanced trade works.
why does there have to be balanced trade? I don't believe balanced trade just happens naturally in a free market.
not necessarily. A situation like this could easily and quickly spiral out of control. High inflation could wipe out decades of trade surpluses and germany cant even control their own inflation, because its using €, which is controlled by the European Central Bank.
As a german citizen I'm hopeful that its only temporary however and that our economy recovers at least somewhat over the next few years.
But computer chips are just a small part, inflation is mainly driven by energy prices right now. Germany's economy is also heavily globalized and any conflicts or reduced global trade will hit the economy pretty hard.
Still, exports totally were just reduced by ~ .5% while imports increased by 2.7%. But these small percentages already create an imbalance.
Germany has a huge industrial organic chemistry complex. In comes the oil and gas, which get vapocracked, distilled into base molecules; out goes fertilizers, plastics, medecines, precursors, etc
It is so integrated that pipes run from one factory to another. Changes in the input will affect the whole chain.
Sounds like a significant shortage relative to their population and GDP…
The constituent factors of the trade imbalance being spoken about here is a sharp rise in energy costs. For decades, Germany has led the EU in repressive energy security policies including a heavy focus on shutting down existing Nuclear facilities that typically have >90% uptime in favor of cyclic sources.
For example, less than 10% of installed renewable capacity in Germany right now is usable: https://twitter.com/burggrabenh/status/1543388878584823810
Thanks to which, Germany is presently generating 72% of their electricity through very dirty and very expensive coal https://twitter.com/bjornlomborg/status/1543190255477706752
In H1 2022 >50% of German energy consumption was from renewables [1] and Germany has currently significantly lower spot-market prices than France, which went full-on nuclear [2].
The sharp rise in energy costs has nothing to do with nuclear (at least not now - if the society 20-30 years ago had invested more in nuclear, things could've turned out differently. Now, nuclear is neither feasible nor economically viable..) and everything to do with gas prices, which dominate energy costs due to the merit order. Coal is currently actually still used below capacity while gas plants are running at record utilization, thanks to profit-maximizing utility companies exploiting this.
Unfortunately, Germany had a government for the last 16 years that cared a lot for preserving the status quo for incumbents (cheap gas!) and neither companies nor consumers were willing to pay a premium for energy security/resilience. We're now paying the bill for that.
[1] https://mobile.twitter.com/energy_charts_d/status/1542804890... [2] https://mobile.twitter.com/energy_charts_d/status/1543915767...
That's not true. Nuclear is in fact the only feasible replacement for gas and coal as a stable energy source.
If you look at (the very few) recent nuclear projects in western countries, you will notice that a) they take very long to build (longer than to bridge any gap from gas and coal and longer than we have due to global warming), b) they are way more expensive than (over-provisioned) solar/wind PLUS energy storage to make renewables "stable", even when not fully factoring in implied state-guarantees (nuclear is still uninsurable and thus dependent on heavy subsidies that are almost never accounted for by advocates + the problem of longterm storage has also never been solved and is not covered by most cost calculations) and c) the energy companies don't even have enough trained/experienced staff left to extend the life of the last 3 german nuclear power plants.
Yeah, nuclear superficially sounds like a good solution, but I am always surprised that most proponents havbe never looked into the details. Just ask yourself why China, where "irrational" nuclear fear plays no role at all, never went full-on nuclear (~5% of chinese electricity comes from nuclear and even with all planned new projects it will be max 15% by 2050). The reason is they did the math....
That's not always the case, and it's mostly due to regulations which we can revisit. There is a ton of regulatory overhead on nuclear that is based on nothing but fear. More importantly, we don't have any other option to substitute gas and coal in ANY timeframe if not with nuclear.
> they are way more expensive than (over-provisioned) solar/wind PLUS energy storage to make renewables "stable", even when not fully factoring in implied state-guarantees (nuclear is still uninsurable and thus dependent on heavy subsidies that are almost never accounted for by advocates + the problem of longterm storage has also never been solved and is not covered by most cost calculations)
Let's unpack this a little bit. Yes, there is no solution for long term storage, but it is also not a huge problem. Even if all our energy came from nuclear, we could safely store all waste produced from it in a very small space. Again, compare it to the alternatives: the waste from coal and gas is released in the atmosphere, causing thousands of direct deaths due to pollution, and potentially billions due to climate change.
Now for the first part. Nuclear is not heavily subsidized at all - renewables have way more subsidies, and let's not even talk about coal and gas -, nor is there any issue getting it insured except cost. In fact this is a major factor in how costly it is, because nuclear providers usually have to contract private insurance [0].
> the energy companies don't even have enough trained/experienced staff left to extend the life of the last 3 german nuclear power plants.
This is a German problem, not a global problem. And in the time it takes to get these plants running, we could easily train staff. Again, not an issue except cost.
> Just ask yourself why China, where "irrational" nuclear fear plays no role at all, never went full-on nuclear (~5% of chinese electricity comes from nuclear and even with all planned new projects it will be max 15% by 2050). The reason is they did the math....
Yes, they did. Which is why in China 10 years ago nuclear energy was only 1% instead of 5%, and 10 years before that it was 0.1% [1]. And they plan to double it to 10% by 2035 [2]. In other words, China is the perfect example of my point, not yours.
But let's address the elephant in the room. What is your proposed alternative to nuclear?
[0] https://world-nuclear.org/information-library/safety-and-sec...
[1] https://www.statista.com/statistics/265533/consumption-of-nu...
[2] https://www.spglobal.com/commodityinsights/en/market-insight...
This is a false reading of the source. The source talks about domestic electricity production.
You said energy consumption, which would include gas/oil, and I really can not imagine that statistic to hold up considering all the energy we import.
I just read (literally published right now) that 49% of the energy that has been produced in Germany during the first half of this year is from renewables. 6% more than last year.
https://www.tagesschau.de/wirtschaft/strom-erneuerbare-energ... (German)
That my own solar panel right now has the best time of the year, also makes me doubt the 10% figure.
However, I think Germany will need nuclear, but the government first needs a plausible (in the public eye) reason to do a 180.
https://en.m.wikipedia.org/wiki/Capital_account
Sad thing is that 1. Whole EU has to suffer because of this 2. You can't stop thinking "What it would be like if Germany actually stepped up to lead with understanding"
There is no inherent reason why Germany cannot singlehandedly support/fund Ukraine's war with a country with an economy 40% Germany's size.
That it cannot is a condemnation of every German government over the past 30 years. (That NATO's European members cannot do so either, and that the US is providing the bulk of the Ukraine aid, is correspondingly a condemnation of every member government over the past 30 years, although the newer members get a pass because they are a) small, b) poor, and c) actually meet the NATO 2%-of-GDP guideline.)
None of them want to get in an expensive war. And Putin is probably bluffing about using nukes, but who wants to risk it.
The US do have an interest and they’re dragging/pushing WE into the fire while EE are jumping head first with barely any encouragement.
If anything the EU has proven that the East-West rift cannot be overcome and that they do not have strategic independence.
There certainly is an inherent reason, which is that Germany and the German economy is dependent on Russian oil and gas as well as fertilizer and a whole host of other natural resources. This inherent reason will initially be felt only economically as factories and industries shut down without the resources need to continue production. In a few months when the temperature starts dropping this inherent reason will be felt in a much more interpersonal way as the German people start freezing to death when they can not afford to heat their homes or find the fuel to do so.
Germany is heading towards a few well earned decades of economic stagnation and political decline.
The question is - will the rest of the EU be able to seize this opportunity?
France tried repeatedly (for their own benefit but thats a given) to arm EU. Germany was comfortable so they turn it down (or at least hide behind US opposition).
It wasn't Germany blocking an EU wide army but the UK. Maybe you should get your facts straight.
What? Since when is making nuclear weapons obsolete a noble goal? I am really confused. Rheinmetall is heavily investing into autonomous AI for ground vehicles. The drone swarm memes are starting to get real, except flying drones were a stupid fantasy fueled by cheap imported plastic drones rather any any capability that they offer.
>Sad thing is that 1. Whole EU has to suffer because of this 2. You can't stop thinking "What it would be like if Germany actually stepped up to lead with understanding"
The EU doesn't work like that.
There is just no way for Russia, being a full blown fascist state now, to get peace of mind.
I think that demolishing Kremlin after Putin's death will help with that.
the EU gets it’s buffer state and cheap gas
I think that is the most naive take I’ve read here.
So Yes, Germany can dream of appeasing Russia by risking internal EU war with Poland.
Something never talked about is how her parents moved from West to East Germany when she was a baby.
>Germany got a lot of structural characteristics of a socialist economy, in particular being dominated by large manufacturers who have been getting preferential treatment from the government, and losing the ability to adjust and maneuver. She also didn't have that gut check of dealing with Russia and has put all the Germany's eggs into one basket which has been held by Putin.
It's amazing how many gullible still say that Merkel was always against German dependence on Russian gas but could not do anything about it. For 16 years!
I would be surprised, but not shocked, if we learn someday that Merkel is a long-term Russian intelligence asset, recruited in her youth.