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German model is ruinous for Germany, and deadly for Europe
Topic Started: 10 Oct 2014, 06:29 AM (2,777 Views)
Dam
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newjez
10 Oct 2014, 10:27 PM
UK got it's first UKIP member today, and nearly got two. They are becoming a force. The referendum will be a very ugly affair. Like the Scottish vote, I doubt anyone is really sure what it means. Does it mean all the Polish will have to leave? How will it affect trade? Obviously the UK will always have very strong links to Europe, but moving out will mean that the European laws do not govern them. It will be an interesting time.
UKIP is mainly a vote of very old white fart, right wing, basically around one man.I dont see much future in that, it s a weak proposition.

It used to be the case of Front National but nowadays, FN is the main party of the less than 35yo, and extremely popular with young, above 30% rising fast, getting voters from both side of the spectrum and they achieved it while being opposed by almost 100% of the media/politicians.

What s holding them back, is the old honorary leader, which has created the party 40years ago, is still very controversial ( but was, in fine, right on almost everything), but he is 89, once he is out of the picture for good, they ll get in power and France would then have a chance to get its Mojo back.

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Lef-tee
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Sober
10 Oct 2014, 08:58 PM
It's a recipe for a non-Keynesian approach to fiscal management, one in which the government share of GDP will not grow, and may well shrink, unless there is a plausible case for increasing taxes, to cover any enlarged and/or increasing heads of government expenditure which have a political consensus behind them.

That's an unusually disciplined approach to seeking political mandates for increased expenditure, but it is not self-evidently a Bad Thing. Leave it to the private sector to compete for and use available investment capital for leveraging purposes, and have the government get out of the way, i.e. not attempt counter-cyclical "pink batt"-style stimulus measures of dubious merit.

Remember, there is no sign whatsoever that this approach has been "suicidal" for Germany. Even including the 2009 decline, its longterm GDP growth has averaged to a steady if unspectacular rate, and there have been no drastic cutbacks to its extensive social welfare programs.

The main complaint of Krugman and the other neo-Keynesians is that Germany may have done *less well* than it otherwise could have by failing to take a big Bogart on the stimulus bong, and by not jacking up the EU delinquent family back up to happy days accordingly.

That case for "otherwise" is, at best, unproven.
The very serious flaws in the German system are now apparent as the country looks increasingly likely to tip into recession.

The German model is very heavily one of export-led growth but it's policy approach as the big boy in the EU of "beggar-thy-customer" has not exactly been conducive to anything good. AS the title says - ruinous for Germany and deadly for Europe. Their own ideology - rooted in the hyperinflations of Wiemer republic - and imposed forcibly on other countries within the Eurozone effectively means that they have continuously smashed demand in neighbouring countries and then wondered why they can't buy so many German exports. They overcame that by finding new markets in China (while still punishing everyone around them) but now demand in China isn't so crash-hot anymore either and as a result Germany is teetering on the brink.

Who will they export to now? Indians? Martians perhaps?

The success of the German system is entirely dependent on plenty of strong demand growth elsewhere. They are deliberately holding it's head underwater in their own neighbourhood and it's now coming back to bite them in the arse.
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Sober
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peter fraser
10 Oct 2014, 10:56 PM
Do you not think that the sheer distance involved rules out any opportunity for that to happen

Here is a map of the drive between Hamburg and Munich - just 7 hrs and 44 minutes.
Hamburg/Munich

Here is the map of the drive from Perth to Cooktown - all 62 hours of it.
Perth/Cooktown

Infrastructure projects connecting over large distances must require greater funding for less return especially given the population difference, and at the end of the project the opportunites are less due to that distance.

I could manufacture parts at one end of Germany and transport them to the other end for assembly in maybe 8 hours. The time cost plus the fuel cost must be less than a country with a time cost 8 times higher and probably a similar ratio in fuel costs.

To get the same ratio or scale we would need a population of maybe 640 Million people spread more evenly, and we will never have that. the infrastructure cost per capita in Australia will always be higher than European countries, and the ROI will be less.

I don't see any other possible outcome.
But travel by road is by no means the only transportation option available. Air-, sea-, and rail-based options also exist, plus intermodal combinations of these.

Looking at that larger transportation menu, it is by no means fanciful that Perth and Cooktown are economically-connected. I personally know of several people who physically travel from Far North Queensland--Cairns, Port Douglas, Atherton, Townsville, Bowen--to the Pilbara via Perth on a biweekly basis. To a man, they all grumble about "the commute", but nonetheless keep it up for years at a time.

Your straw-man 640 million population figure is fanciful, because it is based on a mistaken premise. German industrial production--let alone its service industry production--is not monolithically "German" in origin. It relies on component, energy and finance inputs (e.g. Taiwanese chipsets, Russian gas, London-brokered finance) from around the globe.

To be sure, the relatively compact geography and high population density of Germany as a whole is probably somewhat helpful at the margin. But if that was the key to economic success, Bangladesh (1091 people per sq km, #11 in world terms) would be an economic powerhouse, and the USA (32.45 people per sq km, #180) a backwater.
Lef-tee
11 Oct 2014, 09:22 AM
The very serious flaws in the German system are now apparent as the country looks increasingly likely to tip into recession.

The German model is very heavily one of export-led growth but it's policy approach as the big boy in the EU of "beggar-thy-customer" has not exactly been conducive to anything good. AS the title says - ruinous for Germany and deadly for Europe. Their own ideology - rooted in the hyperinflations of Wiemer republic - and imposed forcibly on other countries within the Eurozone effectively means that they have continuously smashed demand in neighbouring countries and then wondered why they can't buy so many German exports. They overcame that by finding new markets in China (while still punishing everyone around them) but now demand in China isn't so crash-hot anymore either and as a result Germany is teetering on the brink.

Who will they export to now? Indians? Martians perhaps?

The success of the German system is entirely dependent on plenty of strong demand growth elsewhere. They are deliberately holding it's head underwater in their own neighbourhood and it's now coming back to bite them in the arse.
"Imposed forcibly"??? Remind me, which side won WW2?

The EU, and the eurozone, is largely modelled on German economic management principles because Germany has been the most conspicuously successful European economy for decades, and the others wanted inside the tent.

It is not Germany's fault that Greece and the other PIIGS decided to gorge on the initial "free lunch" aspects of a hard currency, without adopting the fiscal disciplines required to live with one over the long term.

Call me when Germany *actually* runs out of export markets. :z:
Edited by Sober, 11 Oct 2014, 09:58 AM.
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Sober
11 Oct 2014, 09:43 AM
But travel by road is by no means the only transportation option available. Air-, sea-, and rail-based options also exist, plus intermodal combinations of these.

Looking at that larger transportation menu, it is by no means fanciful that Perth and Cooktown are economically-connected. I personally know of several people who physically travel from Far North Queensland--Cairns, Port Douglas, Atherton, Townsville, Bowen--to the Pilbara via Perth on a biweekly basis. To a man, they all grumble about "the commute", but nonetheless keep it up for years at a time.

Your straw-man 640 million population figure is fanciful, because it is based on a mistaken premise. German industrial production--let alone its service industry production--is not monolithically "German" in origin. It relies on component, energy and finance inputs (e.g. Taiwanese chipsets, Russian gas, London-brokered finance) from around the globe.

To be sure, the relatively compact geography and high population density of Germany as a whole is probably somewhat helpful at the margin. But if that was the key to economic success, Bangladesh (1091 people per sq km, #11 in world terms) would be an economic powerhouse, and the USA (32.45 people per sq km, #180) a backwater.

"Imposed forcibly"??? Remind me, which side won WW2?

The EU, and the eurozone, is largely modelled on German economic management principles because Germany has been the most conspicuously successful European economy for decades, and the others wanted inside the tent.

It is not Germany's fault that Greece and the other PIIGS decided to gorge on the initial "free lunch" aspects of a hard currency, without adopting the fiscal disciplines required to live with one over the long term.

Call me when Germany *actually* runs out of export markets. :z:
Exactly.

You clowns don't seem to realize, it is all the other dopey countries who went on the debt binge with no means to ever support or sustain it moving forward.

And yet most of you here ask why they did not do the same and completely destroyt themselves too. :bl:

Because their not as stupid as everybody else, unlike everybody else, they learned from previous mistakes, where the others exaggerated theirs.

We are now in a vicious downward cycle thanks to the decline of china.

The reasons the Germans have remained quite strong over the years is because of their motor industry, but this is about to change. The rise of China since 2003, when iron prices went from around $10/a tonne to $190/a tonne saw a massive level of employment and growing businesses making everything we all used to make. As their wealth grew over the years, so did their ddesire for quality luxury goods , such as BMW, Mercedes and porshes to name a few. I think at one stage many Chinese governments where using BMWs.

So as China has grown, the Germans have done quite well selling luxury cars to them. This made up for a bit of downturn from slowing of other western countries in decline who were cutting their spending and buying of luxury cars.

But here is where the vicious downward spiral begins. With China slowing now, their demand for luxury german goods is declining. With everybody now slowing, we will all buy less goods from one another, and all decline further, and so the visious downward spiral starts NOW.

No rocket science........
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Lef-tee
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Quote:
 
"Imposed forcibly"??? Remind me, which side won WW2?

The EU, and the eurozone, is largely modelled on German economic management principles because Germany has been the most conspicuously successful European economy for decades, and the others wanted inside the tent.


Sober, you need to more closely examine the political and economic structure of the Eurozone. In theory all members are equal but in reality it's the big boy that determines what happens. They even installed their own "caretaker" to implement their policies in Italy, supplanting the democratic process. German economic ideals and policies are forced upon member states who have no hope of making them work for the simple fact that they are not Germany. In order for Germany to run an external surplus, others must be in deficit with Germany - it's a simple fact that for a net exporter like Germany to exist as such, somebody, somewhere must be the opposite. Germany is punishing it's customers (in the Eurozone) for being good customers and as a result, is now punishing itself, now that alternative export markets are failing. It's lamentably stupid and is the result and is the result of a rigid, unbending ideology imposed on entrants to the Eurozone. Basically, Germany demands that all in the Eurozone run their nations and economies like Germany does, but this is simply impossible for most and the attempt to do so - under duress - is crushing their economies, which is in turn crushing their ability to purchase Germany's output. As previously stated, Germany first overcame this by finding alternative export markets while continuing to savage it's neigbours. But now this has turned sour and Germany is in trouble.

Quote:
 
It is not Germany's fault that Greece and the other PIIGS decided to gorge on the initial "free lunch" aspects of a hard currency, without adopting the fiscal disciplines required to live with one over the long term.


Germany was very, very happy with the "binging" while it was occurring because it meant fantastic sales for German exports.

Quote:
 
Call me when Germany *actually* runs out of export markets. :z:


The phone is ringing off the hook right now - that's why they are looking at the very real possibility of recession. They'd better pull something out of the hat very soon.
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Guest
11 Oct 2014, 10:40 AM
Exactly.

You clowns don't seem to realize, it is all the other dopey countries who went on the debt binge with no means to ever support or sustain it moving forward.

And yet most of you here ask why they did not do the same and completely destroyt themselves too. :bl:

Because their not as stupid as everybody else, unlike everybody else, they learned from previous mistakes, where the others exaggerated theirs.

We are now in a vicious downward cycle thanks to the decline of china.

The reasons the Germans have remained quite strong over the years is because of their motor industry, but this is about to change. The rise of China since 2003, when iron prices went from around $10/a tonne to $190/a tonne saw a massive level of employment and growing businesses making everything we all used to make. As their wealth grew over the years, so did their ddesire for quality luxury goods , such as BMW, Mercedes and porshes to name a few. I think at one stage many Chinese governments where using BMWs.

So as China has grown, the Germans have done quite well selling luxury cars to them. This made up for a bit of downturn from slowing of other western countries in decline who were cutting their spending and buying of luxury cars.

But here is where the vicious downward spiral begins. With China slowing now, their demand for luxury german goods is declining. With everybody now slowing, we will all buy less goods from one another, and all decline further, and so the visious downward spiral starts NOW.

No rocket science........
I should also add here, and don't quote me exactly here, as its from memory, but I think the most recent figures were that German car sales had declined by 5.7% over the last month, it may have been for the quarter, but I think it was for the month.

Now even if this 5.7% decline was over a quarter, that would be a shocker in itself, but I think it was monthly, so an absolute disaster.

What this actually shows us is, just how fast China is declining, at a rapid rate.

The only thing that will temporarily halt this, will be a Chinese stimulus move. But the fact is, they have been stimulating for the last ten years like there is no tommorow. And its got to a point,like here and other western economies, where the pay packets going out can no longer maintain these levels of prices and debt anymore, they are exhausted. China could also drop interest rates, but when the speed of decline now is so fast, it may not have the desired effect and would only halt the decline temporarily even if it does work.

The start of the GFC was nothing compared to what we all face now. And more so for Australia, where many of the others had a correction of sorts, we pumped our ponzi higher than ever at a time in history when the whole world economy declines on a level never seen before, and this is with all this bullshit stimulus( counterfeit printed money) thrown into the system like no tommorow.

So basically, we have all fukd up, and are about to pay the ultimate price, indefinate decline. You think it can't happen, think Japan, a better economy in many ways that our own, and the only reason they are where they are and not worse off is because of their own stimulus along with stimulated economies around the world still buying cars and products off them.

Realistically, and along older longer term trends, prices should be about a third of what they are now. And even then they will not be sustainable in future. Not that many of you seem able to see this.

Good luck......
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Guest
11 Oct 2014, 12:08 PM
I should also add here, and don't quote me exactly here, as its from memory, but I think the most recent figures were that German car sales had declined by 5.7% over the last month, it may have been for the quarter, but I think it was for the month.

Now even if this 5.7% decline was over a quarter, that would be a shocker in itself, but I think it was monthly, so an absolute disaster.

What this actually shows us is, just how fast China is declining, at a rapid rate.

The only thing that will temporarily halt this, will be a Chinese stimulus move. But the fact is, they have been stimulating for the last ten years like there is no tommorow. And its got to a point,like here and other western economies, where the pay packets going out can no longer maintain these levels of prices and debt anymore, they are exhausted. China could also drop interest rates, but when the speed of decline now is so fast, it may not have the desired effect and would only halt the decline temporarily even if it does work.

The start of the GFC was nothing compared to what we all face now. And more so for Australia, where many of the others had a correction of sorts, we pumped our ponzi higher than ever at a time in history when the whole world economy declines on a level never seen before, and this is with all this bullshit stimulus( counterfeit printed money) thrown into the system like no tommorow.

So basically, we have all fukd up, and are about to pay the ultimate price, indefinate decline. You think it can't happen, think Japan, a better economy in many ways that our own, and the only reason they are where they are and not worse off is because of their own stimulus along with stimulated economies around the world still buying cars and products off them.

Realistically, and along older longer term trends, prices should be about a third of what they are now. And even then they will not be sustainable in future. Not that many of you seem able to see this.

Good luck......
Unfortunately the facts don't agree with you.

aus housing, up 10% yoy. Someone call the wahhhhambulance!
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Guest
11 Oct 2014, 04:42 PM
Unfortunately the facts don't agree with you.

aus housing, up 10% yoy. Someone call the wahhhhambulance!
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Graeme
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peter fraser
10 Oct 2014, 06:29 AM
The Kaiser Wilhelm Canal in Kiel is crumbling. Last year, the authorities had to close the 60-mile shortcut from the Baltic to the North Sea for two weeks, something that had never happened through two world wars. The locks had failed.

Large ships were forced to go around the Skagerrak, imposing emergency surcharges. The canal was shut again last month because sluice gates were not working, damaged by the constant thrust of propeller blades. It has been a running saga of problems, the result of slashing investment to the bone, and cutting maintenance funds in 2012 from €60m (£47m) a year to €11m.
Unfortunately Ambrose Evans-Pritchard hasn't quite got his facts right here. According to an article from Der Spiegel:

Although the canal is under the jurisdiction of the federal government, it has been the subject of financial disputes for years between Berlin and the state. Last year, the German government even reduced the money available for maintaining the canal from €60 million ($78 million) to just €11 million, the Süddeutsche Zeitung newspaper reported Friday. Years of neglect have led some of the locks on the canal to fall into such disrepair that it had to be closed on Wednesday to most ship traffic.

So the cuts were due to a budget dispute, and not because of austerity...

The Germans have been keen on balanced budget rules across the Eurozone, but I believe that's over the entire of the economic cycle. If it's strictly adhered to then it makes a lot of sense, but anyone who followed British politics over the last fifteen years will remember how Gordon Brown fudged his version of this, the Golden Rule.
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miw
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11 Oct 2014, 10:40 AM
The reasons the Germans have remained quite strong over the years is because of their motor industry, but this is about to change. The rise of China since 2003, when iron prices went from around $10/a tonne to $190/a tonne saw a massive level of employment and growing businesses making everything we all used to make. As their wealth grew over the years, so did their ddesire for quality luxury goods , such as BMW, Mercedes and porshes to name a few. I think at one stage many Chinese governments where using BMWs.
Germany sells very few cars to China, simply because BMWs, Mercs, Audis and VWs are all made in China and have been for a heck of a long time. All Germany gets out of these is licensing fees. Porsche and top-end BMW and Mercedes models are imported, but it's not a big part of the overall volume.

I've never seen a govt car that was a BMW, although there may have been some at some stage and in some places. High-end govt cars are all Audis. A friend of mine got rid of her BMW years ago because in her line of business she sometimes had to send a car to pick up government employees to bring them to meetings, and, as she said, "Govt employees don't want to be seen getting into a BMW or a Merc."

http://www.forbes.com/sites/jackperkowski/2014/02/12/can-tesla-outsell-porsche-in-china/
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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