(Disclaimer: I know nothing about economy, and the very little I've read made no sense to me)<p>I keep reading about how Germany's "zero debt" economic policy is bad for the country, and how bleak Germany's future is. That is, everyone seems to agree on this... except for the Germans, who say nothing about it while they continue being one of the top 5 economies in the world.<p>Lots of these analysis come from the US, which to me makes even less sense: why would anyone listen to the country who got paralyzed when they couldn't keep getting even more in debt? How come George Soros can suggest[1] that Europe should go to war against Russia as a mean for stimulating the economy, and do it with a straight face?<p>Every article seems to suggest that German economists are a bunch of amateurs who don't know what they are doing. But from my layman's point of view, it certainly doesn't look that way.<p>[1] <a href="http://www.nybooks.com/articles/archives/2014/nov/20/wake-up-europe/" rel="nofollow">http://www.nybooks.com/articles/archives/2014/nov/20/wake-up...</a>
The really funny thing is, that the Idea of the Euro was never well beloved by the german government prior tho 1990. But then, the French demanded (out of historical fear) some reassurings for allwing the German reunification and preventing a dominant Germany in Europe again. That plan has hugely backfired, boosting the struggling german economy after the very costly reunification in the beginning of the 20th century.<p>In fact, French fear (or envy?) of the Deutsche Mark in the 80s and 90s lead to a legenday discussion between a german and a french state official:
"We have to talk about the threat of german nuclear weapons, too!"
"But we germans have no nuclear weapons!"
"Yes you have. You just call it Deutsche Mark!"
If these were 2 people, then who is the 'problem':<p>* US with heavy debts?<p>* Germany with savings?<p>Germany is in a position to fix its infrastructure, but then again, this can wait until there's a need for job creation.<p>Also, outstanding tax 'reforms' are more a symptom of weak political influence by corporations, which is a good thing.<p>Germany isn't the US, and for this reason, it is rich.<p>Edit: punctuation
There is a fairly interesting book written by the current finance minister of Greece Yanis Varoufakis on the subject called "The Global Minotaur", he argues that after Bretton Woods the trade surplus of Germany especially vis a vis the United States was by design, as the profits of German corporations ultimately ended up in the hands of Wall Street. On the other hand Europe lacks such a surplus recycling mechanism, which according to him worsened the current economic crisis in Europe.
I'm from Germany, and im tired of the argument, the Germans should do something about their export.<p>Export exists, because someone outside of Germany thinks goods from Germany are better then goods from their country.<p>How to solve this problem? Go and produce better goods urself, instead of crying to Germany to make their goods worse.
Why do macroeconomists focus on single countries at all? I guess you can argue that policy changes (and taxation) can be made on a country level. For many policy decisions this is not as true as it was pre EU.
Since I'm a "micro guy" anyway (even though I do enjoy chaotic systems etc.) I am fairly suspicious of the aggregation mechanisms in general. If you aggregate over "what money is used" (which seems sensible if you want to make balance of trade arguments in the traditional, currency based sense) the Euro-zone has close to a +-0 balance of trade. Recently the chart got a bit out of whack shape wise but it's still close to the +-0 now.<p>I used to be very interested in economics but have grown more and more frustrated with the entire field. I pretty much stick to stuff that's interesting for other reasons (multi agent based modelling, chaotic systems, game theory etc.).
As an academic in another field the entire field seems pretty strange. Conflation of politics and economic theory is wide spread and there seems to be a lot of "friend helps friend, outsiders suck" like structures in place. Granted this is the case in academia in general but economics always struck me as rather extreme in that regard.
As Paul Krugman has said before[1]<p>This is a reflection of the following identity:<p>Current account = Savings – Investment<p>Basically, Germany is over-saving and both Germany and its trade partners are worse off because of it.<p>[1]: <a href="http://krugman.blogs.nytimes.com/2013/11/01/more-notes-on-germany/" rel="nofollow">http://krugman.blogs.nytimes.com/2013/11/01/more-notes-on-ge...</a>
Often surpluses and deficits are not really problems. Say for example a guy in the US has Facebook stock which has gone up and a guy in Germany has a Porsche he helped make. They swap, both happy but in the trade accounts it shows a big surplus to Germany and deficit to the US because the transfer of shares is treated as investment rather than trade. A lot of the surpluses and deficits are in effect stuff like that.
Someone explain to me why the same argument does not apply internally within the US. The imbalance of trade between Germany and other Eurozone partners does indeed create winners and looser. How different is this from states within the US. Since when did the US care about similar imbalances created between Alabama and say California? I'm sure there are arguments against this comparison. I'd be interested to hear them.<p>That aside, I "feel" (based on living in Germany) that Bernanke is correct with his suggestions of where Germany could move. I don't think it will have much impact on the trade deficit but it will help Germany avoid more drastic emergencies in the future. The pay for workers is out of balance. The investment in infrastructure is not required now but important for its future. Currently it's infrastructure is far better off than other EU zone countries of similar size (and many times better than the US). But if it wants to retain it's significance 20 years from now it will need to innovate in infrastructure or be satisfied with being that country known for making old-world things at good quality. Germany definitely needs policies that encourage investment. Ideally though I'd prefer that not be in housing as stable housing is probably one of the primary social benefits in Germany. But as it stands with its undervalued assets it's becoming a place to be bought by others. Politically this creates interdependence which is NOT a bad thing but ultimately as the undervaluing continues Germans are just throwing away that value as value lost. In a globalized economy if they do not capitalize on it someone else will. Still, none of this will do much for the trade deficit. Because while it may take 20 years for Germany to push some of these changes, change within other EU countries to take advantage of it will take significantly longer. Then again, I'm not an economist so what do I know.
The article assumes that if you have a trade surplus then your bridges are crumbling. I cross bridges in Germany everyday and they look OK to me. There are some big projects going on here too, for example cities are burying their ring roads underground. Not cheap. <a href="http://www.dorsch.de/en/news/story/article/licht-am-ende-des-tunnels-mittlerer-ring-suedwest-laeuft-auf-hochtouren/" rel="nofollow">http://www.dorsch.de/en/news/story/article/licht-am-ende-des...</a>
Isn't he the one who thinks printing money is a sound economic policy? Pot calling the kettle, I suppose.<p>Anyway, I don't think there are absolute rights and wrongs in this game. And a game it is, the outcome of which is quite uncertain. The players (i.e. nation states and larger economic entities such as the EU) in this game sometimes act as opponents, sometimes they cooperate but unfortunately they're hardly friends with a common goal or the greater good in mind. Germany's zero-debt policy might very well prove to be the right one once the next few rounds have been played.<p>Bernanke's criticism has some merit, though. Certainly, Germany's economic policy currently severely disadvantages other EU countries and benefits from their weakness. That definitely is a problem. However, this weakness also is largely self-imposed by corrupt politicians or generally wide-spread corruption. Greece for instance, economically shouldn't ever have been admitted to the Euro but it was nonetheless because of political reasons. This doesn't mean German politicians or Germans for that matter have any right to be condescending towards other nations as they sometimes come across recently. There's corruption and tremendously wasteful spending in Germany as well. Maybe it's just not as severe as in other countries but Germany hardly is a paragon of economic virtue itself. However, they can hardly be blamed for trying to achieve the best for their country first. Why should they draw up economic policies that benefit other countries which - without any accompanying political change on their part - would likely continue as before. Their crisis primarily isn't caused by Germany's strength but by their comparative weakness. On the same grounds Bernanke could advise the US the cut their grotesquely large military expenses and donate some of it to Greece so they can pay off their debt. Not bloody likely either, I suppose ...<p>That said, Germany is a tremendously wealthy country that could spend a lot more on infrastructure if it wasn't for large amounts of taxpayers' money wasted on pointless stuff and corrupt structures. There have been talks about a proper tax reform for more than 30 years now and by and large nothing has happened. If there's one point of criticism that can be justly made it's that German politics is lacking a vision and is largely guided by cowardice and unwillingness to assume a leadership role. Some of its success in recent years probably was mere luck.
Germany was a strong exporter even in the past, with the strong Deutsche Mark. And they save money for the rainy day, so they can invest in R&D and infrastructure as needed.<p>“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”<p>-- Charles Dickens
I'm still woefully ignorant about world economics. Could someone do me a favour and answer a few basic questions about this:<p>1. Is the trade surplus mainly affected by private enterprise? If that's the case, what control does the German government have over it if the businessmen running the companies would rather save than spend? (Interest rates are already incredibly low.)<p>2. I'm personally conservative with money, and never like to get into debt, so from a this naive point of view, I would be very happy to know my country has a large buffer to weather out any oncoming storms. Assuming that Germany's position (saving) is bad for the world economy, but good for Germany, what would make the Germans change their behaviour?<p>3. What books would you recommend for a complete newcomer to learn about macro economics?
The US is simply not producing and exporting anything of value and able to compete with comparable products.<p>Furthermore not every country in EU is "suffering from Germany's export surplus" - countries like Estonia, Poland, Norway, Sweden, Denmark, ... are doing pretty well and doing better.<p>What countries are supposedly suffering?<p>- Portugal<p>- Italy<p>- Greece<p>- Spain<p>... aka the <i>PIGS</i> states - have a look at their economic and political history and you will notice they were all ruled by incompetent and corrupted governments.<p>Berlusconi is still active in policts ... do I need to say more? A lot of countries in EU have issues not due to Germany but due to their very own problems.
Not it's not. Currency is a unity of measure, it's not the foundation of an economy. The real problem with Germany's trade surplus is that is showing how inefficient and backwards are some of the other European countries. What would happen if Italy, let's say, had it's own currency? They would still buy goods from German, they would pay more, plus they would be even more unreliable as a country since the monetary policy would be in the hands of the Berlusconis and such (meaning: huge inflation to monetize public debt).
why, when something works well, some people have an urge to change it?<p>shouldn't it be the other way around?<p>why not go through Germany state policies and copy working ideas over to other countries?<p>telling germans what to do sounds like a joke, people should learn from them, not teach them how to do things.
No, it is a problem for the rest of us that we cannot make anything Germany wants, at a price it wants.<p>People, especially economists, love to make macro economy some big mystery (no doubt so that they seem important) when it really can be solved the same way it can be solved on a smaller level.