Yet again, the beneficial and good sides of the economy are being blamed by Keynesians bouffons and Monetarist clowns, and of course by ignorant socialists at the government.
Let me put a few bullet points to clarify things before we dive into this absurd report:
- Savings (underconsumption) is the base of any investment.
- Investment, not consumption helps the economy become more productive.
- When an economy is growing, prices fall due to improved productivity.
- When an economy export a lot more than it imports, the balance of payment creates a higher demand of the currency of that economy, which then leads that currency to become more expansive than the ones which are only importing.
- If the trend continues, the exporting country becomes less competitive due to a higher currency, and a new balance is created.
- This currently doesn't happen because central banks prevent exporting countries from having their currencies re-evaluated (like China and Germany).
- Germany is a great country, and its competitiveness is a major benefit for itself and the rest of the world: the whole planet can enjoy German quality, for low price.
- The issue are Central Bankers and politicians, as usual.
- Another issue is the government educating people with nonsensical theories, and journalists reporting absurd and completely wrong news.
Here the quotes from the infamous Bloomberg report:
Aug. 18 (Bloomberg) -- Germany may have become too competitive for its own good.How is that possible? How twisted must the mind of the person writing this line be?
With exports driving the fastest economic growth since reunification, consumers are failing to respond in kind as companies from Siemens AG to Daimler AG hold fast to the wage restraint that’s given them an international edge. The result: Europe’s largest economy, four times more reliant on exports than the U.S., is firing on only one cylinder.There are no issues at all with that: Germans are benefiting from falling prices, and they don't need to have their wages increased, due to productivity growth, and a deflationary environment.
That’s unlikely to change as Germany spearheads a push for European fiscal prudence and ignores calls from investors and the Obama administration to do more to help rebalance the global economy by reviving domestic demand. While Chancellor Angela Merkel’s plan to cut 80 billion euros ($103 billion) of spending helps make government bonds attractive to Pacific Investment Management Co., retail stocks may suffer, and the country’s dependence on exports leaves it vulnerable to a global slowdown.Thank god they ignore Obama. Obama is an ignorant man and his policies are dangerous and destructive.
“Germany has got to work on its domestic demand,” said Andrew Bosomworth, Munich-based head of portfolio management at Pimco, which oversees the world’s largest mutual fund. “Not everybody can export. Somebody has to import.”So just let the economy find its new balance instead of interfering with it!
French Finance Minister Christine Lagarde, the U.S. Treasury and billionaire George Soros have already urged Germany to do more to smooth out trade flows they say are still too lopsided and pose an obstacle to a global recovery.Lagarde and Soros are both socialists. The best thing one can do is follow a path exactly opposing their advices.
“Anybody who believes China is a problem has to believe Germany is a problem,” Nobel Prize-winning economist Joseph Stiglitz said in an interview in Sydney on Aug. 5. Germany should consider more stimulus measures to encourage spending and investment at home, he said.Stiglitz is a Keynesian Bouffon. The best thing one can do is do the opposite of what he suggests.
Exports are driving Germany’s recovery. The economy grew 2.2 percent in the second quarter from the first, yielding an annualized growth rate of about 9 percent that puts it on a footing with emerging markets like China and India.
The benchmark DAX share index has gained 4.2 percent this year compared with a 0.2 percent decline in the Dow Jones Industrial Average. The DAX was little changed at 6207.71 points today. The yield on the German 30-year bund fell to a record 2.978 percent.Things are going just fine for Germany. Yet, Socialiasts and Keynesians want to fix it...
Merkel has defended Germany’s right to engage as competitively as possible in international trade.
“We won’t surrender our strengths just because our exports are perhaps purchased more than those of other countries,” she said in parliament in Berlin on March 17. “That would be the wrong European answer to the competitiveness of our continent.”Of course you shouldn't surrender your strengths!
At the same time, wage restraint and fears over pension security are taking their toll on the aging German consumer.
Since Germany’s reunification in 1990, private consumption has risen 21 percent, reflecting a 21-percent increase in real disposable income. In the U.S., by contrast, income surged 71 percent in the same period and private consumption jumped 75 percent.Where do they get this? Common sense just makes this statement ridiculous. Who is crumbling under debt? Who cannot afford to pay their mortgage, car loan, credit cards, home equity loans? Is that because they are so rich?
“Private consumption will remain sluggish because Germany hasn’t allowed real disposable income to grow more strongly,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt, who co-authored a book on the 100 most important global economic indicators. “Income and consumption walk hand-in-hand.”How do you allow real disposable to grow? By decree maybe? Andreas Scheuerle seems to have been enjoying German's strong economy for many years without even knowing it and he's now trying to destroy it.
Germany’s critics say Merkel’s refusal to bolster the domestic economy is strangling other countries’ export prospects by damping demand for their goods in a country with 82 million people. Those missives are unfair, said Thomas Mayer, chief economist at Deutsche Bank AG in London.
“We were successful in building one of the most competitive economies in the world, why should we ruin that by pumping up wages now?” he said. “That would increase unemployment. And we shouldn’t punish our exporters, that’s idiotic, they’re our crown jewels.”
Germany’s export strength has its roots in the country’s efforts to rebuild its economy through foreign trade after World War II. While consumer demand soared in the U.S. after troops returned home and the economy boomed, spending in poverty- stricken Germany was weak.Thank god someone is getting it!
In the 1970s, when Germany’s post-war recovery had faded and unemployment increased, the country responded by cutting costs instead of building a stronger domestic services sector. That approach set the tone for future reforms.
Germany once again squeezed labor costs and boosted productivity when it adopted the euro in 1999, attempting to redress the competitive disadvantage its overvalued Mark had left it with after the reunification boom of the early 1990s.
Meanwhile, economies from Spain to Greece allowed employment costs to rise. Today, those nations are grappling with the biggest budget deficits in the region while Germany enjoys a trade advantage.
The country became 13 percent more competitive against its neighbors in the 11 years through 2009, mirroring similar declines in Spain and Greece, according to a wages-based indicator designed by the European Central Bank. Germany is also reaping the benefits internationally of the euro’s 10 percent decline against the dollar this year.The obvious is totally invisible to journalists and economists. Who would you rather be? Germany? Or Spain and Greece? Is Germany the problem????
“By cutting its budget deficit and resisting a rise in wages to compensate for a decline in the purchasing power of the euro, Germany is actually making it more difficult for other countries to regain competitiveness,” Soros said in a speech on June 23 at Berlin’s Humboldt University. Germany is “the main protagonist” for Europe’s debt crisis, he added.
Merkel’s four-year plan to cut German spending from next year contrasts with U.S. President Barack Obama, who is urging his Group of 20 counterparts to focus on economic growth, saying restoring order to public finances should come in the “medium term.”Obama and Soros are both socialists. The best thing one can do is follow a path exactly opposing their advices.
Pimco’s Bosomworth said Germany’s propensity to save, both at a state and household level, make the country’s bonds “attractive in the sense that they’re a safe place to be in a world not so friendly to risky assets.”
“We will see still lower yields on German bunds,” he said. The yield on Germany’s 10-year bund fell to 2.33 percent this week, a record low. U.S. 10-year bonds yield 2.63 percent.
German policy makers say Europe’s debt crisis shows why it would be a mistake to stimulate domestic spending again, and ask why Germany should pick up the bill for other nations’ profligacy.The obvious is totally invisible to journalists and economists. Who would you rather be? Germany? Or Spain and Greece? Is Germany the problem????
“Attempts to blame Germany for problems in those countries and policy recommendations of symmetrical adjustment needs are questionable,” Bundesbank President Axel Weber said on April 26. “Rather, the adjustment process that Germany underwent in the decade preceding the financial crisis may serve as an example.”The obvious is totally invisible to journalists and economists. Who would you rather be? Germany? Or Spain and Greece? Is Germany the problem????
Update: I just found another article I had saved a while ago, containing the same nonsensical rubbish:
July 28 (Bloomberg) -- Germany’s “short-work” policy showed the world how to survive a recession without losing jobs. Now it’s time to pay the price.Remains to see any "hiring" in the UK and US. There's still a lot of "firing" going on and these economies are still falling toward the abyss. Yet, it seems like they are praised for their greatness...
The country’s social welfare-driven economic model, which the International Monetary Fund says is helping to preserve labor-market rigidity, has sheltered it from the worst of the financial crisis. The cost is that as the economy recovers, hiring won’t pick up as much as it does in countries such as the U.S. or the U.K., posing a risk to growth in a nation that needs to ignite household spending.
This is obviously a bad idea. But it's way better than what we see in France... And it's direct subsidies to the industry, so less interfering with the economy than when the government decides which sector needs to expand or what banks and industries have to do...
Under the so-called short-work plan, or Kurzarbeit in German, companies can temporarily move employees onto shorter working weeks to reduce costs during periods of weak demand. They pay only for the hours worked and the government provides up to 67 percent of the remaining wage.
The program supported up to 1.5 million employees at some 63,000 companies and saved as many as 478,251 jobs last year, according to the Federal Labor Agency. In March this year, the latest month for which data are available, some 693,000 people worked fewer hours. The government extended the payment of short-work benefits to a maximum of two years in May 2009. Before the crisis, it was limited to six months.
The idea dates back to 1910, when the government compensated workers who were put on shorter hours in the potash and fertilizer industry during an earnings slump. In 1924, when unemployment climbed to 11 percent, the government introduced nationwide short-work policies similar to those used today. A quarter of the German workforce was enrolled in the program at the time.
“Companies have replaced rigidly agreed working hours with flexible labor schemes that allow them to breathe with the economy,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. “Germany’s labor market is less inflexible than commonly thought.”
“It was our top priority to keep our core workforce and preserve knowledge and experience for the next upswing,” said Trumpf Executive Vice President Gerhard Ruebling. “We had layoffs in foreign markets with less flexibility, such as Spain, Japan, Poland and partly also in the U.S.”This is a safe and sound policy.
“Gross domestic product in Germany can expand by more than 7 percent without any increase in employment, if hours worked per employee and hourly productivity were to rise back to their pre-crisis levels,” OECD economists said in a report on July 7. “Achieving GDP growth on this scale is expected to take several years, and thus it is unlikely that the steady decline in the unemployment rate during recent months will continue through the second half of 2010.”When there's no firing, there's far less need for hiring. And we'll see what the future holds for Germany. Odds are highly biases in favor of Germany: as usual, the IMF and OECD are proven wrong. Of course, one has first to believe that the economy will improve on the short term. That's highly unlikely.
That’s a challenge for Germany, whose economic Achilles Heel has long been the reticence of its consumers to spend. Even as exports boom, the Bundesbank forecasts GDP will rise 1.9 percent this year and 1.4 percent next.