Bloomberg Writes: Why Germany’s Export Machine Is Under Attack

 

Imagine someone who runs a thriving luxury car dealership, yet does the weekly shopping at a no-frills discount store. That pretty much describes the Germans. The global No. 3 exporter is famously thrifty at home, so Germany runs a trade surplus equaling nearly 7 percent of its economy.

Now, imagine telling the Germans that this is bad. That’s what is happening as a growing chorus of international critics warns that Germany’s trade surplus is endangering global growth, and putting Germany’s own future at risk.

On Nov. 5, the European Union threatened to probe Germany’s trade surplus, which since 2007 has exceeded EU guidelines of a maximum 6 percent of gross domestic product. Germany must boost consumption and raise wages “to open the bottlenecks to the growth of domestic demand,” EU Economic and Monetary Affairs Commissioner Olli Rehn said.

Rehn’s comments follow recent criticism from the International Monetary Fund, which says German export policy is hindering Europe’s economic recovery. A “significantly smaller current account [surplus] would be useful,” David Lipton, the IMF’s first deputy managing director, said in Berlin last week.

The U.S. has weighed in, too, with a recent Treasury Department report (PDF) warning that German policies were placing “severe pressure” on troubled European economies and creating “deflationary bias for the euro area, as well as for the world economy.”

Not surprisingly, the Germans are furious. Trade surpluses “are a sign of the competitiveness of the German economy and global demand for quality products from Germany,” the country’s Economy Ministry said on Oct. 31. “There are no imbalances in Germany which require a correction of our growth-friendly economic and fiscal policy,” spokesman Martin Kotthaus told reporters in Berlin. An article in the magazine Spiegel 

The critics, though, aren’t really asking Germany to export less—although that certainly would help such EU trading partners as Spain and Italy, which are struggling to export more of their own goods. The Germans are mainly being asked to spend more money on themselves. Over the past decade, Germany has dramatically lowered labor costs and reduced unemployment by creating a large number of low-wage and part-time jobs.

Read The Rest Of The Article Here

Sometimes I feel like I live in the parallel universe where only stupidity is rewarded.

Germany is running its economy as any responsible country should (well, besides being a part of the European Union) and IMF/USA have the balls to tell Germany to that it is doing everyone a disservice by not spending more.  I have never heard anything more ridiculous.

While I understand the reason behind such a statement, this is equivalent to having a friend who has already maxed out all of his/her credit cards telling you that you should live it up a little and instead of saving money should blow it all on coke and hookers.

It is terrifying, but that is the state of our economic leadership today.   It leads to nothing more than an eventual  decline in economic standard or worse…..an economic collapse that is just around the corner.  

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!  

Bloomberg Writes: Why Germany’s Export Machine Is Under Attack

 

Imagine someone who runs a thriving luxury car dealership, yet does the weekly shopping at a no-frills discount store. That pretty much describes the Germans. The global No. 3 exporter is famously thrifty at home, so Germany runs a trade surplus equaling nearly 7 percent of its economy.

Now, imagine telling the Germans that this is bad. That’s what is happening as a growing chorus of international critics warns that Germany’s trade surplus is endangering global growth, and putting Germany’s own future at risk.

On Nov. 5, the European Union threatened to probe Germany’s trade surplus, which since 2007 has exceeded EU guidelines of a maximum 6 percent of gross domestic product. Germany must boost consumption and raise wages “to open the bottlenecks to the growth of domestic demand,” EU Economic and Monetary Affairs Commissioner Olli Rehn said.

Rehn’s comments follow recent criticism from the International Monetary Fund, which says German export policy is hindering Europe’s economic recovery. A “significantly smaller current account [surplus] would be useful,” David Lipton, the IMF’s first deputy managing director, said in Berlin last week.

The U.S. has weighed in, too, with a recent Treasury Department report (PDF) warning that German policies were placing “severe pressure” on troubled European economies and creating “deflationary bias for the euro area, as well as for the world economy.”

Not surprisingly, the Germans are furious. Trade surpluses “are a sign of the competitiveness of the German economy and global demand for quality products from Germany,” the country’s Economy Ministry said on Oct. 31. “There are no imbalances in Germany which require a correction of our growth-friendly economic and fiscal policy,” spokesman Martin Kotthaus told reporters in Berlin. An article in the magazine Spiegel 

The critics, though, aren’t really asking Germany to export less—although that certainly would help such EU trading partners as Spain and Italy, which are struggling to export more of their own goods. The Germans are mainly being asked to spend more money on themselves. Over the past decade, Germany has dramatically lowered labor costs and reduced unemployment by creating a large number of low-wage and part-time jobs.

Read The Rest Of The Article Here

Sometimes I feel like I live in the parallel universe where only stupidity is rewarded.

Germany is running its economy as any responsible country should (well, besides being a part of the European Union) and IMF/USA have the balls to tell Germany to that it is doing everyone a disservice by not spending more.  I have never heard anything more ridiculous.

While I understand the reason behind such a statement, this is equivalent to having a friend who has already maxed out all of his/her credit cards telling you that you should live it up a little and instead of saving money should blow it all on coke and hookers.

It is terrifying, but that is the state of our economic leadership today.   It leads to nothing more than an eventual  decline in economic standard or worse…..an economic collapse that is just around the corner.  

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!