How Germany got it right on the economy

[Jay]

Re: How Germany got it right on the economy

Hmmm. I wonder if she needs a driver...

I'm pretty sure she comes with power steering.

[jk]

Re: How Germany got it right on the economy

german banks have about $450billion worth of loans to mostly spain and ireland, the rest to portugal and greece. how did germany get it right?

[GRG55]

Re: How Germany got it right on the economy

german banks have about $450billion worth of loans to mostly spain and ireland, the rest to portugal and greece. how did germany get it right?

Apparently they avoided lending to Italy?...

[oddlots]

Re: How Germany got it right on the economy

I take your point GR but you have to admit at least the German Banks had to leave home to get into trouble. That's something.

[c1ue]

Re: How Germany got it right on the economy

My morning amusement...

Limited the FIRE economy? Really??

And just which European country state owned banks were among the largest consumers of toxic toilet paper being churned out by Wall Street?

This show in Europe is far from over - the crowing about Germany is premature...far, far too premature. The Germans are just as adept at "kicking the can down the road" as everyone else. They might be the last economy standing as Europe melts down, but that's not going to be much help...

I think there is a large difference between buying a toxic MBS disguised as a AAA bond vs. creating a gigantic real estate bubble via fraudulent mortgages, appraisals, and loans in order to sell crap to other people.

I'd also point out that while the Landesbanks and what not were buying the above American crap, the money used to do so wasn't cheap Fed money but rather the savings of the people and companies in those regions.

So I am unclear as to why this qualifies as the same type of FIRE activity as has been seen in the United States, Canada, and the UK.

[Thailandnotes]

Re: How Germany got it right on the economy

Most of the comments have been about finance. I'm hoping for more comments on how Germany managed this...

"The glory of German industry is not in the big firms that are well known around the world, such as Daimler-Benz, Volkswagen, Siemens, or Bayer (see table 16, Appendix). It is in the small- and medium-sized firms that constitute what the Germans call the Mittelstand . Although that term has political and social as well as management connotations, it has been widely accepted to mean companies that employ fewer than 500 workers. Such firms constitute 98 percent of all German companies, hire 80 percent of all employees, are responsible for a significant share of exports, and provide one of the firmest foundations of the middle class."

http://countrystudies.us/germany/145.htm

[gnk]

Re: How Germany got it right on the economy

german banks have about $450billion worth of loans to mostly spain and ireland, the rest to portugal and greece. how did germany get it right?

Exactly. In my view, it's money laundering, is it not?

Let's remember double entry book-keeping and view Germany's "success" in that manner.

German banks make dodgy loans to other EU members. That money trickles into their economies, and the population in the periphery economies buys German products. I live in Greece now - anything of quality is German, cheap stuff Chinese.

Then the money returns to Germany as a surplus.

But with double entry book-keeping, it is a liability for the borrowing country.

Basically, Germany vendor financed it's success and now it is wagging its finger at the very same countries that made Germany a "success." You want to see German "success?" Stop the indirect bailouts of German banks and then we can talk about success.

[GRG55]

Re: How Germany got it right on the economy

I think there is a large difference between buying a toxic MBS disguised as a AAA bond vs. creating a gigantic real estate bubble via fraudulent mortgages, appraisals, and loans in order to sell crap to other people.

I'd also point out that while the Landesbanks and what not were buying the above American crap, the money used to do so wasn't cheap Fed money but rather the savings of the people and companies in those regions.

So I am unclear as to why this qualifies as the same type of FIRE activity as has been seen in the United States, Canada, and the UK.

The end result is exactly the same. A cratered up banking and financial system that needs government sponsored life support or it collapses; the result of lax regulatory oversight and a complete lack of political will to rein in the nonsense, despite ample warning signs, before the players became TBTF, and the system too interlinked.

Come now c1ue, do you REALLY think that Germany is bailing out Ireland [and Greece before that] because they have some altruistic love for Ouzo or Jameson? The bluster from the politicians, such as Mrs. Merkel, is all for show for the voters...Germany is going to keep bailing out its banking system no matter what. Sound familiar?

[c1ue]

Re: How Germany got it right on the economy

The end result is exactly the same. A cratered up banking and financial system that needs government sponsored life support or it collapses; the result of lax regulatory oversight and a complete lack of political will to rein in the nonsense, despite ample warning signs, before the players became TBTF, and the system too interlinked.

Come now c1ue, do you REALLY think that Germany is bailing out Ireland [and Greece before that] because they have some altruistic love for Ouzo or Jameson? The bluster from the politicians, such as Mrs. Merkel, is all for show for the voters...Germany is going to keep bailing out its banking system no matter what. Sound familiar?

Again, I disagree.

While Germany will continue to bail out its banks so long as they have significant (i.e. dangerous) foreign liabilities, ultimately the scope of all these bailouts is limited and relatively small compared to the German economy.

In contrast the United States is bailing out its own internal banks from its own internal domestic population's liabilities, and the scale of these bailouts continues to grow.

In the former case, it is a limited liability. As the PIGS economies shrink and as the PIGS continue to be unable to sell more bonds, their internal bubbles will shrivel and die. Yes, this will affect Germany - but Germany is going from a position of prosperity into the night even as their liabilities (and PIGS related false economic prosperity) taper off.

In the latter case, the liabilities are assets - all within the United States. The bailouts will continue or else the American economy such as it is will collapse from a barely break even state into a Depression state. And in fact the bailouts will end no matter what once the tripod of dollar world trade reserve currency, petro dollar, and US Treasury debt as money collapses.

So again, I don't agree that just because both Germany and the US are executing bailouts - that either the proximate reason or the result are the same.