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Comment by Despegar | Hacker News Reader

Even though certain economists and politicians know better, they ultimately reflect the political will of the people. So while at an individual level it doesn't matter that someone saves all their income and spends nothing, if that becomes the "culture" then it influences politics (which it has). Even the leftist parties in Germany don't drift far from this orthodoxy.

The great thing is that negative rates are self-correcting. While the story mentions the German finance ministry is considering making it impossible for banks from passing on the negative rates to depositors, so clearly they're going to try literally everything to keep the delusion going, eventually after putting their banks at risk and realizing the negative rates aren't going away they'll figure out they need to actually spend on a national level.

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"Even though certain economists and politicians know better, they ultimately reflect the political will of the people. So while at an individual level it doesn't matter that someone saves all their income and spends nothing, if that becomes the "culture" then it influences politics (which it has). Even the leftist parties in Germany don't drift far from this orthodoxy."

I cannot believe that we are this far through this discussion, with 80+ points and 120+ comments and not one person has mentioned the underlying cause that is deeper than the "german culture of savings".

None of them had any kids.

Their birthrate is well below replacement.[1] You can't produce an inflationary environment when households aren't being established and the major, overriding driver of consumption has been removed from the lives of so many Germans.

There is a reason they have all this money to save ...

[1] https://en.wikipedia.org/wiki/Demographics_of_Germany "The total fertility rate was rated at 1.57 in 2017." (vs. a replacement rate of 2.1 ...)

Well, Merkel took in 1M of (young) refugees and took flak from the same people that are now complaining about recession.

As we speak there are millions of people wanting (hell, willing to pay hundreds of euros to smugglers) to be European consumers, younger than the Euro average (I don't have hard numbers on this, but I would be real money), but they are driven away and left for dead in dinghyes.

There's more than one way to grow the population.

While the demographic time bomb is a long-term issue for a lot of advanced economies like Japan (but also China), it's kind of a separate issue than what's happening in the EU today (and has been for the life of it).

Ideally there'd be enough political will to finish the EU project, but that's even more of a long shot than Germany seeing the light on fiscal spending. Then there'd be actual transfer payments between rich and poor EU members, but barring that, Germany and the other rich EU members need to spend.

All the single Germans should probably start taking more vacations in Greece and Spain and the rich ones should buy some Ferraris.

Rsync isn't talking about the demographic time bomb. What they mean is: Consumers having children directly causes higher consumer spending, because the child needs food, clothes, shoes, transport, education, medical care, furniture, holidays, sport, childcare and suchlike. And less directly they might want more bedrooms, a safer neighbourhood, a safer car, a stay-at-home parent, and so on.

USDA figures [1] put the costs of having a child at 12% to 24% of household income (for richer and poorer families respectively) while some UK estimates [2] have put it as high as 38%

Of course a childless couple can build savings like crazy, if they've got as much income as their peers who are parents, but their outgoings are that much lower!

[1] https://en.wikipedia.org/wiki/Cost_of_raising_a_child#Dual-P... [2] https://www.lv.com/about-us/press/cost-of-a-child-2016

Sure but I guess my point is that how Germany ends up allocating their fiscal spending doesn't really matter, as long as on balance they run deficits for a long period of time.

Germany could give every German with a child a stipend to subsidize families (and if they're already doing that, increase the amount they get per child). I don't actually think that would make more Germans have children, but the ones that have families would be able to spend more.

The administration has been trying to get people to have more children for a long time. Around the early 2000s, our birth rate was actually 1.4 children per mother, so the current 1.6-ish is already a significant improvement. This increase is usually attributed to three things:

1. "Elterngeld" (parental leave money): After a child is born, parents can take up to 14 months off and the state pays a portion of their last salary (70% afaik). Employers are required by law to accommodate parents who wish to take parental leave.

2. A few years ago, a "right to child daycare" is introduced. If you're working and want to give your child into daycare, the municipality has to offer you a place in their daycare facilities or, if they don't have enough, compensate you for lost income.

(This isn't to say that you don't have to pay for that daycare, but "free child daycare" is now a popular slogan among many political parties and some states have already implemented it afaik.)

3. Not a policy, but there is ongoing pressure from society on employers to improve the work-life balance of parents. Things like making it easier to both men and women to work part-time after a child is born etc. It's still a problem that women are low-key discriminated against, as in "We cannot promote her into an important role. What if she has a child?", and the gender pay gap is still significant, and fathers doing parental work are still looked at funny sometimes, but it's all getting better. (Frustratingly slowly.)

on a slightly related note; daycare thing does not work though, every couple I know of in Berlin has been looking for kita like crazy even before the baby is born.

> they ultimately reflect the political will of the people

That requires some proof. The German public loves to save, the German state doesn't. The German public hates bailouts with tax money, the German state loves them. Germany isn't a good example for "individual interests form policy".

> Even the leftist parties in Germany don't drift far from this orthodoxy.

Why would they, leftist parties love generous state spending and high debt. The somewhat surprising part in Germany is that the conservatives love spending and hate saving, too.

Are you aware of the schwarze Null? Germany has had a balanced budget for many years. It's almost a political religion in Germany.

I am aware of it. I'm also aware of the fact that it's a lot of bookkeeping, i.e. not counting bank bailout costs, pension guarantees etc, the implicit public debt looks very differently. And keep in mind that the last few years with little to no new debt (on the federal level) were during record tax income and strong growth that is now turning into a recession. With explicit public debt hovering around 65% of GDP, Germany is pretty average in both the world and Europe.

In this environment, talking about the German government as if it were spending money carelessly seems to me to not reflect the reality.

People are willing to pay money for the privilege of lending money to the German government. Yet the German government, including the supposedly left-wing SPD, is still holding to the schwarze Null ("black zero," meaning a balanced budget). A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus. Instead, they're dogmatically holding to the zero-deficit policy.

Look at Germany's spending, and then predict how it will be financed a year or two into a recession, especially with falling exports. Since it's hard to cut the expenses, you either increase taxes, or you increase debt. Taxes are already pretty high and unpopular. The "balanced" budget has been a thing since 2012, but hasn't in the past 50 years before that. It's not like it's virtually unknown for Germany to take on debt.

As for the SPD being left-wing: traditional political categories quickly break down when applied to Germany, the continuum is "far left, nothing, nothing, the super majority in the center, nothing, nothing, far right". There's very little actual difference between the "conservative" CDU, "social democrat" SPD, the socially progressive Green party and the "free markets will take care of that, whatever it is" FDP when it comes down to policies, which is also why Germany's policies don't change a lot when the government changes (the conservatives removed the military draft, the social democrats cut back the social system, and the pacifist Greens & social democrats went to war in Kosovo).

> A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus.

In a time of growth, record tax income, strong-ish inflation (thank god for cellphones and smart tvs or it would shoot up like crazy)?

> Taxes are already pretty high and unpopular.

Taxes on income, yes. Taxes on spending, yes. Taxes on capital gains, not really. And taxes on property are virtually nonexistent. And where's that financial transaction tax people were talking about 10 years ago?

> Taxes on capital gains, not really.

The share of tax revenue they provide isn't that large, it's about as much as car tax. Even if they doubled it, it wouldn't really matter. Property taxes do exist, but they aren't a federal issue, they (together with a tax on company earnings) fund the local communities, the federal level is funded by income tax and sales tax, mostly.

> And where's that financial transaction tax people were talking about 10 years ago?

It was mostly activists talking about it in a "if we all got together and did this world wide, it would be so nice" kind of way. I don't see that happening any time soon.

> In a time of growth, record tax income, strong-ish inflation (thank god for cellphones and smart tvs or it would shoot up like crazy)?

Germany is on the verge of recession. Growth was negative last quarter. Inflation is around 1%, which is rather low.

So is the rational policy you recommend to go into debt for stimulus, and pay off the debts in subsequent years, through lower government spending? Or would it be to go into debt permanently, passing the interest payments on to future generations?

Debt is usually paid off by inflation. As in: If you have a non-zero inflation, your GDP grows accordingly (all other things being equal), so you can take on new debt and still have your debt-as-percentage-of-GDP stay the same.

The interest payments here would be from the bond holders to the German state.

Right, but if you issue a 10-year €x bond and spend the €x, in 10 years you have to repay the bondholders, which means you either have to have saved up €x over the intervening years, or you have to take out another loan of €x at the prevailing interest rate.

Unless the state is expecting bond rates to remain negative indefinitely.

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