Germany records first monthly trade deficit since 1991 as inflation soars
theguardian.com
theguardian.com
Then from Wikipedia:
> In 2016, Germany recorded the highest trade surplus in the world, worth $310 billion. ...
https://en.wikipedia.org/wiki/Economy_of_Germany
So it's not just the magnitude of the trade balance (negative) but the velocity (sharply downward) that should get attention.
The US has run persistent trade deficits (now ~ $50 billion) for years. This brought cheap goods but eviscerated the manufacturing base. You could call it a tradeoff. What the US has going for it though is: (a) the ability to print its own money; (b) the ability to print the world's reserve currency; and (c) the demographics to support a consumption-led economy.
Germany has none of these things going for it. The situation is not sustainable. The article implies that the change is not structural (increased competition from elsewhere, for example), but if it is things could get weird real fast.
https://www.bloomberg.com/news/articles/2022-07-04/germany-h...
[1]https://www.macrotrends.net/countries/USA/united-states/trad...
What? Balanced trade is inherently sustainable. If Germany exported for the last few decades then it is going to import for a few decades at some point. That is how balanced trade works.
why does there have to be balanced trade? I don't believe balanced trade just happens naturally in a free market.
not necessarily. A situation like this could easily and quickly spiral out of control. High inflation could wipe out decades of trade surpluses and germany cant even control their own inflation, because its using €, which is controlled by the European Central Bank.
As a german citizen I'm hopeful that its only temporary however and that our economy recovers at least somewhat over the next few years.
But computer chips are just a small part, inflation is mainly driven by energy prices right now. Germany's economy is also heavily globalized and any conflicts or reduced global trade will hit the economy pretty hard.
Still, exports totally were just reduced by ~ .5% while imports increased by 2.7%. But these small percentages already create an imbalance.
Germany has a huge industrial organic chemistry complex. In comes the oil and gas, which get vapocracked, distilled into base molecules; out goes fertilizers, plastics, medecines, precursors, etc
It is so integrated that pipes run from one factory to another. Changes in the input will affect the whole chain.
Is this a bad thing? Depends. Germany is a manufacturing heavy economy where energy prices are obviously a major part of input costs. So there is certainly an argument that at some level, this is unsustainable.
In the long term, if the economic growth within Germany is able to offset the additional "expense" incurred , then it will not matter a lot. The US routinely runs a trade deficit, but the US economy is one that the world holds at envy for the reasons that it is able to do so. There is plenty of domestic consumption and growth that offsets the massive trade deficits and in a simplified way, the US imports deflationary prices from the rest of the world and exports technology (I said highly simplified)
For Germany, they don't have the luxuries that the US does. The question that is crucial now is how long can Germany sustain these deficits while their domestic economy re adjusts or is able to find deflationary forces from energy security etc. If they are unable to do so, then, by definition, they are fucked.
We keep talking about interest rates and monetary policy, when the reality may be that we need to look at all aspects of policy.
The thing to watch here is, the knockover effects and 2nd, 3rd order effects. When there is a gas shortage in Germany. . . Everyone suffers. A much higher portion of their GDP goes to compensate. When gas prices go up in the US, a section of the population “suffer”, but there is a lot more economic tolerance built in.
Arguably, there is no economic zone in the world which is internally well balanced today. This will translate into unique and difficult to navigate problems across the globe due to deferred consequences of past crises, geopolitical conflict, global climate change, and changing demographics.
Sad thing is that 1. Whole EU has to suffer because of this 2. You can't stop thinking "What it would be like if Germany actually stepped up to lead with understanding"
There is no inherent reason why Germany cannot singlehandedly support/fund Ukraine's war with a country with an economy 40% Germany's size.
That it cannot is a condemnation of every German government over the past 30 years. (That NATO's European members cannot do so either, and that the US is providing the bulk of the Ukraine aid, is correspondingly a condemnation of every member government over the past 30 years, although the newer members get a pass because they are a) small, b) poor, and c) actually meet the NATO 2%-of-GDP guideline.)
None of them want to get in an expensive war. And Putin is probably bluffing about using nukes, but who wants to risk it.
The US do have an interest and they’re dragging/pushing WE into the fire while EE are jumping head first with barely any encouragement.
If anything the EU has proven that the East-West rift cannot be overcome and that they do not have strategic independence.
There certainly is an inherent reason, which is that Germany and the German economy is dependent on Russian oil and gas as well as fertilizer and a whole host of other natural resources. This inherent reason will initially be felt only economically as factories and industries shut down without the resources need to continue production. In a few months when the temperature starts dropping this inherent reason will be felt in a much more interpersonal way as the German people start freezing to death when they can not afford to heat their homes or find the fuel to do so.
Germany is heading towards a few well earned decades of economic stagnation and political decline.
The question is - will the rest of the EU be able to seize this opportunity?
France tried repeatedly (for their own benefit but thats a given) to arm EU. Germany was comfortable so they turn it down (or at least hide behind US opposition).
It wasn't Germany blocking an EU wide army but the UK. Maybe you should get your facts straight.
What? Since when is making nuclear weapons obsolete a noble goal? I am really confused. Rheinmetall is heavily investing into autonomous AI for ground vehicles. The drone swarm memes are starting to get real, except flying drones were a stupid fantasy fueled by cheap imported plastic drones rather any any capability that they offer.
>Sad thing is that 1. Whole EU has to suffer because of this 2. You can't stop thinking "What it would be like if Germany actually stepped up to lead with understanding"
The EU doesn't work like that.
Except Germany is a manufacturing- and export-based economy. Take that away, and you have a recipe for economic collapse.
Read the FT's article, which includes much more statements from politicians and economists. https://www.ft.com/content/6f325773-bf8a-4e28-9fc1-6bc986ee9... Use the Bypass Paywalls Clean extension if you need to.
Or, read what Stratfor (if you have a subscription) has been predicting for a decade now: Germany's slow decline, to be replaced as Europe's power center by Poland.
Germany was already facing a worker shortage and inflation. Now the government is discussing rationing gas allocated to German businesses. Beyond the ideological arguments, it's clear that this is going to be a crisis for Germany, and for all Eurozone economies; and their reactions will determine "how bad it gets". We are looking at a probable recession across Europe.
By the way, I warned months ago that sanctions against Russia would have a backfire effect: Russia is mostly unscathed, their oil and gas revenues are soaring; meanwhile Germany is talking about rationing. Sanctions don't work in an interconnected economy.
Ok so what is correct then? I’m not seeing the reason trade deficits are inherently bad anywhere in your comment.
edit: Germany's exports are 48% of GDP for context. And this trade deficit reflects increased import costs, which will hurt businesses since Germany is poor in raw resources. I.e., this is a problem for both the German government & German businesses, and for their whole economy.
An export-based economy just means you let someone else consume the excess you produce.
The vast US military is arguably primarily to protect the right to print the world's currency. (The day Iraq started to sell oil in euros the US attacked it for example)
As Blyth knows and talks about the ECB is in dire straits versus the reserve currency dollar. The EU has a difficult road ahead having completely screwed up their energy policy and are now creating food shortages in Holland and elsewhere to add to the global inflation nightmare.
It's hard to tell if the US federal (it's not, it's private banks) reserve (they don't have any) are willfully incompetent or master tactical strategists...
etc.
dutch farmers are spraying manure at the bureaucrats buildings
This stupid meme needs to die.
Iraq's switch to the Euro was not some rogue act of defiance. It happened under the UN's Food for Oil-for-Food program and was authorised by the Security Council: https://www.un.org/depts/oip/background/chron.html
If it really was such a significant risk to the dollar hegemony, the US could have simply vetoed it. The switch happened in late 2000 but Iraq wasn't invaded till March 2003.
> US federal (it's not, it's private banks) reserve
Eye-roll.
The FR is a federal board 'overseeing' 12 private chartered regional banks. This contraption was organized in deep secrecy in 1910 at Jekyll Island as I expect you are aware.
The Polish GDP per capita is 30-40% lower than the German. Assuming it will ever happen, it will take decades for Poland to replace Germany.
For an export driven economy like Japan, Germany or China - balance of trade could be bad. How big is the German software & banking industry to offset some of this default in the long haul?
As a Pole, I cannot help but laugh at that. Why would that ever be the case?
Stratfor employs many ex-US-intelligence-agency people who use the same geopolitical analysis methods for a corporate audience (though without classified data) and their views are a close approximation of the thinking of the US's intelligence community; in that sense, they are significant.
They do state it with an air of authority and "high caliber top secret intelligence" but still laughable.
Which means in that sense it will be very likely ridicously wrong?!
To reply (though you were perfectly capable of this thought yourself):
Obviously; but it gives us a frame to understand geopolitical behavior by the US as it happens, and before it happens.
Edward Gibbon described “secret intrigues of the palace” (palace intrigue) as “those trifling but decisive causes which so often influence the fate of empires.” Stratfor is the Pentagon's palace intrigue (several steps removed).
If you've ever read Stratfor you know they expect, and plan for, the disintegration of Russia and China into smaller republics; and you can tell I don't believe in that.
It is merely an indication that the US likely now sees Germany as a second-rate ally, irrelevant to its geopolitical future; and therefore doesn't care about the sanctions' effect on Germany. That is the only reason I brought it up.
Similarly, holding the passport of a country doesn’t automatically make someone a geopolitical expert
I mean no offense at all, I’ve simply observed way too many instances of online discourse beginning with “as a citizen of ____” to establish credibility in areas that don’t really benefit from citizenship.
Not gonna lie, you had me in the first half.
Poland has had an anemic demography for years (1.38 child per woman in 2021, the lowest in Eastern Europe after Ukraine and Moldova), a massive brain (and workforce more generally) drain since the fall of the Eastern Block.
Its GDP per capita is even 30% lower than Czech Republic and less than a third of German's GDP.
German's economy is going to face troubles, but Poland isn't even remotely close to taking any kind of economic leadership. And it won't happen until Poland fixes their natality issue (and even then, it would take them another fifty years).
Yes, it is a recipe for collapse because imbalanced trade is inherently unsustainable.
Whether trade deficits are good, or bad depends on your monetary policy.
In case of Germany, it was definitely bad after them having such low interest rates for so long.
It was Germany's pride — it's manufacturing industry which took damage from low rates the most.
2. Trade deficits are not inherently bad
Which claim sounds more “flimsy”?
"Just read this link" on a complex and controversial topic may be comparable to "Just read this religious tract".
That’s a ridiculous and unhinged comparison.
You can’t arbitrarily denigrate one side of the argument because economics is a religion when both sides take it as a given that economics is a rational field of study.
Sounds like a significant shortage relative to their population and GDP…
The constituent factors of the trade imbalance being spoken about here is a sharp rise in energy costs. For decades, Germany has led the EU in repressive energy security policies including a heavy focus on shutting down existing Nuclear facilities that typically have >90% uptime in favor of cyclic sources.
For example, less than 10% of installed renewable capacity in Germany right now is usable: https://twitter.com/burggrabenh/status/1543388878584823810
Thanks to which, Germany is presently generating 72% of their electricity through very dirty and very expensive coal https://twitter.com/bjornlomborg/status/1543190255477706752
In H1 2022 >50% of German energy consumption was from renewables [1] and Germany has currently significantly lower spot-market prices than France, which went full-on nuclear [2].
The sharp rise in energy costs has nothing to do with nuclear (at least not now - if the society 20-30 years ago had invested more in nuclear, things could've turned out differently. Now, nuclear is neither feasible nor economically viable..) and everything to do with gas prices, which dominate energy costs due to the merit order. Coal is currently actually still used below capacity while gas plants are running at record utilization, thanks to profit-maximizing utility companies exploiting this.
Unfortunately, Germany had a government for the last 16 years that cared a lot for preserving the status quo for incumbents (cheap gas!) and neither companies nor consumers were willing to pay a premium for energy security/resilience. We're now paying the bill for that.
[1] https://mobile.twitter.com/energy_charts_d/status/1542804890... [2] https://mobile.twitter.com/energy_charts_d/status/1543915767...
That's not true. Nuclear is in fact the only feasible replacement for gas and coal as a stable energy source.
If you look at (the very few) recent nuclear projects in western countries, you will notice that a) they take very long to build (longer than to bridge any gap from gas and coal and longer than we have due to global warming), b) they are way more expensive than (over-provisioned) solar/wind PLUS energy storage to make renewables "stable", even when not fully factoring in implied state-guarantees (nuclear is still uninsurable and thus dependent on heavy subsidies that are almost never accounted for by advocates + the problem of longterm storage has also never been solved and is not covered by most cost calculations) and c) the energy companies don't even have enough trained/experienced staff left to extend the life of the last 3 german nuclear power plants.
Yeah, nuclear superficially sounds like a good solution, but I am always surprised that most proponents havbe never looked into the details. Just ask yourself why China, where "irrational" nuclear fear plays no role at all, never went full-on nuclear (~5% of chinese electricity comes from nuclear and even with all planned new projects it will be max 15% by 2050). The reason is they did the math....
That's not always the case, and it's mostly due to regulations which we can revisit. There is a ton of regulatory overhead on nuclear that is based on nothing but fear. More importantly, we don't have any other option to substitute gas and coal in ANY timeframe if not with nuclear.
> they are way more expensive than (over-provisioned) solar/wind PLUS energy storage to make renewables "stable", even when not fully factoring in implied state-guarantees (nuclear is still uninsurable and thus dependent on heavy subsidies that are almost never accounted for by advocates + the problem of longterm storage has also never been solved and is not covered by most cost calculations)
Let's unpack this a little bit. Yes, there is no solution for long term storage, but it is also not a huge problem. Even if all our energy came from nuclear, we could safely store all waste produced from it in a very small space. Again, compare it to the alternatives: the waste from coal and gas is released in the atmosphere, causing thousands of direct deaths due to pollution, and potentially billions due to climate change.
Now for the first part. Nuclear is not heavily subsidized at all - renewables have way more subsidies, and let's not even talk about coal and gas -, nor is there any issue getting it insured except cost. In fact this is a major factor in how costly it is, because nuclear providers usually have to contract private insurance [0].
> the energy companies don't even have enough trained/experienced staff left to extend the life of the last 3 german nuclear power plants.
This is a German problem, not a global problem. And in the time it takes to get these plants running, we could easily train staff. Again, not an issue except cost.
> Just ask yourself why China, where "irrational" nuclear fear plays no role at all, never went full-on nuclear (~5% of chinese electricity comes from nuclear and even with all planned new projects it will be max 15% by 2050). The reason is they did the math....
Yes, they did. Which is why in China 10 years ago nuclear energy was only 1% instead of 5%, and 10 years before that it was 0.1% [1]. And they plan to double it to 10% by 2035 [2]. In other words, China is the perfect example of my point, not yours.
But let's address the elephant in the room. What is your proposed alternative to nuclear?
[0] https://world-nuclear.org/information-library/safety-and-sec...
[1] https://www.statista.com/statistics/265533/consumption-of-nu...
[2] https://www.spglobal.com/commodityinsights/en/market-insight...
This is a false reading of the source. The source talks about domestic electricity production.
You said energy consumption, which would include gas/oil, and I really can not imagine that statistic to hold up considering all the energy we import.
I just read (literally published right now) that 49% of the energy that has been produced in Germany during the first half of this year is from renewables. 6% more than last year.
https://www.tagesschau.de/wirtschaft/strom-erneuerbare-energ... (German)
That my own solar panel right now has the best time of the year, also makes me doubt the 10% figure.
However, I think Germany will need nuclear, but the government first needs a plausible (in the public eye) reason to do a 180.
There is just no way for Russia, being a full blown fascist state now, to get peace of mind.
I think that demolishing Kremlin after Putin's death will help with that.
the EU gets it’s buffer state and cheap gas
I think that is the most naive take I’ve read here.
So Yes, Germany can dream of appeasing Russia by risking internal EU war with Poland.
Something never talked about is how her parents moved from West to East Germany when she was a baby.
>Germany got a lot of structural characteristics of a socialist economy, in particular being dominated by large manufacturers who have been getting preferential treatment from the government, and losing the ability to adjust and maneuver. She also didn't have that gut check of dealing with Russia and has put all the Germany's eggs into one basket which has been held by Putin.
It's amazing how many gullible still say that Merkel was always against German dependence on Russian gas but could not do anything about it. For 16 years!
I would be surprised, but not shocked, if we learn someday that Merkel is a long-term Russian intelligence asset, recruited in her youth.
In the export destinations like Greece. For Germans it means supressed wages because they have to compete against Greek wages which means Germany has to sacrifice its productivity gains to provide low priced goods, effectively giving those productivity gains away for free the moment the export destination country predictably must go bankrupt.
https://archive.nytimes.com/krugman.blogs.nytimes.com/2010/0...
Of course, you could make the argument that it violated the spirit of the treaties.
That being said I have no idea what the OP was on about, it's not illegal, it's just stupid.
Because Germany has renounced part of its independence and sovereignty by joining the EU, so now it has to do the patriotic thing and think of that larger collective. As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country. As was pointed out many times during the crisis years of 2008-2013, many of the problems in the EU exist because of its partial and unfinished integration. It is very difficult to have a unified currency without also having a unified fiscal policy. As others have pointed out, the EU cannot survive in its current state, either it breaks up or it deepens its integration and becomes a United States of Europe.
Is this enumerated in a treaty? Which law says this?
>As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country.
I live in the United States and I have never, ever, heard of this question being asked. Which thing is New York sacrificing for the rest of the United States?
https://www.intereconomics.eu/contents/year/2018/number/3/ar...
"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."
The idea being, why would Italy, France and Greece agree to open their market and give up their currencies (ie ability to devalue) in the face of the German juggernaut? A joint market would destroy French and Italian industry and in-debt Greece - as happened.
<rant> The Euro zone was a mistake. Its premise was solid - the europeans no longer had the ability to have colonies to steal resources from, so they sought to create a large enough market to be relevant and muscle themselves into decent prices.
It failed because the US quickly made sure the euro never seriously challenged the USD. Also, a continent that makes < 1.5 children/woman is not a going concern so no one has ever taken them seriously. Finally, the rise of China and India sealed the EU's fate. </rant>
Because they couldn’t manage their currencies and always dreamt of low inflation, in a few words: they wanted the Mark. Calling it Mark would have upset the nationalists, so they made the Euro.
> The Euro zone was a mistake.
Outside of the eurozone, Italy would have gone bankrupt in the mid 2000s, Greece a few years later.
This implies that Italians are dumb and that Germans are still in the business of making evil plans that fail at the end, because good always triumphs.
Go look at the econ stats circa 2000 of Veneto, Lombardy and Piedmont and compare them to Germany's.
Typical Northern Protestant bigotry. As if Italians and Greeks don't have economics courses in college.
Italians, Greeks, etc would purposely devalue their currencies to effectively lower wages (which are sticky) wrt to international markets, making their exports competitive while manufactured imports more expensive. The French created the CFA (under the bayonet) to have a larger economic mass to play with (the most egregious post WW2 colonial abuse by Europe).
of course this policy results in (very well managed) inflation which results in the middle class saving through real estate, hence these countries' high rates of home ownership (Greece in particular).
So the single market (ie no protective tariffs) and a single currency are poison to Southern Europe's industry so why should the agree to it? They agreed under the condition that Germany's industrial appetites wouldn't be rapacious. Which was a great plan, after all when has Germany ever tried to swallow its neighbors? /sarcasm
For your information I am Italian, I won’t reply to the rest of your fantasy, but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites.
> They agreed under the condition that Germany's industrial appetites wouldn't be rapacious.
So you are saying that when Italy joined the euro, they asked the Germans to slow down research and development and to artificially reduce the productivity of its industry? Or does “rapacious” mean that the Germans send assassins to kill good Italian managers? Are you implying that Italians are inherently less productive than Germans?
So was I until I grew out of it. What's your point?
"Are you implying that Italians are inherently less productive than Germans?"
... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.
I didnt venture an explanation as to why Neapolitans make less cars, nor do I care. The role of Rome, or any government, is to represent the interest of its citizens.
If Napoli makes less cars because there's less capital invested or because they all get sick during the world cup is of secondary concern to me. My primary concern is that the internal market ensures my citizens are employed in a dignified labor (and not that story of a woman offered 200euros/month to work 6 days a week as a cashier)
"but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites."
The CFA is not a conspiracy theory, ask Congo (or Gaddafi. Or do a HN search in the bottom of this page), and you'll find websites in all languages talking about it. Especially French, but Ive read websites in Spanish, and in English.
The only language I haven't read about the CFA is in Italian, but the Italian internet is... dull.
"Or does “rapacious” mean that the Germans send assassins to kill good Italian managers?"
I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.
"So you are saying that when Italy joined the euro, they asked...."
Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.
That I’m not Nordic nor Protestant.
> ... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.
So, is it a racial thing? The Italian is inherently less productive because he doesn’t have the German spirit?
> The CFA is not a conspiracy theory, ask Congo (or Gaddafi.
I’m not sure Gaddafi opinion would be relevant.
> I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.
So the Germans are back at the Reich thing and Frau Merkel is a cover up because we are scared of people with moustaches.
> Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.
So you read it on a blog and you think it makes lots of sense but you can’t explain how? What are these safeguards supposed to be? If Audi makes too many Audis than Frau Merkel has to drive a Fiat Punto?
I don’t think you should continue with this.
So much wrong with that sentence.
The birth rate went that low (and lower!) but has been going up recently[0]. But even if total population was halving every generation, that’s only a concern if it’s sustained for many generations, and population forecasting (especially this simplistic) has never been particularly accurate over such periods.
Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3].
[0] https://www.macrotrends.net/countries/eur/europe/fertility-r...
[1] https://www.reference.com/geography/many-cities-world-c25cce... and https://en.m.wikipedia.org/wiki/List_of_states_with_nuclear_...
[2] https://en.wikipedia.org/wiki/Economy_of_the_European_Union
[3] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
I think the data you linked is prediction from year 2020 onwards, and there is no observed increase from 2013.
Who cares what the halving period is? You still have an inverted population pyramid. Have fun paying pensions. Even if you started popping 3 kids per woman today you still have 30 years before they become productive (debauchery during an Erasmus is not a productive use of time). How's Europe going to pay bills until then?
Btw, 3 kids / woman in Europe is a laugh - 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so. But why would you if you have the qualifications to move abroad?
"Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3]."
I really dont understand how your point about nuclear weapons is germane to this discussion. Ill have to ask the French and Brits? Naw, Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.
As to Europe's post war relevance - Europe has no resources and the Asians have caught up, and surpassed, technologically. Where's Europe's competitive advantage?
Europe's GDP is not impressive. Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery. On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.
Europe is not a going concern. Heck Im expecting a new debt crisis in the EU this year
As does the USA and China, with fertility rates of 1.7 (according to Google).
> Have fun paying pensions.
Pension ages are increasing. Germany is also encouraging immigration, but that's only going to affect Germany as a million across Germany is economically relevant but the same million across the entire continent isn't.
But, we also have improving tech for old age care as everyone saw this coming since the Japanese did it first, and anti-aging in lab rats is now at the "huh interesting" stage. Nothing's guaranteed of course, this is just to illustrate that everything can radically change for reasons you don't consider. Like a global pandemic or a land war in Asia.
> 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so.
And as the population goes down, everyone still around gets more space.
> But why would you if you have the qualifications to move abroad?
Where? Europe is very varied from one country to another, but overall it's better than most places worldwide — while not as much as the USA, the USA doesn't seem to want immigrants, and conversely much better than China and India which you previously described with the sentence "Finally, the rise of China and India sealed the EU's fate".
> Ill have to ask the French and Brits?
Both of which have only enough to deter outside forces from destroying them, they didn't have enough military power to e.g. keep their empires.
> Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.
The modern state of Germany literally only exists because of the fall of the decline and fall of Soviet Union, allowing reunification. They felt safe for fairly obvious reasons, but that postdates the only period of European weakness since the age of exploration.
> Where's Europe's competitive advantage?
This is the only relevant question. I don't have an answer (software engineer not economist), but everything else you've said either doesn't matter or can't be treated as a long-term trend.
> Europe's GDP is not impressive.
The EU alone being the third largest on the planet isn't impressive? As you sometimes write of the continent and sometimes of the EU, I will also add that if Brexit had not happened the EU alone would be above China right now, and you can add another trillion for the EFTA. The biggest economic issue the continent has right now is that Russia and Ukraine are both in the continent, and each is likely to see order-of trillion dollar costs.
> Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery.
"Everyone else is catching up" is not a bad thing. If all else was equal, every nation would have a share of GDP equal to their share of population, which would put Europe at double the GDP of the USA and China at four times the GDP of the USA.
> On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.
Tertiary sector includes tourism, but isn't limited to it. Tourists is 10% of EU GDP. Tourism includes museums.
Other things in the tertiary sector include education, IT, FIRE, management consulting, and public health.
It's generally seen as a good thing, and is more than half of both China's and India's GDP.
It was rather the other way round: Germany was made to agree to the euro project as a concession for reunification.[1]
All in all, this seems to have been beneficial for a majority of normal people in the countries getting a stronger currency and for a minority of people in Germany, who export: Consequently, Germany’s wealth distibution tends to be the most unequal in the euro zone,[2] and its median wealth is slightly below that of Slovenia and significantly below that of France, Italy and Spain.[3]
[1] https://voxeurop.eu/en/you-get-unification-we-get-the-euro/
[2] https://www.reuters.com/article/us-germany-wealth-idUSBREA1P...
[3] https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...
So the Germans accept the Euro in exchange for re-unification (France's biggest mistake IMO) Thats one negotiating point.
Second negotiating point: who's in charge of the Euro? Who's industrial interests are represented by the ECB? Germany needs cheap imports (strong currency) or its industry screeches to a halt.
https://www.intereconomics.eu/contents/year/2018/number/3/ar...
"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."
init(clever);
Obama's observation was that you can't run a trade surplus with Southern Europe for decades and then get all surprised when they run out of money to pay you with. In a similar vein, you can't have EU cross-border banks without a EU cross-border insurance deposit scheme, because then one bank can potentially drown a small country, which is what happened during the Eurozone crisis.
Barring an economy from running a surplus seems like a terrible trade deal to me, so I wonder why the Germans would ever agree to such a rule.
If Germans are allowed to have a permament surplus, than someone MUST always have a deficit.
No country has a trade surplus/deficit of exactly 0, or even near 0. There's always at least half a billion going either way. If you know of any treaties that put limits on these numbers, I'd like to know what they are because I'm very curious about the intentions behind the people who would draft something like that.
Going by https://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_... (link says 2013, but document says Q1 2022), Germany had an intra-EU trade surplus of about 0.2 billion euros. Germany is the closest to a perfect balance within the eurozone in the entire EU except for Bulgaria. Their surplus is almost entirely extra-EU, which isn't a problem for EU members.
The Greeks do hence they are massively in debt. No, they can't export their way out of debt because that would mean Germany has to export less and import more. Germany is supposed to be the workplace country and Greece must remain soulless suburbia with no job opportunities.
Greece can export to any country it wishes, if it has goods or resources that other countries want. If Greece can produce the Germans really want, they'll export to Germany all the way to an internal German trade deficit.
The entire EU would be quite happy if Greece turned into a workers' paradise tomorrow, but no other country is going to pay to fix the mess corrupt Greek governments have left behind unless the Greek situation threatens the stability of their own economies.
China is #1, the USA (all of it) is #2 and Germany (just Germany, not the EU) is #3. Have a look at their relative populations and appreciate that fully.