However, what role does "Germany" (as in the German government) really play in this? Did the German government pass laws forcing Germans to build good cars and save money and not spend it all and get all indebted? No! That is what is, IMHO, missing in this whole discussion. The Chinese government greatly influences the economy, but what specifically does "Germany" do or rather what did "Germany" do? Can someone please explain??? Thanks!
Low taxes, low social transfers, stagnant wages, running a budget deficit in good times, keeping gross public debt above 60% every year since 2001. The brainless should not be in banking -- Willem Buiter
stagnant wages - thats the unions and the employers association, NOT the government
running a budget deficit - what does that have to do with current account?
I'm just considering macroeconomic aggregates. You're the one who turned the macroeconomic aggregates into a presumably easier to understand metaphor about German grannies lending Californias the money to buy BMWs. The brainless should not be in banking -- Willem Buiter
which way does the whole cause and effect go
But:
From DIW (German Economic Institute) Weekly Report, October 2009 (pdf), "Real Wages in Germany: Numerous Years of Decline".
The line that the government has nothing to do with this, that it's just the unions and bosses, is the line being pushed right now by the German government. Yet there is no doubt that wage "restraint" is part of a deliberate policy beginning in the early '00s under Schröder. One of the obvious ways a government can create an economic environment in which unions are weakened in pay negotiations is to reduce social security safety nets (unemployment benefits, etc), so that workers are willing to accept tougher conditions rather than lose their jobs, and this is the series of programmes associated with the name Hartz.
In addition, the German social model has traditionally involved a political consensus involving the employers, unions and the government. To deny that now is disingenuous or market-worshipping ignorance. The brainless should not be in banking -- Willem Buiter
Try this: real wages (whether gross or net or 'total compensation') peaked in 2003, so they have not kept up with GDP growth. The brainless should not be in banking -- Willem Buiter
Half of Germany's exports are to the rest of the EU
Two-thirds.
43-44% to the Eurozone.
German capital was able to move just like any other capital. And I would assume that the capital in another country could possible be positive for that country current account.
Eastern Europeans working in Germany. OK, there were some restrictions but a LOT of stuff on the construction market (housing, streets) is done on the black market. What the net effect of that is, I don't know...
Because German monetary policy has a deflationary bias, and because German industrial policy is export-driven. The brainless should not be in banking -- Willem Buiter
