economy germany Markets

Fate Of The Universe Now Hinges On Germany, $683 Billion In AUM Says

Loosen the damn purse strings.

Loosen the damn purse strings.
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3 comments on “Fate Of The Universe Now Hinges On Germany, $683 Billion In AUM Says

  1. To play devil’s advocate here, if Germany’s current mild recession is largely caused by the US-China/EU/everyone trade wars – which seems plausible to me – then should Germany let itself get pushed by markets/investors into a hasty rush of fiscal stimulus?

    Recessions are a normal part of the economic cycle. Domestic German stimulus isn’t going to get Chinese factories to release machine tool orders. I’m not hearing that the current German recession is overcoming its social safety net.

    The US is running colossal deficits and lurching toward MMT to maintain 2% GDP growth. China is accumulating structurally dangerous private/quasi-public debt levels to maintain 5-6% GDP growth. Germany is running a balanced budget and about 0.5% GDP growth.

    0.5% is too low, but maybe Germany should focus on lowering some of its structural impediments to growth: productivity, taxation, labor market rigidity, infrastructure, education, financing, attitudes toward entrepreneurship, etc. Some of this requires public spending but more of it probably requires thoughtful reforms. Perhaps its best to spend strategically as part of that reform rather than trying to spend urgently as part of an emergency response to the current recession.

    In the Great Recession, we saw that when governments rush to pump 100s of $BNs into “shovel ready” projects, it doesn’t necessarily result in a commensurate level of long-term benefit.

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