‘A Real Emergency’: German Economic Collapse May Be Biggest Tail Risk
Although consensus is coalescing around the idea that the next shock to markets will come from lackluster US corporate earnings and a shallow recession in the world's largest economy, the bigger risk may be a sudden, deep downturn in Germany.
Already distressing rhetoric took another turn for the dramatic over the weekend, when Yasmin Fahimi, the head of the German Federation of Trade Unions, told Bild am Sonntag that the country "has a real emergency."
"Entire branches of industry are in dang
H-Man, it appears the world is on fire — this morning I noted some countries are battling 80% inflation (Turkey) and 40% to 60% in South America. More problematic, countries that have been aggressively hiking are seeing little headway in dampening inflation ranging from 9% to 12%. Then JP Morgan issues a note that oil could go as high as $380 a barrel if Russia really tightens the screws. Not sure how anyone can honestly say a “soft landing” is in the cards.
Germany (and the rest of the European NATO countries) are going to be forced into a ‘war’ footing where the people are going to be asked to make whatever sacrifices are necessary to build a new energy base for the country and all of NATO must start developing the new weapons of war to keep ahead of Russia (and China). Missiles and drones are the new mainstay. Hunter/killer drones are needed to seek out and destroy Russian drones. Trumps ‘Space Force’ will be needed to protect friendly satellites and to knock out the enemy eyes in the sky. Missiles of various sizes, speeds and destruction capability will be needed in large numbers. Remote warfare is the new future and the race is on. A wartime economy can quickly shore-up a peacetime economy. Germany did it in the 30’s. Russia is going to force them into it.
I fail to see a direct path between beating back Russia on the battlefield and restarting the gas pipelines to Germany. The battle will be getting LNG in, rationing and nuturing European solidarity. And there is no way the ECB will let Germany down if it’s a matter of printing Euros.
Yes but your statement isn’t contradicting the post you’re replying to. We’re still going to be spending a pretty penny getting our military up to speed and re-tooled to be able to face Russia and China conventionally.
Your point about Germany not being a monetary sovereign is critical. War brings many unintended consequences — and the demise of the euro may be one of them.
The main point I see in this post is that Putin may actually be crazy like a fox. Perhaps he did not reckon on so much resistance from Ukraine, a seemingly costly mistake. But it is possible his years in the KGB helped him see what desperate people will do when cornered. By the winter Germany will have to make a decision between principle and survival. Germans, IMO, are survivors. They need gas and can get it if they buy Rubles, give Putin needed Euros and and get their gas. While that would enable Putin, it can protect Germany as a cornerstone of NATO. Both choices are crap, but biting the bullet and caving to buy gas is better than an economically destroyed Germany. Putin has more choices than it may seem and he, too is a survivor … and a nut job.
agreed…I attempted a more substantial comment tying current situation to America’s misguided response to the 9/11 attacks, Putin’s cyber, economic, and military actions since, aided and abetted by right wing pols, greedy social media cos, China and India, but website denied it…
“German companies are paying out around €70 billion euros in dividends this year, more than ever before,” she told Bild. “At the same time, business leaders claim that it is not possible to get through the crisis without burdening consumers with higher prices and employees with lower wages. That doesn’t add up.”
Yep.
Habeck echoed his own dire prognostications. He cautioned that Vladimir Putin isn’t acting erratically. Rather, the Kremlin is engaged in a “completely rational and very clear” campaign of “economic warfare.”
Double yep.
Hence act logically. Declare this to be wartime and the economy as well as the whole population needs to be subjugated to the needs of the country. Prioritize survival and national unity.
there is a very basic ethical question in Malcolm Gladwell’s The Bomber Mafia. The Bomber Mafia looks at the historical development of the use of aircraft in warfare, and the strategic debate that existed in WWII: namely, targeted, precision bombing vs. massive firebombing of entire cities. Which was the most humane way to wage and win a war? Was it better to wreak more devastation, and win the war perhaps more quickly, or to wage it by targeting only strategic resources that would eventually bring the enemy to its knees? We are effectively reliving this debate again today in the Ukraine. The slower attempts to economically strangle Russia have not worked as quickly or efficiently as Germany and the rest of NATA have hoped. How much suffering should we expect the people of the Ukraine endure? Please understand I am not advocating escalation; however, as German and other European nations suffer from a lack of relatively quick resolution, will not pressure to do more, and sooner, not escalate? What does Nato do then? How does the crazy man in the Kremlin respond?
Sooner or later it will dawn on the West that we are in a global war with Russia. While the military fighting is limited geographically at the moment, cyber, food and energy, to name a few, are global. We do ourselves a disservice to think this is only a war in Ukraine. It’s time for “all hands on deck”.