German powerhouse struggling

shortchanged_2

http://www.bbc.co.uk/news/business-29517657

German industrial output took a dive recent figures released show. Not good news for the powerhouse of Europe.

How can this news be spun by the usual suspects on here?

It's a great opportunity for the UK to take up this slack from Germany's struggling situation....

Any other suggestions to turn this bad news around?

Generali

shortchanged wrote: »

Any other suggestions to turn this bad news around?

It'll push house prices up in London (I think that's a good thing: it used to be).

The reason? People in the Eurozone are understandably worried about the future so aren't buying stuff. However they want, again understandably, to carry on making stuff. That means they want to run a massive trade surplus of ~€200 billion/year, quite possibly rising too.

However, if the Eurozone is going to run a surplus of €200,000,000,000 that means someone else has to run a deficit of €200,000,000,000 unless the Eurozone is going to start to export to Mars. To finance that surplus, the Eurozone is going to have to buy assets from deficit countries in order to recycle the cash.

What assets are particularly highly sought after in the UK right now? Ah yes, I remember......London housing! If you think it's expensive now then you ain't seen nothin' yet.

The Eurozone, one way or another, is likely to purchase net overseas assets of $1 trillion over the next 4 years. Unless anyone thinks that the Eurozone's problems will go away between now and the next World Cup.

michaels

I can not understand the almost worship that many seem to have for the German economic model. To me it seems to consist of extreme income inequality and resultant insufficient domestic demand only mitigated by lending money to the rest of Europe to allow them to purchase the German surplus. Loans that of course can never be repaid.

Generali

michaels wrote: »

I can not understand the almost worship that many seem to have for the German economic model. To me it seems to consist of extreme income inequality and resultant insufficient domestic demand only mitigated by lending money to the rest of Europe to allow them to purchase the German surplus. Loans that of course can never be repaid.

The trouble is, the Europeans are stopping borrowing and in any case, that model only worked to sell stuff in the Eurozone. Now the Germans are coming for your assets. I wouldn't mind betting on a huge asset bubble in anything with a sniff of yield being the result (don't forget about all those aging populations that want yielding assets).

Now, who wants to buy a load of AAA high yield debt?

ruggedtoast

Why cant everyone just make things and sell them to eachother equitably. What is so wrong with that?

Generali

ruggedtoast wrote: »

Why cant everyone just make things and sell them to eachother equitably. What is so wrong with that?

They do. The problem in this case is that workers want to save rather than buy imports.

Everything's equitable. The result might get a bit messy though.

purch

michaels wrote: »

I can not understand the almost worship that many seem to have for the German economic model.

It was, apart from the odd blip, highly efficient and allowed Germany much of the control over the rest of Europe that they failed to achieve a few decades earlier.

Unfortunately they didn't quite achieve enough control to stop the rest spending money they didn't have, and couldn't possibly hope to borrow without assistance from German Credit.

CLAPTON

ruggedtoast wrote: »

Why cant everyone just make things and sell them to eachother equitably. What is so wrong with that?

do you buy things 'equitably'?

Thrugelmir

michaels wrote: »

I can not understand the almost worship that many seem to have for the German economic model.

Because in the main it works across many levels. I'd prefer to be in Germany right now than the UK on the basis of economic fundamentals.

Thrugelmir

shortchanged wrote: »

Any other suggestions to turn this bad news around?

France and Italy are of greater concern than Germany in my personal view. .

michaels

purch wrote: »

Unfortunately they didn't quite achieve enough control to stop the rest spending money they didn't have, and couldn't possibly hope to borrow without assistance from German Credit.

But surely that is the whole point, the Germans were only able to make more than they consumed because people in other countries were willing to consume more than they made - without the rest spending money they didn't have Germany could not have made what it didn't want, the one is the flip side of the other.