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Why Do The German And Uk Economies Differ Sharply?

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The German economy grew by 3.6% last year and is expected to grow by more than 2% this year. According to the latest figures, the British economy actually shrank in the last three months of 2010, although it is expected to grow by 2% in 2011. In the UK, unemployment is rising. In Gemany, it is falling. The British unemployment rate is higher than Germany's, and so too is the rate of inflation. In Britain, trade is in deficit. In Germany, it is in sizzling surplus.

Trade is the key to the German recovery. The country makes things that others want to buy - particularly in growing economies, and particularly in China.

The German economy currently meshes nicely with China's needs, such as machinery to industrialise. It is also good at providing China's wants, including BMWs for the new rich. As Germany's Economy Minister, Rainer BrĂ¼derle, told the BBC: "We give the equipment to the world, to the virgin markets that need it and want it".

German industrialists make much of the strength of their manufacturing. Dieter Burmester created and owns Burmester Audio Systems which makes very high-end amplifiers and speakers - the price tags say hundreds of thousands of pounds, euros or dollars, for the top of his range.

"I don't understand politicians who don't know the value of production", he says. You can see German technology all over the world, very often from small companies. The disaster in Chile with the mining workers? The drilling machinery was from Germany. Drilling a tunnel in Switzerland? The machinery comes from here.

"Many years ago, when some countries saw their future in service industries like I believe the British did, I wondered about it.

"The strongest economy you will have is when you have to deal with something concrete, and it's not just a number written on paper," said Mr Burmester.

Dependable products. He is a classic German engineer and entrepreneur.

His company is a typical example of the "mittelstand", that swathe of medium-sized, often family-owned firms which produce things, often of high quality, with much investment in research and design. His product is handmade in Germany. The words are written on the back of every item in English, but there is much research and development behind it. He is an unflashy engineer. Solid, but with carefully planned change, might be his motto. A growing economy means more spending power which in turn, helps the economy to grow even more. "Solid" is the word that keeps recurring with the German economy. For consumers, it translates as "save then spend". In these times of austerity, that may be a virtue - though borrowing to expand is a virtue when times are less constrained.

But those are not the current times. British households are more indebted than their German counterparts. In the UK, debt is about 80% of income left after tax. In Germany, it is about 60%. On top of that, Britons borrow to buy property - the weight is around their necks for life.

Mortgages make up about 90% of people's debt. In Germany, it is about 70%. Artur Fisher is a good person to compare and contrast. He is the joint-chief executive of the Berlin stock exchange. He has worked and lived in London and he's married to a British woman. His mother-in-law lives in East Anglia so he goes there often. He makes much of the British belief that owning one's own home is one of the prime aims in life while Germans rent.

"In Germany only 50-60% of the population own their own house. The rest rent. Renting is quite normal". Contrast that with the UK where he says that 90% of households own their own home. "The most important thing in their life is to own their own house. So you tie down capital."

He notes, too, a difference in attitude between him and his wife when it comes to mortgages.

The British, he says, are used to variable rates of interest - they go up and down over the lifetime of the mortgage. In Germany, you agree the rate and it stays fixed. "My wife is English and when we agreed a ten year mortgage at 3.5%, she asked me why we didn't get a variable rate because it might go lower. "This shows you the difference of attitude whereby the English see an opportunity in change whereas the Germans hate change - we don't want change. We want to plan things.

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In the 80's I was studying A levels in Engineering and Design. We were told then that if we wanted to persue this career we would need to go abroad as this country did not respect the industral base that it was built upon any more.

The desire in this country to actually making things has been eroded over the last few decades. Engineers in Germany are revered in the same way as other top professionals. Making stuff is interesting and fun but also takes hard work and investment.

Alas, in this country we were more interested in the quick buck and flogging houses at inflated prices.

This country is too short-termist and so most technical talent is exported.

A genuine shame.

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to be competitive in the world, there is no point trying to compete for bottom level wages to churn out cheap products on a production line.

the best position to be in at the moment to meet the demands of the developing world is to be expensive and offer high end products.

thats what the developing world doesnt really have.

burberry in the UK has just made record profits with massive growth in china. rolls royce is doing just fine.

supplying sparkling white wine in the developing world wont get you far. call it champagne and charge 6 times the normal price and you will sell bottles by the millions.

that kind of high end opulant, expensive products should be what the UK is good at producing anyway. the range rover, bentley, rollys royce, aston martin , jaguars, would be perfect products for the developing world right now.

Edited by mfp123

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Guest sillybear2

It's all to do with these :-

spanner.jpg

The Germans know how to use them; and we're run by them.

Edited by sillybear2

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Sounds like the kind of fawning article you would have read about Ireland circa 2005, just substitute "IT" for "manufacturing".

Germany has its own bubble, private individuals bought overpriced Mediterranean holiday homes and their banks and pension funds are highly exposed to PIIGS and eastern European debt.

They've done pretty much the same as the rest of us. Fiat currency since the 1970s, low interest rates in the 90s and 00s, cheap imports from China holding down inflation. I'm not convinced they're on a fundamentally different path from the rest of us.

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Guest sillybear2

Sounds like the kind of fawning article you would have read about Ireland circa 2005, just substitute "IT" for "manufacturing".

Germany has its own bubble, private individuals bought overpriced Mediterranean holiday homes and their banks and pension funds are highly exposed to PIIGS and eastern European debt.

They've done pretty much the same as the rest of us. Fiat currency since the 1970s, low interest rates in the 90s and 00s, cheap imports from China holding down inflation. I'm not convinced they're on a fundamentally different path from the rest of us.

But that's a product of running a trade surplus, they end up owning their creditors assets. They might not be worth what they paid for them anymore but at least they earnt the money to buy them in the first place, rather than leveraged up.

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"Many years ago, when some countries saw their future in service industries like I believe the British did, I wondered about it.

This.

(plus they fixed themselves into an advantageous exchange rate with the rest of Europe, selling them German goods on tick using recycled surplus whilst blowing them up).

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Sounds like the kind of fawning article you would have read about Ireland circa 2005, just substitute "IT" for "manufacturing".

Germany has its own bubble, private individuals bought overpriced Mediterranean holiday homes and their banks and pension funds are highly exposed to PIIGS and eastern European debt.

They've done pretty much the same as the rest of us. Fiat currency since the 1970s, low interest rates in the 90s and 00s, cheap imports from China holding down inflation. I'm not convinced they're on a fundamentally different path from the rest of us.

Rubbish - cars, trains, machine tools, heavy equipment, electronics, systems, facilities, power - they produce or control the manufacture of it and they produce in large volume toegher with a massive trade surplus.

We however have a few niche players who have survived despite everything else.

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Sounds like the kind of fawning article you would have read about Ireland circa 2005, just substitute "IT" for "manufacturing".

Germany has its own bubble, private individuals bought overpriced Mediterranean holiday homes and their banks and pension funds are highly exposed to PIIGS and eastern European debt.

They've done pretty much the same as the rest of us. Fiat currency since the 1970s, low interest rates in the 90s and 00s, cheap imports from China holding down inflation. I'm not convinced they're on a fundamentally different path from the rest of us.

Houses cost about half there, both to rent and to buy. (Please see my sig., below.)

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"We however have a few niche players who have survived despite everything else."

Yeah like most of the components of the FTSE 100 ... a few niche players ....

Which would be why our lovely cuddly Jerman buddies have a,

"Gross domestic product based on purchasing-power-parity (PPP) per capita GDP of $34,905.117"

http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=134&s=NGDPD,NGDPDPC,PPPGDP,PPPPC,LP&grp=0&a=&pr.x=52&pr.y=17

And useless, feckless debt ridden Blighty has one of "$35,082.832"

http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=112&s=NGDPD,NGDPDPC,PPPGDP,PPPPC,LP&grp=0&a=&pr.x=25&pr.y=6

The article is just typical un-researched hunphile garbage.

Jermany is no promised land. It's cold, wet, dark and boring and full of people who are at best, constantly chasing the joke,

Edited by indirectapproach

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Jermany is no promised land. It's cold, wet, dark and boring and full of people who are at best, constantly chasing the joke,

Has the UK changed its name recently??? :lol:

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This.

(plus they fixed themselves into an advantageous exchange rate with the rest of Europe, selling them German goods on tick using recycled surplus whilst blowing them up).

+1

Nail. Hit. Head.

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"We however have a few niche players who have survived despite everything else."

Yeah like most of the components of the FTSE 100 ... a few niche players ....

Which would be why our lovely cuddly Jerman buddies have a,

"Gross domestic product based on purchasing-power-parity (PPP) per capita GDP of $34,905.117"

http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=134&s=NGDPD,NGDPDPC,PPPGDP,PPPPC,LP&grp=0&a=&pr.x=52&pr.y=17

And useless, feckless debt ridden Blighty has one of "$35,082.832"

http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=112&s=NGDPD,NGDPDPC,PPPGDP,PPPPC,LP&grp=0&a=&pr.x=25&pr.y=6

The article is just typical un-researched hunphile garbage.

Jermany is no promised land. It's cold, wet, dark and boring and full of people who are at best, constantly chasing the joke,

Pick out the banks, resource companies, insurance companies, retail and pharma and tell us from what is left which are involved in manufacturing?

Also remind us what our trade surplus is.

Edited by OnlyMe

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Because we have had successive Labour governments who just want to destroy anything they get to control. For what end purpose, I am not sure. But they have been successful every time. In the 60's we had that commie crook Wilson, cutting up pound notes on the TV, Callaghan had the IMF call by and now the hangover caused by the imbecile Brown.

For what it's worth , I emailed the BoE with this.

Can you pass a message to Mr King.

Can you tell him that his comment 12 months ago that inflation was 'a blip' was a misscalculalation, and can you ask him if he should give his job to someone more capable.

He lied to us, or his analysis was grossly in error.

My savings are being robbed, as he continues this bazaar carnage of peoples' wealth with a double edged sword, inflation and ultra low interst rates. Tell him the Banks and overborrowed debtors (many who took out fraudulent mortgages) have been helped for TWO YEARS now. It's time the responsible and prudent were looked after.

Tell him to get ineterst rates up and control the evil that is inflation.

Tell him to DO IT SOON.

And tell him not to print any more money (QE). I presume this is helping fuel inflation.

Why is it that we, the little people, have to suffer these austere times, yet bankers, and Mr King, continue to enjoy high salaries and bonuses?

Thank you.

I also emailed No10, my MP and the Conservative party.

I don't suppose it does any good, but if enough emails flew around, they might get a bit worried.

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I don't suppose it does any good, but if enough emails flew around, they might get a bit worried.

They will only get worried once a million people occupy parliament square and the square in front of the BoE just like they did in the centre of Cairo.

Your emails end up straight in /dev/null...

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  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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