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The Secret Of German Success

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The secret to Germany's export success

It's quite simple really - Germany makes things which people in countries with growing economies want to buy.

As China grows, so does its demand for the machinery which its factories need - and for the accoutrements of wealth which its new rich think they need, like flashy BMWs.

It is true there may be a "bungee effect" - the economic fall was so fast and far that the springing back from recession now seems all the stronger - the German economy grew by 3.6% last year, much more than comparable economies like that of Britain or the United States.

But that bounce from down does not explain Germany's current robustness.

After all, the fall was deep in the US and Britain, too.

One difference is that Germany did not have a property bubble which then burst, leaving consumers and companies pulling in their belts to a painful degree to pay off debt.

'Embraced reforms'

In Germany, for example, renting a home is perfectly respectable, whereas in Britain and the US the great aspiration is to own - even if that means (or at least meant) saddling a mega debt round the owner's neck.

The result is that British households have 50% more debt relative to their incomes than families in Germany. And debt is now a dampener.

Before the crash, it did not seem that way.

http://www.bbc.co.uk/news/world-europe-13335943

:rolleyes:

Edited by Britney's Piers

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Pathetic, they still don't get it - only a problem because the bubble burst and the overhanging debt is a "dampener".

The buble destroyed competitiveness and forced people to lump all their earnings into housing, drive out industry and stopped people from doing something more constructive with their earnings.

Who knows how many companies never started becuase there wasn;t the financial leeway or capability to do so.

Edited by OnlyMe

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So true.

Real example.

City: Dormagen

Population: I think its 50k

Low pay salaries: friend of mine works at the till in local superstore and gets 1300 Euro, net pay. Thats is 8h/day 5 days out of 7. Her husband is a builder and gets a bit more but no more than 2k a month.

Living cost: Food is a lot cheaper than here. Friend and her husband own a 3b flat, something like 130sqm, REALLY NICE ONE, 10 mins walk from CC. They paid 80000 two years ago. The cheapest (livable) flat in my area (Exeter) is at 130k, 2b ex-council, still need some work and with 78 years lease left.

CRAP :(

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How dare the BBC print this heresy? Every idiot knows the "future" is selling overpriced shitholes to each other, debt, debt and more debt, banks, more banks, toss another trillion at the bankers (cos they are worth it guv) and more diversity liason officers. Heads will roll at Pravda for this!

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Did they mention how damaging it is to have TV channels that devote lots of their schedules to property porn programs? Business news bulletins infested with failed mortgage brokers and mouthpieces from banking associations trying to create the impression that HPI and debt are good.

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And what do they do if people won't buy their stuff?

:blink:

This is the problem. When the SHTF no one is going to be buying BMW's, Audi's, Mercs etc.

Remember in 2008 when German industry virtually collapsed within the space of a few weeks?

I still maintain that the most resilient countries are those with low population densities and high agriculture production, e.g. Russia.

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In Germany, for example, renting a home is perfectly respectable, whereas in Britain and the US the great aspiration is to own - even if that means (or at least meant) saddling a mega debt round the owner's neck.

They don't seem to mention that in Germany (and quite a few other countries) that renting is more attractive than buying because of such eccentricities in their legal systems which allow for security of tenure, controls on rent increases and the landlord needing to have a good reason for evicting you from the property.

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Shame this stuff is all being bought with money borrowed from German banks

Most of which will never be repaid.

:blink:

Not sure about that. I don't think the Chinese, Indians and Arabs are borrowing money from Germany.

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This is the problem. When the SHTF no one is going to be buying BMW's, Audi's, Mercs etc.

Remember in 2008 when German industry virtually collapsed within the space of a few weeks?

I still maintain that the most resilient countries are those with low population densities and high agriculture production, e.g. Russia.

There is far more to Germany that makers of quality cars. They make everything form chemicals to machine tools. With regard to Agriculture they make many of the farming chemicals and lots of quality farm machinery. They have many markets covered.

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There is far more to Germany that makers of quality cars. They make everything form chemicals to machine tools. With regard to Agriculture they make many of the farming chemicals and lots of quality farm machinery. They have many markets covered.

Yep from ships to Asda choc bars (which are nice being continental )

They also have local specialist business 'loan' bank chains

Edited by erranta

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There is far more to Germany that makers of quality cars. They make everything form chemicals to machine tools. With regard to Agriculture they make many of the farming chemicals and lots of quality farm machinery. They have many markets covered.

Yes. I work as a German to English technical translator, and I'm completely snowed under at the moment. A lot of my work comprises instruction and maintenance manuals for various kinds of machinery, and so I've gathered quite an insight into the vast range of machinery that Germany exports. It's interesting how many of these exporting companies are family businesses of the order of 100 employees or so, who are able to concentrate on making quality products rather than keeping their stockholders happy.

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Friend of mine has just paid 259 quid for a Neff Microwave wanting German build quality.

He was well f'ed off when he opened the door and there was a big sticker saying "Made in PRC."

The Germans need to be careful about this because a microwave made in China advetised ad German built quality means people will not trust that the more expensive stuff like fridge freezers, ovens etc are not made in China.

Anyway gave me a laugh when I pointed out to him my 20 quid Tesco Value microwave has the same build quality.

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What is truly hard to understand is why our leaders ever thought that encouraging their citizens to invest huge amounts of capital in slowly decaying piles of bricks was ever a good idea- under what conceivable economic theory could this succeed in creating real national prosperity (As opposed to ponzi prosperity based on the greater fool theory?)

It's as if the entire economy had been set up purely as a means to allow the bankers to make short term profits via a housing bubble, with no thought given to the massive missallocation of capital involved- I guess our leaders were too busy building their own BTL empires to take time out to examine the likely consequences of an economy based on swapping houses at ever inflated prices.

What a bunch of brain dead idiots these people are.

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Friend of mine has just paid 259 quid for a Neff Microwave wanting German build quality.

He was well f'ed off when he opened the door and there was a big sticker saying "Made in PRC."

The Germans need to be careful about this because a microwave made in China advetised ad German built quality means people will not trust that the more expensive stuff like fridge freezers, ovens etc are not made in China.

Anyway gave me a laugh when I pointed out to him my 20 quid Tesco Value microwave has the same build quality.

Build quality is not as simple as where the thing is made.

Lots of high quality stuff (ipods/apple etc) are made in PRC and Japan.

A bigger issue is when brands don't actually design an item at all, but just apply a brand name to some generic item, thats when a brand starts the slide downmarket

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Build quality is not as simple as where the thing is made.

Lots of high quality stuff (ipods/apple etc) are made in PRC and Japan.

A bigger issue is when brands don't actually design an item at all, but just apply a brand name to some generic item, thats when a brand starts the slide downmarket

Big difference Apple success is based on design quality

German success is based on build quality.

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Hmmm. I wonder why they are in less debt and doing better than us? It's almost as if they got rid of most of the grasping element of their society that specialised in money-lending.

Not that I would condone that sort of thing.

Can anyone with a better understanding of history than me explain this? My German friend Sven said this was the reason.

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The main reason for germany's post-crisis export success is unfortunately less luminous... It's largely because they are shackled to the PIGS countries through the single currency.

These weak economies (for all the germanic prudence, the eurozone has plenty of debt as an economic bloc) drag down the value of the euro. This makes Germany a cheaper place to manufacture for export markets than it 'ought' to be.

In fact many of the imbalances within the eurozone are a result of the single currency. The PIGS countries were able to finance themselves at cheap semi-german rates to buy german goods that were over-competitive thanks to the fixed currency relationship within the block.

This is somewhat analogous to the us-china relationship where the major exporter sustains the import addiction of it's customer by lending and pegging currencies.

Sure Germany itself has good structural attributes in manufacturing but the export Renaissance is very much currency driven as far as the current fuss goes.

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Guest sillybear2

The dogma of deindustrialisation started long ago, the political class at the time fell in love with raiders and wreckers like Slater Walker, they had the perfidy to destroy large chunks of our industrial base then sought a Bank of England bailout after they finally wrecked themselves. So much for creative destruction, Schumpeter would be proud.

Gordon Brown repeatedly took the piss out of the Germans in his inimical way for not being good little debt addicted ponzi crackheads, their politicians just rolled their eyes and suggested he went for a quiet stroll on the Nürburgring. They had the last laugh.

They have an enviable competitive industrial base, we just have a pile of unproductive bricks that we exchanged with each other at ever increasing prices, with an ever increasing debt mountain to match. So that's making and exporting world class products versus a frenzied game of pass the parcel. We're f***g idiots. :(

If you want nice public services then you need a large productive base that you can tax, many well meaning people like to ignore this fact and try and shortcut the process by jumping straight to debt fueled consumption. When that model finally blows up in their face they just call for more of the same.

Edited by sillybear2

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The main reason for germany's post-crisis export success is unfortunately less luminous... It's largely because they are shackled to the PIGS countries through the single currency.

These weak economies (for all the germanic prudence, the eurozone has plenty of debt as an economic bloc) drag down the value of the euro. This makes Germany a cheaper place to manufacture for export markets than it 'ought' to be.

In fact many of the imbalances within the eurozone are a result of the single currency. The PIGS countries were able to finance themselves at cheap semi-german rates to buy german goods that were over-competitive thanks to the fixed currency relationship within the block.

This is somewhat analogous to the us-china relationship where the major exporter sustains the import addiction of it's customer by lending and pegging currencies.

Sure Germany itself has good structural attributes in manufacturing but the export Renaissance is very much currency driven as far as the current fuss goes.

That argument would hold a little more water if the euro had weaked against the dollar and pound (which it hasn't) and if Germany's strongest growing export was not countries outside the EU (which it is).

Edited by snowflux

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Sorry I wasn't quite clear enough. The Greek-german issue was due to the historical fixing of the euro in accession and has been going on ever since. It's not a post crisis phenomenon but rather an example of a crisis building.

Re usd and euro will get back with more detail later when I get in front of my computer as reply will be too long for phone.

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  • 311 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% +
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      • Even
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      • up 5%



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