Wednesday, May 21, 2008

Lessons to be leant from the Germans?

Germany seems to be doing well.

At a time of gloom in many of the major western economies, Germany seems to be doing well. Damien McGuiness asks why the credit crunch hasn't hit Germany as hard as other countries.

Posted by landedgentry @ 12:36 PM (672 views)
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6 thoughts on “Lessons to be leant from the Germans?

  • the huge level of debt?

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  • as a national of the country, I can tell you that banks don’t change their lending criteria as the wind blows. Brokers don’t flog mortgages that are obviously not in the interests of borrowers or lay them open to legal action for poor advice. There is no such thing as a street of Estate Agents – banks have the odd house for sale. Houses are seen as places to live – not places to make speculative gains. Germany has always been a long-term thinker. People still buy next to new cars with cash when they have SAVED the money. Since people haven’t been pumped up with credit and then spent that on equity withdrawal, their economy really is based on fundamentals – not the overused definition of it according to Darling Brown Nose.

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  • @Growler – it used to be like that in the UK until the credit boom changed everything. The 1986 “Big Bang” (deregulation of the financial markets) triggered the subsequent credit rampage.

    There must be a fundamental reason why Germany hasn’t experienced the same credit rush that afflicted the US, UK, Ireland, and Spain. German law tends to be very pro-consumer – do they have stricter conditions on advertising credit cards or loans? Or could it be that their famously stable Deutsche Mark meant saving cash was a good investment?

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  • German law is supported by the “rights of the citizen” which has some considerable scope for litigation to protect the consumer The Bergerliches Gesetz Buch or BGB as it’s known. If I was in Germany and had an agent (who represents a company that you can sue vicariously) who allowed me to make a decision which was against my interests – then it’s the top of the tree that gets sued.

    There is also the fact that many of the financial institutions and organisations tend to have supervisory bodies that are made up of executives of other peers or even “competitor” companies. This combined approach tends to lead to a policy to develop long term growth plans. Yes – you can say this might make the country more risk averse – but it also means people think about the fact that it’s no use having a boom and then a bust.

    Advertising: I worked in Germany for some time and we were not permitted to offer the sort of “x% finance” promotional ads as in the UK since these were deemed misleading.

    People also forget the fact that since 1990 Germany has been POURING money into the East which is cash effectively invested in your own country long term. Can you imagine anywhere else (especially in the UK) where you’d get away with a tax increase for “solidarity” to rebuild the East? It’s caused problems – but the long term benefit is what they see now. The UK has their period of a strong economy based on over supply of credit – as we all know. I’m no great Tory (since they used to be anti-Europe), but there is no doubt Brown’s blown the cash and we are paying the price. I also think the tit-for-tat politics of the UK is not conducive to cooperation – and here we are also a nation focussed on winning the battle, not the war.

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  • typo: BGB is Buergerliches Gesetz Buch

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  • Ironic that after over 10 years of outside “observers” being condescending
    over the state of the the German economy – in dire need of structural reform etc. etc. –
    that the miracle of the Anglo-Saxon model now turns out to be an illusion.

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