Wag the Tail

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Germany’s deputy Finance Minister said before the financial world imploded “there was no credit boom in Germany.  Property prices remained flat.  There was no borrowing for consumption.  This behaviour is totally unacceptable in Germany.  This is what German people are.  This is deeply in German genes.  It is perhaps a left-over of the collective memory of the Great Depression and the hyperinflation of the 1920’s”.

Over recent years it should come as no big surprise that power is shifting from Brussels to Berlin and therefore what Berlin values is what Europe values.

German house ownership is about 42%, one of the lowest levels in Europe.  In Britain on the other hand house ownership is at the 69% mark.  In fact in Berlin house ownership is as low as 10%, so you can see the obsession with house prices and fluctuation just isn’t there.  And if it isn’t there its not a source of income to spend on whatever takes your fancy.  To illustrate, over the last decade the price of UK houses all but doubled, while in Germany they have risen about 3%.

So the British obsession with remortgaging to generate ‘income’ has been nothing if not a super heated flame applied to the economy.  Having capitol generated from housing is not productive!

Angela Merkel the Chancellor remains living in a modest flat.  She sets the example that she would dearly love those party animals, the Greeks to follow.  The Greeks are ever so resistant to becoming more German and partaking in paying just a few taxes and spending a little less.

The Germans have never allowed the tail to wag the German Shepherd.  They make stuff instead of being overly clever with moving money around to ‘add value’.  Although the Germans are not afraid of exploiting low interest rates for themselves, selling what are admittedly high quality goods to those they are seeking to bail-out in the olive-belt.  The same people and nations they are expecting to pay 4 or 5 times more then they do for borrowing money.

The Germans export!  The margins they make on manufactured goods are remarkable; to illustrate, the direct cost of making a BMW 5 Series is roughly speaking the same as making a Ford Mondeo.  The BMW will sell for about £10 – £14k more!  Point made I’d say.

But please don’t go getting your German phrase book out just yet.  The German model cannot be scaled.  It only works because the rest of our economies don’t.  We just cant all start making stuff and exporting it, where would it go? who would buy it?

The German dream has a course to run and will come to an end.  German domestic demand is low, and the average German is not much better off than they were 10 years ago.  Real disposable income has fallen over this period by about 7%, compared to Spain where real income has risen about 13% in the same period.

While we partied the Germans had an early night its probably fair to say.  They worked hard, saved and they are getting angry that they have to bail-out the olive-belt.  The reality is, is that some (but not all) Germans are looking for a return of the Deutschmark, national pride, and nationalist sentiment is on the rise in Germany, they are developing a feeling of superiority I fear.

The truth is that the Germans have looked after themselves very well thank you and are looking to be installed as the new masters of Europe.  Well they would be utterly useless in such a position, they are non-intergratory by nature.

The fact is that the economic crisis will run its course and we will come out of it at the end. But for the best outcome the Germans will have to be a bit less German and those of us in those countries where our economies are a work of fiction (Grease, Spain, Italy, Ireland, UK) will have to be a bit more German.

Me, I’m with the French on this kind of matter.  They have no aspiration to be at the center of Europe, it makes them nervous.  They have learn the lessons of history well and whilst not a shining example of how to do things in all cases they are never-the-less a great (probably the best) example of how to bring together a disparate group of people and instill national pride without the unsavory expansionist leanings of political nationalists.

If Angela gets here way and along with the Spaniards, Italians and Greeks we all save but don’t spend, the crisis will go on for much longer than it need and we will remain miserable, jobless and a burden on the German state.

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