Dr. M on Nostr: The German parliament has voted for a historic constitutional amendment that allows ...
The German parliament has voted for a historic constitutional amendment that allows for more defense spending and the creation of a 500 billion euro infrastructure investment fund. This is a game changer for the German and European economies, and I don't think people fully understand it. But the stock market certainly understands, and the DAX is up a whopping 16% this year, while the S&P 500 is down 5% (a performance difference of over 20 percentage points in such a short period is extremely rare).
Superlatives are constantly written about the American economy ("Look how they're growing while the Germans are struggling!"), leaving out the other side of the equation, which is the fact that the American economy has been on fiscal steroids the whole time. Especially in the last 5 years. They've had terrible deficits in recent years...
Germany has simultaneously had budget surpluses in the period up to 2020, and then moderate deficits in recent years. Last year, the German deficit was 2.8%, while the American one was 6.3%. What kind of economic growth do you think Germany would have had if it had injected the same 3.5% of GDP into its economy as the Americans?
This is what is being kept quiet about all this time.
Let's be clear, this does not excuse the bad policies that Germans and Europeans in general are implementing (and I often criticize them myself), but when we compare economic growth between countries, the least we can do is look at the structure of that growth in parallel.
This is exactly what the new US Treasury Secretary means when he says that the US economy must go through a period of "detoxification". The economy must be weaned off excessive government spending, the fiscal steroids they were on. This was unsustainable, he says, and they were racing towards a financial crisis.
The Americans have blown up their public debt to 123% of GDP. Germany's is half that, below 63% of GDP.
The Germans have created fiscal space and now, when it is needed most, they are releasing the brakes. Markets like higher spending and investments (if the state has the fiscal space for that, of course), but they don't really like austerity policies. That's why European markets are happy. German GDP is approximately 28% of the GDP of the euro area, therefore the positive effects of larger German investments will be felt throughout Europe.
#economy #Germany #investments #DAX #EU #S&P500 #growth #US #government #crisis #debt #markets
Superlatives are constantly written about the American economy ("Look how they're growing while the Germans are struggling!"), leaving out the other side of the equation, which is the fact that the American economy has been on fiscal steroids the whole time. Especially in the last 5 years. They've had terrible deficits in recent years...
Germany has simultaneously had budget surpluses in the period up to 2020, and then moderate deficits in recent years. Last year, the German deficit was 2.8%, while the American one was 6.3%. What kind of economic growth do you think Germany would have had if it had injected the same 3.5% of GDP into its economy as the Americans?
This is what is being kept quiet about all this time.
Let's be clear, this does not excuse the bad policies that Germans and Europeans in general are implementing (and I often criticize them myself), but when we compare economic growth between countries, the least we can do is look at the structure of that growth in parallel.
This is exactly what the new US Treasury Secretary means when he says that the US economy must go through a period of "detoxification". The economy must be weaned off excessive government spending, the fiscal steroids they were on. This was unsustainable, he says, and they were racing towards a financial crisis.
The Americans have blown up their public debt to 123% of GDP. Germany's is half that, below 63% of GDP.
The Germans have created fiscal space and now, when it is needed most, they are releasing the brakes. Markets like higher spending and investments (if the state has the fiscal space for that, of course), but they don't really like austerity policies. That's why European markets are happy. German GDP is approximately 28% of the GDP of the euro area, therefore the positive effects of larger German investments will be felt throughout Europe.
#economy #Germany #investments #DAX #EU #S&P500 #growth #US #government #crisis #debt #markets