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Germany Goes Into Reverse

Total wage growth (inflation adjusted, of course) over the last decade has been negative. Minus 4.5% versus positive 8.6% for France, for instance. Here is the chart @Der Spiegel (in German).

No other country in Europe has had lower wage growth. Germans have learned to live off exports. Low wage growth plus low inflation plus a fixed exchange rate (via Euro) keeps exports cheap and competitive. Domestic demand is awfully weak. If it weren’t for exports, Germany would have (almost) constantly been in recession for the last 10 years. I don’t think that there is a single country in the world that has fared worse, except for Zimbabwe.

No surprise that so many Germans want to emigrate. TV channels are bringing one How-To-Emigrate-Successfully show after the other. Switzerland is overflowing with Germans immigrants. The exodus has started. As if it weren’t bad enough that the schools suck, now they are going to have a brain drain, too! Furthermore, they are going to spend billions for bankrupt European countries. The pension system is going to explode within the next 10 years. It’s too late to change course. The iceberg is coming.

Pretty gloomy picture, huh? That’s why economics is renown as “the dismal science”. Actually, it’s not the science that is so dismal but the reality that we economists have to constantly point out. And, NO, it’s not that economists are constantly exaggerating. The fact that the last 50 years have been pretty cosy for Germans doesn’t mean that it’s going to stay so. Fifty years is an awfully miniscule time period in the history of mankind.

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