neaden 24 days ago [-]
"Negative rates, which mean deposits decline over time rather than increase, “would be bad for all savers,” said Juergen Dengel, a 40-year-old civil servant from Bonn. If negative rates were introduced at his bank, he would consider withdrawing his money and using it to build a home -- even if that meant going into debt." - This seems like the goal of negative interest rates.
nugget 24 days ago [-]
His statement reinforces the whole point of ZIRP: minimize the value of financial capital and maximize the value of human capital. Force investors to take on more risk. Entrepreneurs ironically may take on less risk since the value of labor relative to capital shifts in their favor.
hogFeast 24 days ago [-]
Do you know about the behaviour of German savers? It is fundamentally different to America, the UK, most other countries in Europe. The only similar nation anywhere is Japan...and even then, still significant differences.

The ECB is making a huge push, without any kind of democratic consent, towards a finance-based, American/UK-style financial system. This won't work because German savers have virtually no experience of such a system.

All that will happen is: banks go bust (more bust, most German banks are insolvent), and savers lose all their money. Either they hold their money in banks or they take it out and lose it all doing stuff they know nothing about (if we don't have an immediate recession, you will see French investment banks swarm Germany...French bankers have some kind of innate ability to produce bullshit derivatives aimed at savers with a conservative bank-led culture of saving).

It is kind of insane that we have got to the point where policymakers actively ignore markets. All that matters are the textbooks. But this doesn't work. You can't just transplant economic policies from another context and expect them to work the same.

That said, it will be nice to see Germany return to the early 2000s. Objectively, Germany has one of the most vulnerable and poorly functioning economies in the G10. Combine this with utterly insufferable, self-important policymakers and you have quite a nice example of natural justice.

Nimitz14 23 days ago [-]
If the ECB doesn't do so Europe is doomed.

Since the inception of the Euro it's been clear to anyone with an economics education (not me, but this is the impression I've gotten reading commentary from anyone respectable), that Europe has some serious flaws (from a financial perspective) that will take decisive action to fix. One of those things is that Germany needs to start spending more. Unfortunately I don't see it happening. But I'm crossing my fingers than Macron can somehow pull a miracle.

rawland 23 days ago [-]

    > One of those things is that Germany needs to
    > start spending more.
Why?

Especially on the individual - many will ask: Why spend, when you save for "bad times" or your kids' future? And more recently: Why spend, when you want to reduce your footprint on this planet?

graeme 23 days ago [-]
It's more like "for the euro to work, Germany must spend more"

The Euro isn't sensible from an optimal currency perspective. In a good currency union, labour will be extremely mobile. But though labour can move freely in Europe, people tend to prefer their home country. Contrast to the US where people move much more readily and follow jobs.

So monetary policy has been too tight in areas like Greece that would have simply devalued their currencies in the past. Meanwhile policy seems to be too loose for Germany.

If you want to keep the monetary union, you can't crush Greece and other southern countries. So the Euro must devalue a bit to help them. But this cuts interest rates in Germany, discouraging spending.

Hence "Germany must spend more". It's more of a mechanical statement than a moral one.

Also spending could be using capital to buy a business abroad or infrastructure or somesuch, I think. Needn't necessarily be consumer goods.

chii 23 days ago [-]
the fundamental issue with the euro zone is that each member country still considers themselves a separate nation (and i m not talking about policy, but about the people). A greek national considers himself a greek, and not german.

In america, when a state has low revenue or high cost, it is subsidized by federal taxes. I.e., people from richer parts of the country "pays" for the poorer parts (e.g., infrastructure, or education etc).

In eurozone, this is rarely the case. I think a person in the US won't bat an eye if taxes are redistributed to a different state, but the amount of backlash that eurozone sees from this sort of redistribution (see brexit - they even believe in lies because it conforms to their worldview!).

Until the eurozone culturally and societally accepts itself as a single country with a single identity, there cannot be financial unity. Euro is a failure because of this imho.

Nimitz14 23 days ago [-]
This is also how I understand the situation.

Btw I think you've got a typo:

> for the euro to work, Germany must save more

graeme 23 days ago [-]
Thanks! Fixed it
pm90 23 days ago [-]
> Why spend, when you save for "bad times" or your kids' future? And more recently: Why spend, when you want to reduce your footprint on this planet?

You're framing this in moral terms whereas it should be viewed as more in economic terms. Spending by Germans creates more demand for Goods and Services, encouraging economic booms in the rest of Eurozone. These developed countries would then develop the skills and accumulate capital to compete with their peers in Asia. That would be a huge win-win from a European perspective.

Honestly, this shouldn't be viewed as encouraging the average German to spend more of their savings, rather, the German Federal Government borrowing more + spending heavily on infrastructure building in Germany + the rest of Europe.

ChuckNorris89 23 days ago [-]
>Spending by Germans creates more demand for Goods and Services, encouraging economic booms in the rest of Eurozone.

In theory. In practice however, all that negative rate money that people will borrow will all go to real estate causing the already high prices to skyrocket overnight while wages stagnate.

Goods and Services are already cheap enough that we don't need loans for.

When rates were high, property prices in Germany were cheap or at least reasonable as they were pegged to the income levels. When rates went down property prices went to have no correlation to salaries anymore as now every average Joe and his mom could go to the bank and max out a 30 year loan on as big of a house his bank could afford to give him.

That's how Germany went from being one of the cheapest housing markets in Europe to one of the most expensive in the last 10 years.

pm90 23 days ago [-]
Why not build more housing then? Real estate speculation is bad but there seems to be actual demand for more housing if I’m reading your comment correctly.
23 days ago [-]
Paradigma11 23 days ago [-]
Why would greece or italy grow because germany buys more chinese products?

Sure the € would depreciate a bit but there have already been currency fluctuations that did not show a big positive effect on the malingering economies.

Paradigma11 23 days ago [-]
Oops my bad, ment sick instead of malingering. Did not knew the negative meaning of malingering of pretending to be sick.
bitL 23 days ago [-]
This was more in context that Germany is underpaying its employees, i.e. the salaries are similar to France with much higher productivity, average pensioner gets less than somebody in Italy would get, and even Austria has higher wages now; not to mention Switzerland where wages are usually 2x higher. The theory was that if Germans were allowed to earn more, that would in turn propel economy; instead they are forced to save for worse times, companies/banks are super conservative in the time of expansion and not sharing any wealth, keeping their export advantage with stabilized cost of labor, leading to unnecessary suppression of growth that could have happened with increased domestic consumption.
ChuckNorris89 23 days ago [-]
>This was more in context that Germany is underpaying its employees

Yep, at least in tech, German salaries are stupidly close to Eastern Europe now. All this because in EE the free market kicked in and did it's thing, forcing employers to compete for talent while German companies artificially cap salaries to fixed grids while complaining there's a talent shortage and pushing for immigration instead of wage increases.

Throw_Away_3278 23 days ago [-]
What are fixed grids?
ldp01 23 days ago [-]
He probably means a table of standard ranks and salaries.
23 days ago [-]
throwaway34241 23 days ago [-]
To add one more angle on it: everyone can't save money at the same time. Say you have 100B euros. The next year everyone can't just have 110B euros in total unless you print money.

What really happens is that 'savings' have two sides to them, and the other side is debt. So when people's savings go up by 10B, 10B of debt is created somewhere else (bank loans, government borrowing, etc) that enables that.

Having things work this way makes some intuitive sense. Savings are really a promise for goods & services in the future, so it makes sense that you have a matching promise to (forgo) goods & services in the future to counterbalance that.

In Germany's case, it's possible for the public and government to both save in aggregate only as long as trading partners go into debt (in euros). But if the debt becomes unsustainable, you will lose your savings that are the other side of that debt.

Now, everyone can try to save at the same time, but because it's impossible it doesn't work and you just go into a recession. That is, everyone stops spending, people lose their job, and even though they want to save they can't, so the impossibility is avoided.

Even though the basics aren't extremely complicated, it doesn't work like a household, and in many countries the average level of economics education seems to be about zero. There's a lot of public sentiment that everyone should should just save up and pay down debt, even though it doesn't make much mathematical sense how that could happen. I think there's a good chance people are elected at some point that handle things very badly.

On an single individual level there's no reason to avoid saving, it's a good idea. But someone has to take on the debt on the other side of that saving. If no one wants to (including the government), it seems reasonable for interest rates to trend negative.

QuesnayJr 23 days ago [-]
Because you can't really save for the future. You can only invest for the future. Saving only pays off when there's someone to take those savings and spend them on investments.
marticode 23 days ago [-]
Spending more could be done by converting all those coal plants Germany has into renewables, or building better mass transit, or doing R&D for its industry, or providing better benefits for parents to raise its abnormally low birth rate, etc. Having money to spend is a good problem to have.

More generally speaking, Germany has excess saving and insufficient spending which creates problems for the other members of the Eurozone. Excess deficits are bad, but excess surpluses are also not good.

nl 23 days ago [-]
Others have addressed the mechanical points of this argument. I'm going to talk about the moral points:

Why spend, when you save for "bad times" or your kids' future?

By spending you keep companies in business where your kids will be able to work in the future. We often see a moral version of this argument framed as "buy local" or "buy American|German|Whatever"

Why spend, when you want to reduce your footprint on this planet?

Often lower impact choices cost more. By deliberately spending more money on lower footprint choices you are helping the planet. Good examples of this include high-efficiency appliances, extra house insulation, sustainable food sources etc etc.

Nasrudith 23 days ago [-]
That highlights issues of trust and game theory as well - "saving" in some sort of way (including investing) provides security and can allow rising higher.

A moral arguement towards spending is looked at like you are trying to sell them sonething and/or fleece them. And they are technically right about that - accumulating wealth is what makes an individual rich.

Investment in the actual sense would be a win-win. Not speculation or buying goods for the sake of getting cash flowing but things which provide a return. It is similiar to why lending out money/buying stocks is infinitely better as an investment than just holding gold - they provide utility. Gold just sits there.

Of course investing reliably and safely is hard, especially when the behavior of others impact it and nobody has perfect information.

chii 23 days ago [-]
which is why investing in a bank's savings account is the natural way to "save". It's very safe, and still guarentees some level of profit that is not too far off from inflation.

Negative interest rates pulls that out under the rug, and forces people to take on extra risk than they currently do.

perl4ever 23 days ago [-]
"Often lower impact choices cost more."

This doesn't seem like a reasonable assumption to me.

If you spend $ to reduce your carbon output for example, the money circulates among other people, who average about the same usage of fossil fuels as the general population because after a few exchanges they are the general population. So if you are increasing your spending in the long run, you are increasing resource usage by that amount, no matter how virtuous the things you are spending it on.

That doesn't mean it's wrong to invest in something that saves you money in the long run, but if there isn't a payoff, then by default you shouldn't think you're helping the environment.

nl 23 days ago [-]
If you spend $ to reduce your carbon output for example, the money circulates among other people, who average about the same usage of fossil fuels as the general population because after a few exchanges they are the general population. So if you are increasing your spending in the long run, you are increasing resource usage by that amount, no matter how virtuous the things you are spending it on.

This is a second order result, and doesn't necessarily follow. For example, higher quality goods generally last longer, which reduces waste. Higher profit margins also lead to more room for sustainability in supply chains. Apple is a good example of this.

Richer people also generally have less children, which reduces the environmental impact further.

All in all I'd say that second-level effects are guessing at this point.

perl4ever 23 days ago [-]
Sure, that's exactly what I'm saying. Second level effects are guessing, so you should assume by default that spending more means using more stuff means damaging the environment more. Very often people say "it's complex" to evade the simple obvious conclusion because that conclusion is unacceptable.
nl 23 days ago [-]
so you should assume by default that spending more means using more stuff means damaging the environment more.

Sure, but I think it's ok to think about ways in which spending more can help. The OP did ask that question after all..

FabHK 23 days ago [-]
a) you can't compare the finances of a household with the finances of an entire economy. It might make sense for a household to aim to be debt free, but an economy should have plenty of debt (mostly to itself) to build all the infrastructure you need to run a modern and productive economy. It's sustainable for an economy not only to be eternally in debt, but to go eternally into more debt (ie have a deficit), as long as the economy grows. Common sense intuitions don't really work, and are contra-productive, at the level of an economy.

b) insufficient aggregate demand can be a huge problem leading to recessions. What is sensible for the individual might not be sensible for the economy as a while.

c) Germany's infrastructure is decaying, and rates are as low as never before, even negative, ie the market is willing to pay Germany to borrow. Yet Germany refuses to borrow. It's perverse. Of course, unemployment in Germany is relatively low, but in Europe it's high. Some big construction projects in Germany would be a win-win.

wbl 23 days ago [-]
Germans would be richer if they spent and earned more instead of saving and earning less to export more. Germany's current account imbalance threatens eurozone stability and lower rates in Germany are the solution.
wetpaws 23 days ago [-]
Money is not a resource, it's just a number.
rorykoehler 23 days ago [-]
The economy isn't zero sum. More spending means more good times for everyone.
samsonradu 23 days ago [-]
> If the ECB doesn't do so Europe is doomed

Doomed is a strong word, what does it mean? Sure, there are flaws in the common currency and the ECB policies might fail. Europe might be the next Japan for the upcoming decade with ±0% economic growth, that doesn't make it doomed.

JumpCrisscross 23 days ago [-]
> Doomed is a strong word, what does it mean

The Euro could dissolve in lieu of national currencies. Borders may be redrawn and remilitarised.

samsonradu 23 days ago [-]
Well, Europe will still be there, borders or not. Can you elaborate a bit on 'remilitarised'? Why would that be needed and when were borders last militarised? By militarised you mean customs officers?
JumpCrisscross 23 days ago [-]
> Why would that be needed and when were borders last militarised?

Monetary problems tend to prompt populism. That comes with its standard variants of nationalism, fascism and racism. Harsher customs are the least of our concerns from this side of the Atlantic.

mcguire 23 days ago [-]
I'm not JumpCrisscross, but I'm thinking WW1.
imtringued 23 days ago [-]
Leaving the Euro isn't the same as leaving the EU.
cylinder 23 days ago [-]
Only from your American war-obsessed fatalistic perspective does this happen.
dang 23 days ago [-]
Nationalistic flamebait will get you banned here. No more of this please.

https://news.ycombinator.com/newsguidelines.html

nickserv 23 days ago [-]
Because European countries have a long history of peaceful coexistence...
apexalpha 23 days ago [-]
>Since the inception of the Euro it's been clear to anyone with an economics education (not me, but this is the impression I've gotten reading commentary from anyone respectable), that Europe has some serious flaws (from a financial perspective) that will take decisive action to fix.

The Euro set limits on how much countries were allowed to borrow and how high their deficits can be.

The only massive flaw it has is the believe that countries could be simply trusted to stick to these rules.

Smithalicious 23 days ago [-]
The EU is not Europe and Europe is not the EU
repolfx 23 days ago [-]
Europe isn't doomed and it can't have financial flaws because Europe is a continent. Its population isn't going anywhere.

The EU might well be doomed - it seems that's actually what you meant? I've noticed it's quite common for the EU's biggest supporters to use the word "Europe" when they mean EU, but please don't do that. It's a poor use of language and can come across as deliberately manipulative: attempting to graft the permanence of a continent onto a transient political institution. It really grates.

As for the financial flaws. The flaw is not that Germans must spend more but the other countries must spend less. Mere spending is not a useful goal - the ECB is trying (apparently successfully) to force Germans to spend their savings only to wallpaper over the fact that the EU member states continue to have lethargic economies that don't produce much worth spending money on, and to kick the can on a huge debt crisis.

Macron can't do anything - he's in no position to dictate to the Germans what to do with their money. Unfortunately the poor Germans, who are already owed vast sums by the rest of the EU (see: TARGET-2 trade imbalances), are probably going to end up losing all their savings to fund southern/French lifestyles for another decade or two. Their emotional commitment to the EU allows them to be financially exploited without end.

ClumsyPilot 23 days ago [-]
Everyone spends less? we have a name for it, a recession
thefounder 23 days ago [-]
So what's the solution for a United Europe? Brexit? EU prides itself to be more than just a "big trade deal".
repolfx 23 days ago [-]
Europe should never be united. That's a terrible idea: why would you concentrate and centralise power to such a massive extent? Power corrupts and the EU institutions are already riven with it, the last thing people in Europe need is a massive Soviet-style bureaucracy attempting to control the entire continent at once.

Small is beautiful. Let's start by restoring the primacy of the country as an organising unit. Where there are no actual disagreements in policy, they can recognise each others standards and avoid trading friction. Where disagreements over policy do occur, then deviation in those areas should have no impact on unrelated areas.

The EU has become a monster that is willing to cut ties with important European countries entirely if they refuse any aspect of its dominion. Relations with both Britain and Switzerland are on the brink, despite both countries trying hard to be best friends with their neighbours. The EU is actually imposing trade sanctions on Switzerland because of a disagreement over something related to trade union law, so I expect it to get much worse in future as the EU continues to maintain near-totalitarian "with us or against us" politics against them.

Every attempt to unite Europe under a single government has led to disaster. This time around will be no different.

- A Brexit voter

thefounder 22 days ago [-]
Do you think UK should be split as well? Maybe England should stop bankrolling Scotland and NR? Make England Great Again?

I don't think anyone wants the EU to become another Soviet Union. EU believers want a United States of Europe(more or less).

Small might be beautiful but it's weak. It goes with the wind. (i.e with the U.S, China, Russia). Brexit will only move UK closer to the US than to the continental Europe.

U.S doesn't use the same "with us" or "against policy", right? I heard U.S doesn't impose sanctions due various disagreements either... good luck! You forgot the Suez Crisis so fast!

repolfx 21 days ago [-]
Maybe the UK should split - it's certainly pretty painful trying to keep it together.

Despite that I would have recommended Scotland vote to remain a part of the UK. Inconsistent? To a point yes, but with better technology, I might have changed my mind.

One key problem with fully splitting the UK is there's no identity card system so no chance of an internal border. If Scotland had split from the UK, its economy would have rapidly collapsed because the SNPs economic plans were all based on a relatively high price of oil and the oil price collapsed a few months after the referendum. A socialism driven economic collapse in Scotland would have caused a mass influx of Scots into England with no way to identify them or send them back. With an ID card it can be more like in Europe where you have to register, and there can be some notion of a soft border. Same applies for Northern Ireland.

I'm not sure why you think small means weak. Germany would seem to have disproved that notion twice in the 21st century. At any rate, I'm not arguing against military alliances, and given the only armies in Europe that are worth anything are the British and French, the EU will soon be relying almost entirely on France.

Or perhaps you have bought the idea that small countries "have" to sign trade deals with bigger countries. That's simply false.

Finally, what EU fans want is irrelevant. It's what they'll get that matters. Do you see the EU ever respecting a vote that doesn't go it's way? Do you see any real movement towards putting the EU Parliament above the commission and ECB? No, the "parliament" is a sham and the EU's response to democratic rejection is to ignore the result or try and force the population to comply.

You're going to get a new Soviet Union whether you want one or not. The inertial direction of travel is quite clear.

thefounder 21 days ago [-]
So you would support a UK split but it's not possible because there is no ID card system in place? Really? You realise that there would be a transitional period, right?

I'm not looking to convince you that EU is better than you think but this[1] open letter may help you understand some subtle differences between EU and SU.

https://ec.europa.eu/commission/commissioners/2014-2019/andr...

repolfx 20 days ago [-]
Like I said, with the right technology in place I'd reconsider. I'm not emotionally attached to the union as many seem to be and the rest of the UK gets a terrible deal from Scotland in so many ways. My primary concern is that upon becoming independent Scotland might suffer a severe decline in living standards that would result in a large and sudden influx across the border, putting huge strain on England. A hard border would potentially solve that but at very high cost and significant inconvenience: one based on a solid ID system would be much better.

I don't recall any talk of ID cards or transitional periods to sort things out during the Scottish Indyref. Perhaps I missed it.

The reply to the open letter is what you'd expect and isn't reassuring. It makes a few errors.

Firstly, it's not looking forward. It states the EU today is not as nearly as bad as the USSR was at its worst. That's true and nobody argues that it is. However it's also not really relevant, because if you only start to object to a government at the point it's running gulags it's already far too late. To avoid a repeat of history, movement towards such a system must be detected and stopped early whilst it's still possible. That's why we need to look at the direction of travel and extrapolate.

Secondly, it's looking backward. It talks about how the UK was able to opt-out of the EU's worst ideas and talks about Thatcher. That was true in the past, but the EU has been getting more powerful over time and taking over more and more national responsibilities. The veto has been progressively weakened and now they want to abolish it entirely. Today's EU is not the same as the EU in Thatcher's day - it's significantly larger and much more hostile to "deserters", as Juncker has described the UK. And as the EU loves to keep telling the UK there is no more "cherry picking" anymore, i.e. opting out of their bad ideas. That era is over.

So what matters is what the EU will become, not what it is today or what it was 20 years ago.

And here is where the comparisons start to look bad.

Firstly and most importantly the EU does not recognise the democratic will of the people, whilst loudly proclaiming that it does. This is a major red flag. There is no effective way to control the Commission's agenda through voting.

It must be noted here that all communist regimes have Parliaments and they all have votes. In the USSR there was an elected body called the Supreme Soviet, whose members made the laws of the Union. The USSR was a dictatorship despite the existence of the Supreme Soviet because of a simple trick: all elected politicians had to belong to the same party, so there was no real competition of policies. It had the superficial appearance a democratic system without being one.

In the EU there are multiple parties and they do compete. The EU Parliament is neutered via a different means: the elected politicians can't control the executive or change the laws. This means they aren't really politicians and it's not really a Parliament, using standard dictionary definitions. It wouldn't matter if somehow a coalition of parties totally opposed to the Commission's agenda got elected: the Parliament lacks the "right of initiation". That also means there's no real point in having any party policies, so you see a wafer thin and artificial campaigns, where parties either have detailed manifestos that happen to align exactly with what the head of the Commission already wants, or you get protest parties that openly admit they can't change anything but say: elect us anyway just to 'send a message' (which is never received).

A good example of how unseriously the Parliament is taken is the way they were given a "vote" on the new head of the EU Commission, but the vote only had one option. MEPs could either support Ursula von der Leyen, or abstain. Votes with only one option are a classic symptom of communism; the sort of system that is happy to call itself a "People's Republic" but actually doesn't trust the people.

By the way, the EU does try to obfuscate a lot of this stuff by introducing mechanisms that theoretically are usable but in practice aren't. For instance there was briefly the Spitzenkandidaten system which meant the Parliament appointed the head of the Commission ... up until they appointed the wrong one, at which point that ability vanished. There's theoretically an EU Citizen's Initiative, but unlike Citizen's Initiatives in member states, this one can't be used to change the law or trigger a referendum. Actually they accomplish nothing even if you gather the required number of signatures (which is huge).

In the end the true nature is summed up by Jean-Claude Juncker: "There can be no democratic choice against the European treaties".

Another bad sign is the love of secrecy. In theory your countries national leader can influence the choice of Commission leader, except the decision of who gets the job is always made in secret and nobody knows who voted for whom or how the decision was made. This matters: the EU's own leaders have said in the past it's common for politicians to lie to their own voters about what they support. There is no public explanation how Ursula von der Leyen became head of the Commission. It could be fixed by making EU meetings be transparent but they refuse to do it. This pattern of secret meetings sans minutes crops up everywhere when you scratch the surface.

There are lots of other pieces of evidence the EU doesn't care about votes or democracy. For instance, in a democratic system you might have expected rejection by one of the biggest members to trigger at minimum some sort of reflection or debate. There hasn't been any - at the first meeting of the EU Council after the Brexit vote it wasn't discussed at all. The only topic on the agenda was creating an EU army - one that would report directly to the Commission.

Why does the EU need an army when there is already NATO? It doesn't, but totalitarian regimes do. Expect to hear more about this army's "peacekeeping" initiatives in future, albeit not for many years. The process of transforming into a Neo USSR is a slow one, fortunately.

The EU appears to implement rule of law, until the law gets in the way of the EU's aims and then it simply gets ignored. To quote Christine LaGarde on the Eurozone bailouts: "To save the Euro we broke all the rules. The treaties are quite clear. No bailouts."

Finally, loyalty to the EU strongly resembles the sort of loyalty to communism seen in the first half of the 20th century. Brexit has made this very clear by flushing it to the surface. Strongholds in academia, a belief in the superiority of 'expert' run government over democratic decisions, constant double-speak like a "People's Vote" (of the sort held in a People's Republic), a willingness to do whatever it takes to gain victory. Orwell had a lot to say on these topics.

I could go on but you get the picture. The EU looks superficially democratic and law-based, but blocks actual democracy at every turn and the law is enforced politically. It's a deep seated set of attitudes that can't be reformed. It will inexorably continue on its present path, with the EU getting steadily more powerful until it totally controls the member states, helped by large numbers of quasi-religious loyalists who will crack down and imprison anti-EU protesters under the guise of "hate speech".

rexgallorum2 23 days ago [-]
Years ago I had an elderly neighbour here in Germany who fell victim to financial fraud, wiring most of his his life savings--over $200k--to some dodgy bank account in Hong Kong. He thought he was buying shares in some kind of gold mine or something. He asked me for help because most of the information he had was in English. I quickly figured out that he'd been scammed, and very gently broke the news to him. He took it remarkably well.

This happened during the Euro crisis some years ago, and at the time it seemed that Germans with any kind of savings were desperately looking for safe places to put it. Lacking much in the way of financial literacy, many undoubtedly fell victim to professional crooks.

It's hardly any surprise that property markets across Germany started heating up around that time. Property is widely viewed as a safe bet. They call it 'Betongold' or 'concrete gold' for a reason. I know that isn't the only factor behind the vast increase in property values in many areas, but it's undoubtedly a major one, and I think we can expect this situation with interest rates to further inflate what is beginning to look like a bubble.

Nominal property values in the mid-sized city where I live have more than doubled in a decade--seems like a wild party after decades of relatively flat (real) property values.

It's something of a shock, given that earnings have hardly budged during the same period. One could argue that Germany was abnormally cheap 10 years ago in terms of both consumer goods and real estate, and it might be true, but the reality on the ground is pretty disheartening, particularly in light of political developments in places such as Saxony. I'm afraid the squeeze on people in the middle is going to fuel more political instability, or could at the very least be used to stir up trouble.

krilly 24 days ago [-]
Could you elaborate on how the behaviour of German savers differs to those in other countries?
JumpCrisscross 24 days ago [-]
> Could you elaborate on how the behaviour of German savers differs to those in other countries?

European finance is bank based. Banks make most of the loans. Bank managers decide which projects get financed and which don’t. Investors put money in banks and let the banks make decisions.

American finance is market based. Bond buyers make most of the loans. Bond (and stock) investors decide which projects get financed and which don’t. Investors themselves make decisions.

Broadly speaking, the European bank-based model is moribund. It concentrates risks and is too conservative. The ECB is trying to change this, but it involves changing a social contract around how investors behave. This has happened without a broader debate, because Europe, and now we’re seeing a backlash in Germany.

fauigerzigerk 23 days ago [-]
I don't think the ECB is trying to change anything fundamental. It is merely acting within its mandate to keep inflation from falling too far below 2%. That is what democratically elected politicians told it to do. Inflation forecasts are far below target:

https://www.ecb.europa.eu/stats/ecb_surveys/survey_of_profes...

It's not the ECB that is being unreasonable here. It's Germany. Why on earth would you run a balanced budget while getting paid for borrowing? That is just irrational beyond belief.

Fiscal policy is a national matter. It is Germans who need to have that debate you're talking about without constantly blaming the ECB for their own failings.

luckylion 23 days ago [-]
> Why on earth would you run a balanced budget while getting paid for borrowing?

You still need to pay the money back after you invested it. If those investments don't make a profit, you're in trouble. I mean, they could park it in ... maybe bonds? Oh wait.. ;)

There also no telling what the future brings. Borrowing to the limit while times are good leaves you no room when times are bad. A recession is on the horizon, it sounds foolish to shoot your powder before it hits.

QuesnayJr 23 days ago [-]
It's not like Germans are squirrels piling up acorns for the winter. They are keeping gigantic amounts of money in cash, cash that nobody wants. When the crash hits, they didn't do anything useful to prepare for it.
luckylion 23 days ago [-]
> It's not like Germans are squirrels piling up acorns for the winter.

It's exactly like that. They save not because "omg saving is so cool", they save for rainy days. Germans value predictability and security over short term consumption, though that is changing slowly.

QuesnayJr 22 days ago [-]
They didn't do that at all. Did they stockpile food, or gasoline? Did they build extra houses, or cars, or infrastructure. They did not. They put money in the bank. Money by itself doesn't do anything. It has to be invested, and right now the risk-free investments have negative interest rates.

It's hard for individuals to save the way squirrels do. Farmers could do it, but that's it. Now it requires governments, and Germans elected a government that refused to do it, and instead imposed balanced budgets instead. Now they are suffering the consequences of that.

fauigerzigerk 23 days ago [-]
>Borrowing to the limit while times are good leaves you no room when times are bad

Times are bad. Germany is very likely in a recession right now and they have fallen back technologically. Now is the time to spend some money and it was never cheaper.

majewsky 23 days ago [-]
Exactly. And if we don't spend it on a proper Energiewende and to fix our crumbling infrastructure, we will pay it back 20-fold in a few decades.
luckylion 23 days ago [-]
Times are starting to look bad ... but that's my point: don't burn all your wood on the first day of winter when you'll likely still have months ahead.
fauigerzigerk 23 days ago [-]
Don't forget that recessions have a self-reinforcing, psychological element that winters don't have. Money spent earlier may have a significant multiplier effect.

Also, I think spending money is too slow anyway, especially if it is spent on infrastructure, technology development, retooling an obsolete auto and energy sector, etc.

In my view, they are already very very late.

wbl 23 days ago [-]
Germany has enormous borrowing capacity especially in a recession. Governments are not households.
dragonwriter 23 days ago [-]
> don't burn all your wood on the first day of winter when you'll likely still have months ahead.

The analogy doesn't hold since burning wood doesn't help shorten winter.

shshehe 23 days ago [-]
If times are good we wouldn't be talking about negative rates what an insipid thing to write
Paradigma11 23 days ago [-]
"Why on earth would you run a balanced budget while getting paid for borrowing?"

Because later you will have to refinance your debt on worse terms.

duxup 23 days ago [-]
>This won't work because German savers have virtually no experience of such a system.

What do you mean by that?

The incentive is just the same either way. So if they move it from say savings to some investment... not sure that requires huge experience. Most american's aren't savvy investors.

MandieD 23 days ago [-]
While some of us in Germany have betriebliche Altersvorsorge (employer old-age savings), it's nothing like an American 401k. Up to a certain limit much lower than a US 401k, I decide how much I want to contribute pre-tax, my employer tells me how it's generally being invested and what minimum rate I can expect, and I can decide at what point between ages 62 and 67 I want to start taking withdrawals (which are only in one lump sum or five tranches), but I have absolutely no control past that.

There are other retirement savings vehicles, but they're pretty much all annuities. Most Germans, including well-earning engineers like my husband, can't imagine receiving post-retirement income in anything other than a monthly pension; perhaps rent on apartments or houses they've managed to buy along the way. Remember that less than half of German adults live in home they own; renting the same apartment for 40 years is not unusual here.

Germans tend to be more skeptical about the stock market than Americans are. To balance this, they are also far more hesitant to borrow for consumption - my husband's family were slightly horrified that I'd financed the full cost of my car, on top of owing student loans. I didn't mention the credit card debt it took me a couple of years to finish off!

(Me: American who grew up watching my parents always make their payments, but pretty much always have a car loan and who took out some of the student loans I paid back because they absolutely had no discretionary savings.

Husband: German who grew up watching his parents buy 3-5 year old cars with bank drafts once their old one started spending too much time at the shop, and then gave him a bunch of their savings as a university graduation present that sat in his bank account until we bought our house 15 years later)

thecleaner 24 days ago [-]
It would be great for German investors to stop being such cowards when it comes to risk taking. I am not sure where this culture even came from.
scotch_drinker 24 days ago [-]
If only we had a clue where it came from: https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
javert 24 days ago [-]
You're saying that the less Germans learned from hyperinflation in the Weimar Republic is to hold lots of fiat money? Sounds backwards.
scotch_drinker 23 days ago [-]
What they learned is that solving problems with debt is bad. So they try to not have debt by saving a lot. The fact they do it with the same fiat currency system is another matter. But that history lesson is one the OP seems to be ignorant of.
rexgallorum2 23 days ago [-]
Currency reform in 1948 also produced winners and losers. Worth a read.
SquishyPanda23 23 days ago [-]
People get to decide what to do with their property in a lot of countries.
baddox 24 days ago [-]
Guess it just sucks for people who make a modest living and want to save a modest portion of their income over many years.
wbl 23 days ago [-]
They can put their money to work in the stock markets.
rorykoehler 23 days ago [-]
Germany recently changed the law so you have to pay capital gains on unrealised gains so even that is expensive now.
crucialfelix 23 days ago [-]
Wow that's complicated. As you hold the fund, each year you need to recalculate estimated cap gains. You do get a credit if the fund goes down.

But what if I (German resident US citizen) leave the country before I sell the fund? They would have to refund all they had taxed; otherwise how do you reconcile that with tax in a new country of residence?

https://www.howtogermany.com/pages/germantaxesforinvestment....

wbl 23 days ago [-]
Well aren't there gains if you are being taxed?
javert 24 days ago [-]
For that, you need honest, sound money.
arcticbull 23 days ago [-]
There's nothing honest or dishonest, sound or unsound about this. It's a question of what the role of money is in a given civil society. The US tends to view money as a tool for voting on which projects, companies, etc are most efficient.

Saving doesn't always mean saving money but rather saving value. If you own your house and land outright, would you not consider that "savings"? What about government bonds? Corporate bonds? Fixed-incomes? Dividend bearing stocks? Growth stocks? All of that is savings. Cash in a mattress is an unproductive asset, it's a waste of potential. An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't. Money is only valuable when it moves.

repolfx 23 days ago [-]
Saving doesn't always mean saving money but rather saving value

Well, this is the crux of the issue. In the language I learned (British English) the word savings does refer exclusively to cash. Investment is an entirely separate concept, as are assets. I would never consider a house to be savings, because savings are there to provide a buffer if your income suddenly drops below your structural spending level - the proverbial rainy day. Selling a house takes a very long time and has huge overheads, plus, of course, you still need somewhere to live.

Unless your first reaction to e.g. losing a job is to immediately sell your house, your house is therefore not savings.

Government bonds? Great until they default.

Corporate bonds? Ditto.

Growth stocks?!?! The things that can easily move in value 20% in a single day? That's not savings, that's an investment at best or a risky gamble at worst.

Money is only valuable when it moves.

No, money is a store of value, that's literally a part of the definition of what makes something money. It is valuable because it lets you obtain resources later, without having to barter for them at that exact moment.

Money saved means you can lose your job and continue to buy things: that fact alone has value even if the money itself isn't moving right now. This really isn't hard to understand.

The demonisation of savings in our society is one of the most severe problems we face, if not the most severe. It's impossible to have any kind of justice or stability in the world if nobody has any savings, because they convinced themselves a tech stock is the same thing.

QuesnayJr 22 days ago [-]
The exact opposite is true. Savers have been spoiled for generations because they got a positive return without doing any work, or bearing any risk. Those days have ended, at least in Europe.

Nobody owes you a risk-free positive return. If investors don't need your money, then they don't need your money. Money is only a store of value over short time periods (and if inflation is high not even then). Money only has value because you can get it today and use it in transactions tomorrow. If you take that money and stick it in a mattress for a year, nobody owes anything for doing so.

Nursie 23 days ago [-]
> No, money is a store of value, that's literally a part of the definition of what makes something money.

Not according to Merriam Webster - https://www.merriam-webster.com/dictionary/money Nor the OED - https://www.lexico.com/en/definition/money Nor Collins - https://www.collinsdictionary.com/dictionary/english/money

In fact that little factoid you present is a hallmark of Austrian economic thinking and usually cryptocurrency enthusiasm...

mcguire 23 days ago [-]
"The demonisation of savings in our society is one of the most severe problems we face, if not the most severe."

To an extent, you are right. Here in the US, anyway. But it is possible to go too far in the other direction as well.

If all of your disposable money is going into savings, you have no need to borrow money, so the bank isn't making loans, so the interest rate you receive has to fall. More importantly, if you are not spending money, the people you aren't buying from have no incentive to invest. The result is a stagnant economy.

Saving too much is almost as bad as saving too little.

repolfx 23 days ago [-]
I don't think there's any reason for an economy where people save responsibly to be stagnant. That's the error central bankers make. It's sort of like saying if you're not constantly taking ecstasy then your life is stagnant and boring - it might seem like that to someone coming down from an unsustainable lifestyle, but to people who aren't constantly on stimulants life seems just fine and not stagnant at all.

That is, if you judge an economy purely on the basis of "how much stuff is getting done" without caring about what that stuff is, or whether it's actually useful, then yes confiscating savings and making it impossible to actually keep stable money anywhere (which is actually called "economic stimulus"), well, it will appear to make your economy more dynamic. If you start taking into account economic stability though, well, the highs and lows of boom/bust QE-driven economics don't look so great.

So there's really no such thing as saving too much. How much to save is a very personal decision. If you over-save it means lost opportunities, unless you deliberately want to pass your wealth onto your children. But if you save too little, the results can be catastrophic unless the government bails you out, which creates the massive moral hazard that wrecks our global economy today.

jay_kyburz 23 days ago [-]
I speak mostly British English here in Australia as well, and here and I believe most people would expect you to have your savings parked somewhere doing something. Having your house paid off or even paying down the mortgage or an investment properly is still considered saving. Anything that could be converted back to cash if needed.
kamyarg 23 days ago [-]
I wish I could upvote twice, this is so true. It is funny when people forget what money was meant to be; "a store of value".
mcguire 23 days ago [-]
A "store of value", like putting money under your mattress, is, economically speaking, useless.¹

Remember the categorical imperative: "Act only according to that maxim whereby you can, at the same time, will that it should become a universal law."

¹ Beyond a point anyway. Keep 3 to 6 months' income readily available.

javert 23 days ago [-]
I mean, you're arguing against a point I didn't make, but I'll take the bait anyway....

People should not be forced to go further out on the risk spectrum than they want to by government policy (which is what you are suggesting by saying that we shouldn't have what economists call sound money). Forcing them to do that distorts the economy. People should buy bonds because they think the extra risk is justified, not because there is no alternative.

chii 23 days ago [-]
and perhaps the situation has come to the point where low risk investments aren't available anymore. The banks (or ECB) cannot offer risk free interest rates anymore because there just isn't enough such investments to satisfy the demand.

The lever that policy has is interest rates, and by lowering it even more, it forces savers to adjust their view on risk - if they can handle the lowered interest because their risk tolerance is so low that they cant buy bonds or anything, then they will need to suffer the low rates.

It's just that a lot of people are in the situation where they cannot take on any risk with their savings. Historiaclly, banks being risk free is just a gimmick (even if the gov't is insuring the deposit). Banks's risks are diversified, and minimized. But if the economy is doing poorly, they cannot magically produce the low risk returns.

I think the only way forward is actually gov't spending sprees - invest in long term projects, like 100 year long projects, and make these projects the backbone of fiscal policy (print money, if needed). Long term projects that can derive value for all of society, such as establishing bases on moon/mars, mining asteroids, etc.

javert 22 days ago [-]
Another option is "sound money" (historically, this was gold). If you had a sound money option available, people could save wealth without going further out on the risk curve.

At this point, even high-quality corporate bonds are going negative in Europe, so people who want to save have to take a big risk.

In my opinion that is unnatural; it's a creation of central planners who forced everyone away from gold and into fiat currencies.

Gold is pretty risky now because it's not actually used as a currency and thus has low liquidity. If we all used gold as a currency, it would have high liquidity and it would be very stable. (I don't want to go back to gold because digital currency is far more practical, but I'm just making a historical point.)

> I think the only way forward is actually gov't spending sprees

That is going further in the direction of central planning and also further inhibits regular people from saving and investing safely and wisely. How is the middle class going to save and invest under this paradigm? I think the most likely answer is that they won't/can't, and the middle class disappears (like what happens with hyperinflation, e.g. Weimar Germany).

A recurring theme: I am really against central planning. The planners do not always get it right, and when they screw up big time, it makes the system collapse. When people are free to make their own choices the economy adjusts dynamically.

arcticbull 22 days ago [-]
I guess what I don't understand is why we need to force everyone onto sound money. People who receive what they perceive as unsound money can use it to buy whatever would back sound money anyways, can they not?
javert 21 days ago [-]
We don't need to force people onto sound money. People will adopt it naturally over time if it's better for them than fiat money.

However, there is no sound money right now. Bitcoin was designed to be sound money in theory, but it has to get a lot more liquidity first. Gold once was sound money, but also would need a lot more liquidity to be sound money once again. So we just have to wait. I'm not suggesting that we force it.

Fiat money seems destined to eventually collapse. There is a long road, but every time fiat money stumbles, it will be a little victory for alternatives. Investors have been fleeing into gold lately. Wealthy Chinese people have been fleeing into bitcoin to at least some small extent.

QuesnayJr 22 days ago [-]
Sound money is the surest route to destroying capitalism.

The middle class didn't disappear because of Weimar. (It was a mixed bag, because the hyperinflation wiped out a lot of debts.) They disappeared because of the Great Depression. Sound money caused that.

javert 21 days ago [-]
> Sound money is the surest route to destroying capitalism.

I don't agree at all. But let's wait and see. That is a risk I'm happy to take. Sound money is honest money. A system that can't survive sound money is an unsound system.

Anyway, we probably disagree on the definition of 'capitalism.' We don't have capitalism now, we have a mixed economy with partial capitalism.

> the Great Depression. Sound money caused that.

I completely disagree. This is but one theory, and I don't think it's a good one.

> It was a mixed bag, because the hyperinflation wiped out a lot of debts.

Hyperinflation = no debts, but also no savings. So only the very wealthy with large portfolios in real estate or industry could survive financially. Everyone else reduced to poverty. (Granted, I'm no expert on Weimar history, so if that's not exactly accurate, I welcome corrections.)

QuesnayJr 20 days ago [-]
Sound money destroys entrepreneurialism. Rather than investors taking risks to ensure a return for the future, they rely on the government to create risk-free investments for them.

The German economy recovered from hyperinflation, and was booming by the end of the twenties, only to be taken down by the Great Depression. Under Hitler, they abandoned the gold standard, and their economy recovered.

fauigerzigerk 23 days ago [-]
>An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't.

At least it's better than putting money in an index ETF, because bankers making loans do actually contribute to the capital allocation process in a meaningful way.

arcticbull 23 days ago [-]
I believe thats a decision everyone has to make individually, and that's the point :)
fauigerzigerk 23 days ago [-]
Of course, but we are discussing the macroeconomic effects of those decisions. Maybe I misunderstand ...
arcticbull 23 days ago [-]
Oh no I might not have been clear. I'm just taking the position that allocating capital between cash and even index ETFs is meant to be a voting mechanism of how that capital can be most effectively utilized. You're right that active capital management via the bank represents a choice by someone with experience, but that doesn't mean that it's the best use of capital. Further, even if you invest in broad market ETFs you're still picking winners. We may actually just agree here :)
fauigerzigerk 23 days ago [-]
>Further, even if you invest in broad market ETFs you're still picking winners.

What you're not doing is provide capital to companies or contribute to the information processing that makes markets efficient (at least not very much).

Crucially, bank loans (as well as IPOs, rights issues and bond issues) provide capital. Trading existing stocks doesn't.

So when it comes to capital allocation, you're not picking winners and losers by buying an index ETF, because no capital is created at all.

arcticbull 23 days ago [-]
This is a legitimate question, does it not set the rates for any secondary offerings?
big_chungus 24 days ago [-]
But what people forget is it is not just "evil big corp" that has cash on hand which will be devalued in such a way. Individuals do too. Pension plans do. All those will also lose out. Why is there some bureaucrat in an office deciding how much my money gains or loses today? Maybe it would be better to go back to the gold standard.
mikeash 24 days ago [-]
Nothing is stopping you from storing your savings in gold right now. You don’t need the gold standard for that.
the-dude 24 days ago [-]
Last week I stumbled upon an article which claimed the Dutch government ( NL ) has the power to claim all private gold in the country.

If it is true, I wonder if similar laws exist in other countries.

cbanek 24 days ago [-]
Other than needing to safely store your gold somewhere. I'm guessing there's probably also some insurance you could get to protect against loss? With a bank these are generally "free" with laws that protect deposits.
mikeash 24 days ago [-]
If you trust others to keep it for you, there are companies that let you buy gold online that they will store for you, and there are even gold ETFs. If you have a brokerage account, buy some shares of GLD and you’re done.
rightbyte 24 days ago [-]
If you don't trust the financial system surely you don't trust gold certificates either.

Dig it down ... atleast I would.

mikeash 24 days ago [-]
The original comment mentioned the gold standard, which is just gold certificates used as everyday currency.

If you don’t trust that sort of stuff then the gold standard is totally irrelevant anyway.

24 days ago [-]
big_chungus 24 days ago [-]
Well I've considered doing it, but I'm here in America where Roosevelt stole gold at a whim ("mandatory buy-back" at $400/oz in today's currency, where the price is over $1,500). I do like the concept, but I'm not confident one of these kooky big-spending politicians won't decide to steal it to pay for some program.

Regardless, most people won't do this due to liquidity issues. Why can't we just put the currency back on gold? That's like saying we shouldn't put an embargo on Iran because "Every one could just stop buying oil from her."

arcticbull 23 days ago [-]
> Why can't we put money back "on gold?"

Why. To what end? Assuming a fixed amount of gold and a growing economy, you end up creating deflation, which in turn serves to exacerbate wealth inequality in the country. It makes old money wealthier over time. Deflation reduces lending (because it's a "risk free" ROI) and reduced lending slows down the economy. If you don't trust the government to administer the fiat supply, why on earth would you trust them to administer a gold-backed supply? The government is the one that ended it last time around.

If you believe gold is a better store of value by all means buy gold, or buy gold ETFs, mutual funds, shares in gold miners, go 100% gold. Drop it into a margin account, and borrow against it. That gets you everything you want and more. There's no reason to switch over to gold from fiat, in fact you're advantaged if you're the only one doing this and it is in fact better. History however shows us that's not the case.

And then what, we mine one asteroid [1] and your gold pile and all the money associated therewith is worthless?

[1] https://www.express.co.uk/news/science/1169605/Asteroid-news...

goldforever 23 days ago [-]
You've just written a load of crap!
big_chungus 23 days ago [-]
> To what end?

Stopping inflation. The idea that my money is worth less today than it was yesterday is ridiculous. It's not a store of value, and violates one of the three tenets of currency.

> exacerbate wealth inequality

This does not strike me as a reason not to pass a policy. It is true only because Americans are by-and-large spendthrifts. We have gotten away from saving and personal responsibility. Maybe we wouldn't see the large increases in housing prices etc. if we didn't have this runaway creation of fake value based on leverage. I don't think it's sustainable, the economy is overheating, and we will hurt for it. Stagflation proved keynesianism wrong; time for a different approach of the government out of the economy.

More importantly, inflation is already a huge tax on the poor and unbanked. Every one else can recover at least some of the inflation tax; these people cannot.

Finally, deflation may not be as bad as every one thought. [0]

> If you don't trust the government to administer the fiat supply, why on earth would you trust them to administer a gold-backed supply?

I do in part, but there is no reason banks could not issue their own gold certificates. More importantly, the government is not the monolith as which you address it. The fed is separate and independent, and would fill this job (although I still would dispute the constitutionality of a federal reserve, some degree of weaning is probably necessary). This would reign in the profligate spending of the American congress, as the supply of loanable funds would shrink. It would also mean we can't just screw pension funds and individuals by inflating our way out of the problem. The wealthy can personally invest in the market and manage their own money (or hire those smart enough to do so), while every one else pays. Here's an excellent paper with more info: https://mises-media.s3.amazonaws.com/qjae11_1_1.pdf

Finally, inflation tends to encourage economic "fake growth". This is the kind of "growth" shown by sv unicorns, by hedge funds during an expansion, by those who push around rather than make money. Too much fake growth -> overheated economy -> a broader crash. Changes of that sort give the most powerful and most opportunistic the opportunity to profit rather than those with real value to contribute.

> And then what, we mine one asteroid [1] and your gold pile and all the money associated therewith is worthless?

By then we could probably switch over to a (non-bitcoin) crypto-currency. Though I'd blanch at the idea of the gov't creating one now, as it would be doubtless be used to track all spending to "combat money laundering" or some baloney.

My overall point is that we've taken the wrong approach to the economy. We've let this lefty-keynesian approach lure us away from a laissez-faire system with short-term gains and false promises of growth.

[0]: https://www.investopedia.com/articles/markets/111715/can-def...

Nasrudith 23 days ago [-]
Actually yes it is less valueable over time - because economies grow and goods become cheaper. An early pc may be about $900 in today's money. Now go further back to say the value of a barrel itself as cooping became more widespread. The currency in the past is a store of past value in transactions.
mcguire 23 days ago [-]
Tying the growth of your economy to the amount of a metal you can dig out of the ground doesn't sound like a great idea.

Seems like a 1.2% growth rate.

javert 24 days ago [-]
> Why can't we just put the currency back on gold?

Because politicians will take it back off gold again when it suits them.

Sorry to be "that guy," but this is why bitcoin was created.

arcticbull 23 days ago [-]
Don't be the guy advocating putting money into bitcoin to store value when we know 95% of all bitcoin trading volume is fake [1], the primary liquidity supplier in the space is currently being investigated by the NYAG for being a giant fraud [2] and the price is manipulated to serve exchanges looking to trim short and long positions. It's beanie babies for nerds. Parent said "safe" and BTC is about as safe as a chainsaw made of razor blades with no hand guard.

[1] https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-...

[2] https://cointelegraph.com/news/tethers-trouble-with-new-york...

javert 23 days ago [-]
arcticbull, I feel like you have a pattern of being too aggressive with me. Just pointing it out. I have a pattern of being too aggressive in the past and I am trying to tone it back. I appreciate having people to disagree with me, so please keep doing that. (Sorry if this comes across as patronizing, patronizing people is one of my greatest pet peeves.)

> Don't be the guy advocating putting money into bitcoin to store value

Well, I didn't. Bitcoin was designed to be sound and honest money on theoretical grounds. But it hasn't yet achieved the needed liquidity to be relatively stable in value. I hope it does some day, but I don't know if it will.

Anyway, the issues you are raising with your references do not worry me in the least. I have been watching bitcoin a long time and I think that's just short-term news. It's not part of the macro picture. It's like if you came back from a 20 year stint in a monastery tomorrow and watched the news---you would think for sure the world is ending tomorrow. Everything seems like a crisis in the moment, but it isn't.

arcticbull 23 days ago [-]
Truly apologize if I offended you ^_^ tone doesn’t carry well on the internet. I’m just stating my beliefs, and the “don’t be the guy” was a riff on the parent post. I also come here to have my beliefs challenged.
javert 23 days ago [-]
You didn't offend me. Yeah, I didn't pick up on the "don't be the guy" thing being a riff on what I said, so that makes more sense.
Daido_M 23 days ago [-]
An actual civil conversation between two mature people on the Internet! This brought a tear to my eye.
big_chungus 23 days ago [-]
> this is why bitcoin was created

I like the idea of cryptocurrency, but bitcoin is an awful store of value compared to gold. I haven't found a recent calculation for the beta of bitcoin, but it's something pretty crazy. Also, china controls over 2/3 of btc hashing power; I don't trust her with a penny.

javert 23 days ago [-]
I don't agree with you, but I upvoted you. Bitcoin was designed to replay gold/fiat money, but definitely hasn't grown up yet in terms of liquidity. That's OK in my book.
toomuchtodo 24 days ago [-]
There is a penalty for assuming the future will always have value you’ll be able to extract.

Perhaps everyone will consider working less when your excess fiat has so little value.

24 days ago [-]
EliRivers 24 days ago [-]
Why is there some bureaucrat in an office deciding how much my money gains or loses today?

How else would interest rates be set? If you want your money to grow all by itself just because you deposited in an account with an interest rate, how does that interest rate get decided if not by someone in an office? Someone, in an office, whatever tools they use to decide, has to make that decision, surely.

wongarsu 24 days ago [-]
The maximum interest rate at which the bank is (nearly) guaranteed to make profit off my account balance can be calculated by an algorithm. Running that algorithm once a month and using it to set the bank's interest rate would be an interesting model that doesn't directly involve humans.
JumpCrisscross 24 days ago [-]
> The maximum interest rate at which the bank is (nearly) guaranteed to make profit off my account balance can be calculated by an algorithm

This is a good way to blow up a bank.

wongarsu 24 days ago [-]
I'm not saying the algorithm is trivial, as it has to take long-term factors into account, as well as the reaction of the market to the new interest rate, and of course add safety and profit margins. It would be quite a bit of work, but it's well aligned with the core-competency of banks.
JumpCrisscross 24 days ago [-]
> It would be quite a bit of work, but it's well aligned with the core-competency of banks

It is, and it’s difficult. Perhaps fundamentally impossible, given it would have to predict consumers’ tastes and preferences to estimate B2C companies’ creditworthiness.

Rates are negotiated instruments, a combination of the return on safe assets today, the risk of that rate changing tomorrow, and the credit profile and availability of borrowers. There is no known algorithm which can robustly balance these variables. If it were discovered, it would be worth billions, perhaps more, and fundamentally change finance. Pretty much every crisis has a story about smart people thinking they’ve solved this problem in some narrow niche of the economy and then being shown disastrously wrong.

big_chungus 23 days ago [-]
> Perhaps fundamentally impossible

It can't be done by one individual for the whole market, but the invisible hand does a pretty good job. The principle of a market as a whole establishing prices, rates, etc. is widely accepted.

QuesnayJr 23 days ago [-]
If you calculated that interest rate, it would be negative. Ten-year German bonds have a negative interest rate. Cash savings pay less than bonds, so money in a cash account pays an even-more negative rate.

The only way banks could pay a higher interest rate would be to bear more risk, but that's how you get a banking crisis.

mruts 24 days ago [-]
Interest rates in the US are not set directly by the government. Instead the federal funds rate is a target rate that the Fed aims for by either expanding or contracting the money supply.

Also the TIBOR and LIBOR and all the other *IBORs aren’t set by the government either. Certainly government monetary policies affect these rates, but ultimately it’s a free market function.

Having the government directly set private lending rates is a very bad idea and would certainly result in disaster (much like how all other price controls are terrible ideas).

blake1 24 days ago [-]
Very short term interest rates in the US are set by the Fed, pretty much at will.

Under normal conditions, they have an extremely strong influence on medium term interest rates as well by convincing the market that they will keep short rates high(low) in the future, while will then raise(lower) medium terms rates.

If that proves inadequate, like it did after the crisis, the Fed can buy and sell bonds directly to move medium to long-term interest rates.

The Fed may have a historical preference for relying on the first mechanism alone, but through some combination of these techniques, they can set any interest rate to any reasonable value almost at will.

mruts 23 days ago [-]
Sure all of that’s true, but I think there’s a big philosophical and moral difference between changing the incentives of bankers vs forcing them to lend and borrow at a set rate. One relies on an efficient market and incentives while the other relies on coercion and force. It’s possible that the result of both of these systems are equivalent in many situations, but one is much more robust than the other because it still allows for price competition.
big_chungus 24 days ago [-]
> How else would interest rates be set?

By a free market, the same way it was set for a very long time. It gets decided by how many people borrow at a given rate, which will typically raise or lower the rate. Some one will make small adjustments around the broader market rate; if enough people make those small adjustments in one direction, the range moves.

QuesnayJr 22 days ago [-]
I'm not quite sure what you have in mind, but in a free market, interest rates in Germany would now be negative. People are demanding government action to prevent it.
maxerickson 24 days ago [-]
Do they mean public official?

Lots of interest rates are influenced by markets, where lenders and borrowers base their activity on available rates (if no one borrows at a given rate, a lender may seek business by reducing the rate...).

Proven 23 days ago [-]
You have absolutely no clue what you're talking about.
mruts 24 days ago [-]
Then buy the US risk free rate instead? Or get some nice equity premiums if you want. I seriously have a hard time understanding logic like this. Who is actually saving money in a savings account? There’s literally only one reason why you would keep money in a savings account: For FDIC (or equivalent) protection. But if that was the sticking point, then US T-notes are even better and they don’t have a 250k limit.

Maybe this guy doesn’t know anything about finance and doesn’t understand? I’m confused.

Moreover, this is exactly what rate cuts are for: to stimulate the velocity of money and encourage investment.

Europeans in general are so risk adverse that they make irrational financial decisions. As EMH posites, you get a return commensurate to your risk: without bearing risk, there cannot be any return.

aeyes 23 days ago [-]
First of all the German pension system works completely different than that of the US for example. Savings generally aren't for retiring so they can't be seen as long-term. Therefore most people simply don't want them in volatile investments.

The amount in savings accounts is probably much lower than what you are thinking. Median net worth in Germany is only around EUR 50.000.

mruts 23 days ago [-]
In a country that’s obsessed with saving, wouldn’t there be a lot of money in these accounts? Though in a country like Germany that has a large state welfare program, you would think that saving wouldn’t be particularly popular.
aeyes 23 days ago [-]
To be saving you first of all need to have some cash left over. In Germany you only net about 55-60% of your gross income and pay has generally not kept pace with inflation for many years. Moving within Germany doesn't make a big difference as rent is highest where pay is better.

Investment returns are also heavily taxed.

xyzzyz 24 days ago [-]
If you’re German and buying US treasuries, you’re exposed to foreign currency risk. If you want to hedge that risk, you’ll pay for the privilege so that it’s no longer worth it. For the same reason, the German negative yield bonds are actually positive yield after swapping doing a currency swap to dollars.
mruts 23 days ago [-]
This is true, but by taking USD exposure rather than Euro exposure, you are actually derisking and hedging out the massive currency exposure you already have. Namely the fact that you use Euros for everything in your life.

So it would probably be a better idea to hedge some of that out unless you have some specific long view on Euros. Also you could argue that Euro debt isn’t sovereign debt since only the European Central Bank can make more of it. Consequently USD should be a less risky and more stable currency in the long-term.

kgwgk 24 days ago [-]
Juergen from Bonn is not interested in buying US Treasuries for the same reason that Joe from Baltimore is not interested in buying Mexican government bonds even though they yield 7% rather than 1.5%.
mruts 23 days ago [-]
You’re comparing Mexican bonds with US T-notes? US 3-month treasuries are the risk-free for the entire world. Every investor and every country in the world (besides maybe North Korea or something) hold them in massive quantities.
kgwgk 23 days ago [-]
Obviously not “every investor” does hold Treasury bills, not even in the US.

And if you don't like the Mexican bond example [1], let’s say it’s for the same reason that Joe from Baltimore was not interested in buying Australian government bills a few years ago (when they were yielding 2% more than US treasury bills). Note that the rating for the Australian debt is better than for the US...

[1] it’s true that a comparison of 3m bills (8% yield in Mexico vs 2% in the US) would be more appropriate.

badpun 23 days ago [-]
They're not risk free, because there's always the currency risk. 20% of my portfolio is US govt bonds, but that's mostly to hedge against the fall of my country's currency.
mruts 18 days ago [-]
You’re right, nothing is risk free. In finance though, the three month US Treasury bill yield is considered the risk-free rate. The only reason why this matters is that the risk-free rate is built into almost all financial equations and models.
pnutjam 23 days ago [-]
Yeah, I'm pretty sure there is a reason they pay higher interest, more risk.
dragonwriter 23 days ago [-]
> Who is actually saving money in a savings account? There’s literally only one reason why you would keep money in a savings account

Immediate liquidity.

> For FDIC (or equivalent) protection.

That too.

tonyedgecombe 24 days ago [-]
It’s a common attitude, investing is seen as little more than gambling.
zmk_ 24 days ago [-]
EMH says that prices reflect information, if anything it's a statement about the mean/expected return. What you are probably referring to is CAPM which has this baked in as an assumption on people's preferences.
mruts 23 days ago [-]
EMH directly implies that it’s impossible to beat the market on a risk-adjusted basis. Therefore, all above market return is just compensation for bearing additional risk. Therefore EMH is fundamentally about there only being one Sharpe ratio, the market Sharpe.

Though you could also say it’s about the market incorporating all known information because that and there only being one Sharpe ratio mean pretty much the exact same thing. Moreover the implications of CAPM and EMH are pretty much the same.

cylinder 23 days ago [-]
I'll never understand why people expect a rate of return above inflation simply for holding in cash savings accounts. It's a fundamental concept of a market economy -- you need to take a risk in order to earn a risk premium!
24 days ago [-]
samsonradu 24 days ago [-]
What purpose would that home serve? Is there demand for it or it will just suppress housing prices by increasing supply?

I guess the message here is that rent-seeking investments (positive yielding investments, deposits) will no longer work. Value needs to be added.

JumpCrisscross 24 days ago [-]
> will just suppress housing prices by increasing supply?

That’s an odd way to phrase keeping housing affordable.

samsonradu 24 days ago [-]
Just tried to be technical, since 'affordable' is debatable. What I'm asking is how would building houses for no reason help in the current circumstances. Wouldn't the house also erode in value?
JumpCrisscross 23 days ago [-]
> how would building houses for no reason

Stable housing prices are good for an economy. Next to negative rates, that’s a win. That’s the point.

samsonradu 23 days ago [-]
If the prices are stable yes, but why would prices remain stable? Wouldn't this be arbitraged to the level of negative rates?
umeshunni 24 days ago [-]
It's a phrasing that's extremely popular in the US, for obvious reasons.
samsonradu 24 days ago [-]
True, too much watching Bloomberg lately :)
24 days ago [-]
adrianN 24 days ago [-]
You can always live in a home.
samsonradu 24 days ago [-]
In one home, yes.
JetSpiegel 23 days ago [-]
> What purpose would that home serve?

Save on rent? Not every asset is a commodity to be traded.

joezydeco 23 days ago [-]
Nice goal, but how do you do that without triggering a bank run?

Because when everyone starts withdrawing their money, you get a bank run.

JumpCrisscross 23 days ago [-]
> how do you do that without triggering a bank run?

Deposit insurance.

The EU’s lack of a currency-wide deposit guarantee is a separate problem. One uniquely spawned by the Germans.

joezydeco 23 days ago [-]
Deposit insurance? You're going to ask the public to subsidize their own negative interest?
c3534l 23 days ago [-]
Not if the government is giving out money. Besides, the second the bank can't actually provide the money is the second they increase rates.
TeMPOraL 24 days ago [-]
A lot of comments here are saying that this is good, and/or one is not entitled to a non-negative return rate on a bank account. Ok, so as an individual, how am I supposed to store money? Under mattress? Or should I embrace the new way of spending everything I earn immediately, possibly by turning my life into a portfolio of subscriptions, and paper over all unexpected spendings (illness, car breaking down, family issues) with insurance? How are low-to-middle-class people supposed to improve their financial situation in this reality?
throw0101a 23 days ago [-]
The first question to ask it:

* What are you saving money for?

Retirement? Children(s)'s education? House downpayment? Vacation? New/replacement car? The purpose of the money that you are saving determines what you should do.

The rates that this article is talking about is bank savings, so if you're talking about retirement or child education, that is usually many years away. For that money you will need to put it into a portfolio of stocks and bonds, because if you don't inflation will eat away at it over time.

If you're talking about saving for next year's vacation, then a savings account (even negative rate) is fine, because over the course of a year you're not going to lose much.

If it's in the time frame of 2-5 years, then a term deposit will be fine:

* https://en.wikipedia.org/wiki/Time_deposit

It's locked in, so by promising to not touch it, the financial institution gives you a higher rate. Of course if (e.g.) your car breaks down, and you do have grab it, you forgo any interest, but the emergency use is probably a higher interest; if your car does not break down, you earn higher interest than a simple savings account.

And yes: after you've saved an emergency fund, funded your vacation plans, funded any replacement vehicles or other large expenses (new roof/HVAC for your home), you should spend whatever is rest.

You can't take it with you when you die, so once you've planned for certain contingencies, you might as well spend the money on improving your happiness and enjoyment of life.

majewsky 23 days ago [-]
> You can't take it with you when you die, so once you've planned for certain contingencies, you might as well spend the money on improving your happiness and enjoyment of life.

I am a German, and my visceral reaction to this is: "But what if something unexpected comes up!?"

You may roll your eyes at this, but (I believe that) this is a mindset shared by the majority of Germans.

pm90 23 days ago [-]
Suggested solutions: insurance and or social security benefits, UBI.

Some kind of social safety net would, ironically enough, allow the most efficient use of capital by allowing citizens to invest all their extra cash into the economic machine.

wincy 23 days ago [-]
I’d be most concerned about governmental instability. In that case no amount of UBI promises would protect you, but a suitcase of gold and a plane ticket would. At least, 10 kilos or so would let you set up pretty nicely somewhere else.
throw0101a 23 days ago [-]
At some point you have to examine yourself and perhaps see if you have a psychological problem:

* https://en.wikipedia.org/wiki/Generalized_anxiety_disorder

* https://en.wikipedia.org/wiki/Rumination_(psychology)

* https://en.wikipedia.org/wiki/Paranoia

It is prudent to set aside some number of months' worth of expenses:

* https://www.investopedia.com/terms/e/emergency_fund.asp

Per another comment, this is why you have life/disability insurance, health insurance, social safety net (welfare, unemployment).

And what "unexpected" thing are you worried about? You could be hit by a car Monday on your way to/from work and it won't matter any more and all that cash will no longer be useful to you.

dang 22 days ago [-]
zapnuk 23 days ago [-]
> The rates that this article is talking about is bank savings, so if you're talking about retirement or child education, that is usually many years away. For that money you will need to put it into a portfolio of stocks and bonds, because if you don't inflation will eat away at it over time.

In that case, why should the customer need to decide on a portfolio?

Why doen't bank to that internally and offer risk-free, variable rate investments for their customers? The expected stock return is 5-7% p.a., why can't banks offer 3-4%?

> If it's in the time frame of 2-5 years, then a term deposit will be fine:

Except that it's not. In germany I know of two popular alternatives term deposit ('Festgeld', more flexible - can be extended) and savings bond ('Sparbrief'). The interest rate of term deposites is 0,1%, for saving bongs it's 0.1-1%. Both are considerably lower than the inflation rate of approx 1.5%.

Sure, there are different fond/stock based alternatives - but they often carry risk.

throw0101a 23 days ago [-]
> Why doen't bank to that internally and offer risk-free, variable rate investments for their customers? The expected stock return is 5-7% p.a., why can't banks offer 3-4%?

Because banks are banks and investment companies are investment companies, and there are generally regulations about mixing the two (the removal of those regulations helped along the Financial Crisis). And just because something is "expected" does not mean it is guaranteed, further those expectations are averaged out over several years.

If you want safety, you will have to pay for it:

> Of course, all this exists today. If you want to hold gold and watches and sentimental things at a bank, you pay to rent a safe deposit box. If you want to hold oil or grain to use it or sell it next year, you can pay for storage in a tank or some other facility. [...]

> Well, it’s important to remember that money in the bank isn’t really something you have. It’s something that you are owed. When you log into your bank and see that you have $10,000 in your savings account, what that means is that your bank owes you $10,000. [...]

> In other words, to store money at a bank requires the existence of some other borrower who will pay the bank. As such, just as you’ll pay more to store grain when grain is abundant and warehouse space is scarce, you have to pay more to hold money when savings are abundant but demand for borrowing is scarce. [...]

> In the meantime, there’s lots of money out there and a limited capacity to store it all. So increasingly, savers are going to have to pay for money storage services. And although it’s not much consolation, we can at least remember that whether it’s fees for oil tanks, safe deposit boxes, security guards, insurance, or wealth managers, there's nothing unnatural about being forced to pay to preserve your wealth. [...]

* https://www.bloomberg.com/news/articles/2019-08-08/the-non-w...

> Sure, there are different fond/stock based alternatives - but they often carry risk.

If you want more return, you will have to take on more risk. Buy a portfolio of 10% stocks/equities and 90% bonds. Vanguard actually offers an ETF very close to this called VCIP in Canada: only 20% stocks/equities.

If you want safety you will have to pay for it, with low or negative rates. If you want returns you will have to take some risk.

Suck it up.

mindslight 24 days ago [-]
> should I embrace the new way of spending everything I earn immediately, possibly by turning my life into a portfolio of subscriptions, and paper over all unexpected spendings (illness, car breaking down, family issues) with insurance

Yes. I mean, this is the goal of an inflation-forced financialized economy. The "low-to-middle-class" isn't supposed to be able to save - they're supposed to keep working.

The negative interest rate paradigm enjoys support on HN due to the upper-middle-class culture of saving into brokerage accounts holding fauxvestments, and the tech community being generally more in tune with whatever bubbles are currently building. Better access to the printing presses, and all.

The fundamental truth is that prices naturally trend downwards due to technological progress - competition wins out by doing more for less. Actively driving the economy via inflation only made sense before we learned how to make enough stuff. Now the policy is directly opposed to sustainability.

alkonaut 23 days ago [-]
> [if] one is not entitled to a non-negative return rate on a bank account [...] how am I supposed to store money?

In a bank account with a negative rate! Storing money for you is then a service. If you have $1000 under your mattress for 10 years and the risk of theft or fire is 1% over those 10 years, then the storage service would be worth $10 to avoid that risk (assuming the risk in the bank is zero which is a simplification).

twblalock 23 days ago [-]
Invest in stocks, bonds from countries that don't have negative interest rates, etc.

If you keep large amounts of long-term savings in cash you are leaving a lot of money on the table anyway, although apparently a lot of Germans do that. Even in the US, high-yield savings accounts barely outpace inflation.

The purpose of the negative rate is to reduce the chances of an deflationary spiral, which would hurt savers even more than a negative rate because it would tank the economy and cause unemployment. A negative rate is probably better for savers than a recession.

b_tterc_p 23 days ago [-]
This mindset is why I think negative rates are going to mess things up. People aren’t going to behave rationally. If you want to save the rational choice in this situation is to accept a small negative rate that is secure although slightly negative. But... a lot of people are probably going to do one of your two ideas. Neither of which are really “good” for the economy.
fujiters 23 days ago [-]
I'm a bit surprised that negative nominal interest rates are a thing. If you print enough money, inflation starts to rise. Why not print money such that you can still provide a positive nominal interest rate so people don't start bank runs and stuff money in mattresses? True, the real return would be negative, but that would be the case either way.
Paradigma11 23 days ago [-]
Because is just doesnt work. Since 2000 the amount of € (M3) has tripled while the economy grew by 50%. The money is just parked and not circulating in the economy. This is why it does not contribute to inflation. There are no good investments to be found, so adding money just adds to the sea of parked money.
defertoreptar 24 days ago [-]
Either by tolerating some risk and investing locally or by buying some US Treasury bonds.
TeMPOraL 24 days ago [-]
Aren't US treasury bonds about to become negative too? I vaguely recall something from recent negative interest rates discussion.
fileeditview 24 days ago [-]
Oh and since this is about Germany: in Germany "Bundesanleihen" have already negative interest. It will become really impossible to save some money securely for "bad times".

And if people want to tell me I should rather spend some money to push the economy... seriously? I don't need a new tv/phone/car/whatever every few years..

They tell you in the news to save the environment by doing "xyz" daily but just restrain on buying shit you don't need?? No that's too easy..

KozmoNau7 23 days ago [-]
It's a symptom of late stage capitalism. It needs constant growth in order to sustain itself, but infinite growth is impossible.

And in the process of everyone spending money to buy stuff they don't need, we're destroying the world we live in.

thekyle 23 days ago [-]
Why do you feel that infinite growth is impossible? Seems like once we've used up all of Earth's resources we can just move along to Mars, then the outer planets, and so on.
unionpivo 23 days ago [-]
exponential growth, grows exponentially :)

I can't find the article, but it was about extracting X(forgot which) material. And if you want just 1% yearly growth.

If I recall correctly once you outgrow a planet, its less than 250 years before you outgrow whole of our galaxy, and less than 500 before whole known universe.

JetSpiegel 23 days ago [-]
You can always reduce inequality, if you have money you can't spend.

Just give it away and collect that sweet immaterial feeling of a job well done. Support causes you believe in.

repolfx 23 days ago [-]
This isn't capitalism you're seeing at work. It's literally caused by market manipulation by a central bank - and central bankers are central planners!

There was a good article in the Telegraph the other day by someone who used to work for the EU Commission on monetary policy back in the 90s, until he was fired for writing a book arguing that the ERM was terrible :) It argued that central banks are putting the world on a conveyer belt to communism.

The argument ran like this. Because they believe their mandate is to create spending ("growth") at any cost, any form of savings - even low risk investments - is an enemy to their goal and must be suppressed. So they print money to buy up all the low risk investments, to force investors into higher risk investments. That creates bigger bubbles and to try and push back or shrink the resulting recessions they must keep pushing spending levels ever higher, so they buy more and more assets people are using to try and store value. The terminal state is one in which central banks own most of the economy, which is communism.

imtringued 23 days ago [-]
This is one of the reasons why QE failed. The fed assumed that stock yields (price to earning) are the primary reason why people invest into stock and by pumping money into the stock market the yields will go down and become less attractive. In reality investors were happy that their stocks appreciated even if it was completely disconnected from the economic fundamentals of the companies that the stocks are representing.
AdrianB1 23 days ago [-]
Nothing to do with capitalism, any form of economy has a financial system and any financial system can have this problem. I studied economy in a Communist country, we had the same problems as everybody else.
socialdemocrat 23 days ago [-]
What specifically? It did not seem like to me that communist countries were very focused on increasing consumer consumption at all.

And if they had been, that would not exactly been a bad thing, given how much shortage there was of basic consumer goods in communist countries.

I think it seems considerably more absurd in modern rich western countries today, that we are still pushing for ever high consumption.

For all its flaws, the communist countries at least seem to focus more on items being more easy to reuse and repair. Western society is getting deeper and deeper into really short product cycles with products which are next to impossible to repair. We are essentially pushed to an artificially high consumption level.

rocqua 24 days ago [-]
Yes, and many Western European bonds as well. This is part of the justification for negative interest by the ECB. The reason is that government bonds are essentially risk free. Since the ECB is totally risk free, if they were to offer a better interest than government bonds, that would be a no-brainer for banks.

This has the effect of pulling the cash in banks into the ECB and thus out of investments. Cash that is not invested, but stored in the ECB is not contributing to the economy. Moreover, it is essentially unfair competition by the ECB. Finally, governments might be miffed that investors don't buy government bonds.

There is another justification that is essentially focusing entirely on the "Cash that is not invested, but stored in the ECB is not contributing to the economy." line of reasoning. Here, the idea is simply to reduce the ECB interest so banks will want to invest more, thus growing the economy. This differs from the first argument because it doesn't care about the 'risk free interest rate' of the current market. It just wants more money in the economy.

toomuchtodo 24 days ago [-]
We’re on that path, it’s not a sure thing yet. I’d be surprised if all developed countries didn’t have their bonds go negative eventually. Too much capital and not enough productive investments available.
SilasX 24 days ago [-]
They've been negative in real terms (subtracting off inflation) for a long time in taxable accounts for the typical US investor.
im3w1l 23 days ago [-]
Low interest rates are a signal to people to spend money on income/value generating assets. Maybe even borrow to spend. Low interest rates means you shouldn't store money. You should store wealth in productive assets. Buy things that make your life easier and more productive.

And you know, the oldest investment of all: have kids that you raise to be loyal to their parents.

tomjen3 22 days ago [-]
That would be nice, except the only thing that it makes sense to buy, houses, have gone up enough to be unaffordable in any place where it is worth buying.

I mean sure, I can get 3% on the stock market long term, but that isn't where I want my emergency found, because I might need it tomorrow.

faissaloo 23 days ago [-]
>Ok, so as an individual, how am I supposed to store money?

In a current account. If you want to make money you should be investing.

DocTomoe 23 days ago [-]
... in the onset of a recession with a bunch of clowns on the wheel.

I could just burn the money, then at least I´d be warm.

ur-whale 24 days ago [-]
> how am I supposed to store money

It's not like it's some sort of god-given right. But to answer you question: Bitcoin

xyzzyz 24 days ago [-]
Bitcoin price is so volatile that it’s absolutely terrible as a store of value currently.
ur-whale 24 days ago [-]
Not on an yearly averaged basis.
berbec 23 days ago [-]
With a sample size of... 10
AdrianB1 23 days ago [-]
It is called the right of property. Not God-given, for sure, but it exists in most countries. One can keep his own money as he wants, including under the mattress.
AlexAltea 23 days ago [-]
> One can keep his own money as he wants, including under the mattress.

If only it was that easy. With several governments regulating against cash, e.g. banning cash transactions above a certain amount, and limiting withdrawing/depositing cash in bank accounts, can we really say we have right of property (of money at least)? It seems yet another right to throw under the bus for the sake of mitigating "money laundering" and "terrorism".

xkcd-sucks 23 days ago [-]
Let's not forget civil forfeiture in the USA: It's legal to store your cash in a mattress, and it's also legal for law enforcement to seize that cash because its very existence seems suspicious
mikeash 24 days ago [-]
I like getting interest on my savings as much as anyone, but it is kind of weird how we just expect the price of storing money to be negative. No other storage service works this way. I can’t put a bunch of furniture in a warehouse and not only pay nothing, but receive a percentage of the value each month.

I understand why it often works this way for money, but I don’t see why this must be the natural order of things. The price of storing money in a bank will be the underlying cost of doing so, minus the proceeds the bank can make from your money, plus some profit margin. Nothing says this sum must be a positive number.

abernard1 24 days ago [-]
'No other storage service works this way. I can’t put a bunch of furniture in a warehouse and not only pay nothing, but receive a percentage of the value each month.'

The distinction is that your savings in a "storage" scenario are yours exclusively. That is not how it actually works. Banks lend out your "stored furniture" to get a return. Due to fractional reserve lending and the fungibility of currency, the illusion of you being able to receive your stored furniture back is preserved.

But there is never actually a scenario where there are truly idle resources--capital is always utilized at some ratio, and that ratio is independent of consumer behavior. The bank is investing on behalf of their customers.

As banks can only invest based upon the deposits of their customers, I think it is actually extremely unreasonable for customers to have to pay for the privilege in the form of a negative interest rate. That's not "natural" either. Guaranteed checked deposits is the only reason that this swindle can occur.

JumpCrisscross 24 days ago [-]
> it is actually extremely unreasonable for customers to have to pay for the privilege in the form of a negative interest rate

You’re paying for access to a checking account, an electronic payment mechanism.

Savings should be invested, not stored with banks. That’s the nudge ZIRP and negative rates provide. Forcing investment decisions into the hands of the savers over banks’ lending managers. Decentralising the economy’s pool of investing decision makers.

abernard1 24 days ago [-]
I understand the nudge, but my comment was qualified by a statement that is essentially "savers are already joint investors in the operations of a bank." On principle, receiving a guaranteed negative return for providing an investor your own capital is very unnatural.

With regard to fees: the only reason banks charge them is due to the fact they believe that the possible returns from low income customers will never match their cut of the investment. The fact that this interest rate also applies to high income customers exposes the "what about fees" argument. This is about incentivizing moving capital out of the safer investments that bank make (homes, relatively light personal loans, modest business loans) into equity markets. As true "savings" rates in the form of completely unallocated capital is low, my guess is this is pushing on a string.

JumpCrisscross 24 days ago [-]
> savers are already joint investors in the operations of a bank

And highly privileged ones. First in line. Guaranteed by the government.

If savers want to be pari passu with the bank’s capital, they can buy bank bonds and stock. Those yield well, even in the EU.

wongarsu 24 days ago [-]
There is lots of capital that an individual can't reasonably invest. Even if I live paycheck to paycheck then I still on average have half my salary in my bank account. As an individual that's just my working capital, but as a bank I can take advantage of the fact that some people (in Germany) get payed on the 1st and some on the 15th, meaning there is some constant amount of money that can be invested.
pgwhalen 23 days ago [-]
>As banks can only invest based upon the deposits of their customers

This is not strictly true, read about the money multiplier myth. As another (much more informed than I) HN commenter put it, banks think about constraints on lending in terms of the cost of money, not the quantity of money.

19870213 24 days ago [-]
You could rent your furniture out I suppose. That's basically what we were doing with our savings, the bank can use the deposits to fund mortgages and we get some interest on our deposits from the returns on investment the bank made.
psadri 24 days ago [-]
There is a difference - the money that’s stored in the bank is not just sitting there. It is lent out with an interest to people who need to borrow money and earns the bank an income. The banks want your deposits because it lets them earn money. To compete with one another they offer interest bearing deposit accounts.
345218435 23 days ago [-]
that‘s a nice theory.

what actually happens is, when you borrow money, they put the numbers into your account and the negative on their balance sheet. that‘s the basic process of money-creation in a fiat system. out of thin air. debt-based on top so that nobody ever gets away.

but yeah, everybody likes to believe that the amount of money in the system represents goods and services.

Zhenya 24 days ago [-]
This is because banks lend against their deposit value (in many multiples).

So if you give them $1, the bank can now lend $5 (without actually having it) and then make many times that $5 in interest.

So sure, they will pay you a little, so they can make a lot.

At least that's how it works today.

JumpCrisscross 24 days ago [-]
> So if you give them $1, the bank can now lend $5 (without actually having it) and then make many times that $5 in interest

Sigh

This is not how it works. (It’s a common misconception, however.) Loans create deposits, not the other way. Most money is created by banks, not the central bank or mint [1].

From a consumer perspective, imagining a bank as taking your $1 and lending it out five times is okay. But systemically speaking, it’s a misleading model. The truth is the bank created $5 in loans, and through that $5 in deposits. About $4 of those deposits were then spent and ended up in other banks or bank accounts as deposits.

The loan always comes first. The BoE has a good primers on this [2].

[1] https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...

[2] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

kgwgk 23 days ago [-]
> The truth is the bank created $5 in loans, and through that $5 in deposits.

But for that the bank needs to hold $1 (or whatever) in reserves, so either they had excess reserves already (because “someone gave them $1, the bank can now lend $5”) or they a) get new deposits, b) get them from another bank (i.e. the money comes from previous deposits elsewhere) or c) new money is created by the central bank.

JumpCrisscross 23 days ago [-]
The loans are created first. At the end of the day, if reserves are inadequate, they are borrowed. This creates the overnight interbank market.

Because a dollar dealt results in a deposited, this system is self-reinforcing.

kgwgk 23 days ago [-]
But this is not really different from the standard description: you deposit an incremental $1 (cash or a loan) into the banking system and the banking system can loan out $5 (edit: in fact, 0.9$ at first) when it decides to do so. Banks can create this new money “multiplying” deposits (or the central bank intervention is required to create “extra” money).
JumpCrisscross 23 days ago [-]
> this is not really different from the standard description

It is. It’s the difference between picturing a rocket propelled by expanding gases versus a vessel thrust forth by Newtonian dynamics.

It is correlation versus causality. Loans cause deposits. Deposits correlate with loans. This discrepancy is the source of money supply estimation error.

$1 deposited doesn’t create $5 in loans. $5 in loans prompts about $1 in reserves. The difference in these models explains the interbank market, per se and in terms of rates; reserves as a stochastic versus deterministic phenomenon; bank runs and much more.

Loans create deposits. Not the other way. Modern banking makes sense once you internalise this difference.

kgwgk 23 days ago [-]
If your point is that the actual money issued by the central bank (M0) does not necessarily result in the monetary supply that could be potentially produced according to the minimal reserve requirements that’s obviously true.

Banks are not forced to loan out as much as they could, they have a choice. And because the system is not working at “full capacity” the central bank cannot control the money supply adjusting the minimal reserve requirements. They use other mechanism like short term rates (including through the interest the Fed pays on reserves since 2008).

“Loans create deposits” is of course true in the standard description as well. If banks create money (by lending out, if they want, excess reserves) that necesarily means that the total amount of deposits increases. Because the total amount of deposits (plus the relatively less important amount of physical money in circulation) is what we call money!

numakerg 24 days ago [-]
So the bank levies a micro tax on all holders of the currency with the expectation that their investment in the receiver of the loan will yield a better return?
JumpCrisscross 24 days ago [-]
> the bank levies a micro tax on all holders of the currency with the expectation that their investment in the receiver of the loan will yield a better return?

No.

Banks compete for deposits and compete to lend. The spread between those rates must pay the bank’s costs, cover its risks and turn a profit. When central banks reduce the return on safe assets banks hold, their income from lending to the government goes down. The banks thus seek to replace that income with other lending. Unfortunately, everyone in the system is doing the same thing. This competition forces lending rates down.

Savers are competing for investments next to the banks. There are lots of them crowding into bank deposits; this lets those banks lower the rate they pay. (Nobody forces savers to deposit Euros only in German banks.)

This is a system of feedback loops. Nobody is charging a tax, though banks may charge a fee for a service it costs them to provide. Depositors are free to take their business elsewhere. And entrepreneurs who think they can do better are free to launch competing financial services.

numakerg 24 days ago [-]
>Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account.

If that £100 is spent into the economy but is not returned, did the total volume of available £100 not increase, reducing the buying power of any £ stores? Perhaps it is not a tax because it isn't used directly by the government, but it is a burden that such a lender can enforce upon currency holders with the authority that is given to it by the organization controlling the currency.

>entrepreneurs who think they can do better are free to launch competing financial services.

Entrepreneurs cannot lend out money they never had. How difficult is it for a new company to obtain a piece of the volume of money that the currency regulator deems available for creation within a timeframe?

JumpCrisscross 23 days ago [-]
> If that £100 is spent into the economy but is not returned

Loans create deposits. The only way the deposit isn’t returned is if capital is destroyed.

> Entrepreneurs cannot lend out money they never had

With a banking license, yes. They can.

Once you have a banking charter, you can lend to your heart’s content. At the end of the day, you borrow to make your reserve requirement. (If you’re deficient, you die.)

Lending creates deposits. Not the reverse.

Zhenya 23 days ago [-]
Thanks for the clarification and additional commentary below; great to learn something new.
mikeash 24 days ago [-]
You’re the second reply who seems to think that I have no idea how banks actually work or why they can often pay interest. Did you just skip my second paragraph, or what’s the deal?
Zhenya 24 days ago [-]
I read your second paragraph.

There is almost a zero-cost to storing the money and as the account size grows the cost to transact on this account per dollar of storage also approaches zero.

Meanwhile the lending power of the bank multiples by large whole numbers.

They aren't storing your bills or gold coins.

floatingatoll 24 days ago [-]
“Zero-cost excluding the cost of insurance” is more precise here.

Bitcoin is zero-cost^ to store for any dollar amount. So are gold bars.

Insuring them against theft and loss is not zero-cost.

A shovel for burying gold in your yard is cheap (high capex, low opex), but if a sinkhole opens up and eats your gold, you’re probably out of luck. A hard drive for your Bitcoin is cheap (high capes, low opex), but if a lightning bolt burns your house down and you aren’t paying for offsite backups, you might be out of luck.

What degree of loss do you wish to insure against (accident, damage, theft, loss) — and what percentage of your money are you willing to spend on that?

^ “I bury coins on my land” seems zero-cost, but it just means that you’re paying property tax to insure against treasure hunters uncovering your hoard with a metal detector. External costs need to be accounted for.

mikeash 24 days ago [-]
Yes, costs are low, but so is the potential revenue from loans right now.

I never said anything about storing bills or coins.

JumpCrisscross 24 days ago [-]
> so is the potential revenue from loans right now

Broader interest rates are low, too. The revenue potential for banks is limited. Particularly European ones.

European banks have failed to compete for investment opportunities. Negative rates push that onus back onto savers.

Isinlor 24 days ago [-]
Banks are not storing money. Banks lend money. They store only some ridiculusly small amount (something like 5%?) and lend everythig else. So in case everyone wants to get they money back bank goes bankrupt, because they don't have that money. They would need to force on moment notice that money out of people they lend it to.
mikeash 24 days ago [-]
I’m well aware of how banks work. See my second to last sentence in which I describe how the price of storing money in a bank is set and why it can be negative.

Banks are definitely storing money. They’re just not storing physical currency. They mostly store money in various financial instruments such as loans, which provides them with some revenue. If that revenue is sufficiently high, they can make all their money this way and set a negative price for their money storage services. But there’s no natural law that says the revenue potential must be that high.

Dylan16807 24 days ago [-]
Well either something has gone wrong with the money-lending part, so it's not making enough money to pay interest... or there's a terrible lack in competition and banks are keeping all the profits.

It would be nice to blame the latter but there seems to be evidence toward the former.

Dylan16807 24 days ago [-]
Yeah. And an important consequence is that there is a natural cap on how low rates go, as banks put their vaults to use.

Also with inflation the real rate of sub-percent interest is already negative, so a below-zero rate is more psychological than anything. The difference between inflation and inflation+1 isn't transformative.

jonatron 24 days ago [-]
Physical space is expensive in many places. 64 bits of disk space is cheap everywhere.
shultays 24 days ago [-]
Why price of storing electronic money differs in between 1$ or 1000$ though? Only difference is a few bit flips in a bunch of databases.

Generally you already pay for a fee for your account/credit card.

mikeash 24 days ago [-]
Fraud risk is higher, which means the cost of insurance is higher.

I think this cost actually goes up more than just proportionally, too. Criminals will preferentially target higher value accounts, and they’ll make off with more when they do, so the risk increases more than linearly.

In any case, not all costs are fixed.

Gys 24 days ago [-]
What a world we live in: spending all you money and maximizing your debts is the new credo. Pay back? Will never happen.

I think 'the Germans' were never a big supporter of keeping the economy running at all costs. Like the way the ECB operated in the last few years.

Sooner or later there will be a crash. But somehow everyone thinks that will never ever happen.

EDIT: typo

benj111 24 days ago [-]
But we're 10 years into this low interest rates/ low inflation environment, which came about after the last crash.

I don't doubt a crash/recession will come eventually, it doesn't seem obvious to me that that will take it back to how it was before.

Ididntdothis 24 days ago [-]
This time it’s different :)
danmaz74 24 days ago [-]
It's the first time I hear about this new credo. Source?
pascalxus 23 days ago [-]
Negative rates doesn't change the reality that retirees need to save money. It just exacerbates the situation.

Negative interest rates could cause even more aggressive saving as people need to hold on to every last little penny they own. When you know that you're bank account will have less and less in it in the future, saving even more in the present day becomes even more important. If I was a retiree in germany right now, I'd cut as much of my spending to almost nothing and wait for this ridiculousness (negative interest rates) to stop.

IloveHN84 24 days ago [-]
Are actually Germans big savers? Living here for almost 10 years, I've NEVER found anyone saving money..the majority burn their salary month per month or burn their short 'savings' in more-than-they-could-afford vacations, like entire months in US or Australia.
radicalbyte 24 days ago [-]
I assume from your username that you're in your mid-30s. If that's so, then it's a largely generational thing.

The generations in Western Europe who are 45-50+ have considerable wealth and thus have been able to save. For the generations below it's not really possible, on a macro level, to save money. They need all their money for housing and what's left to try to keep up the pretense that they're as successful as their elders.

majewsky 23 days ago [-]
To counter your anecdata with some anecdata of my own, my savings rate right now is around 48%, as in: I spend 52% of my income. I'm currently implementing some lifestyle changes that are going to push the savings rate over 50%.

I'm not trying to deliberately pinch pennies. (Well, maybe a little.) I just happen to live in a way that avoids big spending. I don't have kids, so I don't need to spend money on that. Because I don't have kids, I don't need a large house. Therefore I live in an apartment in the city center, which (besides being convenient) means I don't need a car. And so on.

> the majority burn their salary month per month

I obviously don't know your sample, but out of the people that I know, those who live paycheck-to-paycheck usually do so because they work in low-wage jobs that simply don't pay enough to save any money. There surely are outliers that just don't know how money works, but the majority fail to save because of low-wage jobs.

flukus 23 days ago [-]
I'm pretty similar to you, although on the other side of the world in Australia with the ~50% going into paying off apartment rather than saving right now (the only debt I've ever taken on) and much of the 50% I do spend is government sin taxes. But living within your means, not taking on debt (especially for frivolous things) and saving was instilled by my English father, I never knew it was a German attitude, just basic financial responsibility.

That financial responsibility has saved me too, during an unemployed stint I was living off the extra money I'd put against my apartment. Had I not put the money away or gone into more debt to buy a bigger apartment I would have lost it entirely and been back to renting.

The idea of living on credit is insane to me.

majewsky 23 days ago [-]
I think that my strongest influence in that regard was my grandmother. She was born in 1937 and experienced WW2 firsthand, and her formative years were spent in East Germany when society was slowly reconstructing itself after the devastations of the war.
rad_gruchalski 23 days ago [-]
> my savings rate right now is around 48%

Self employed with Gewerbesteuer?

majewsky 23 days ago [-]
No, regular salaried employee. Those 48% are for income after tax.
rad_gruchalski 22 days ago [-]
Ah, the number sounded so familiar! Nice, keep it going!
jaclaz 24 days ago [-]
It depends how you make calculations, but yes, globally savings in Germany are "high" see here:

https://en.wikipedia.org/wiki/List_of_countries_by_gross_nat...

Germany: 27.4 % GDP

As a comparison:

USA 16.9 % GDP UK 15.8 % GDP

gumby 24 days ago [-]
Germans are huge penny pinchers (and why not?). When Walmart tried to take on Germany and offered free bags as they do in the US, German shoppers were convinced that Walmart’s prices must be higher to support such an extravagance.

It should be no surprise that Aldi and Lidl are German companies.

pjmlp 24 days ago [-]
Actually compared with southern Europe culture, everyone here (NRW) seems crazy about collecting all sorts of coupons and waiting until most stores offer like double discounts.

While back home most people would resort to black market or bazaar.

segmondy 24 days ago [-]
They might also be lying to you. ;-) I know savers that pretend that they have none. They cry with everyone about how they are broke, but are actually saving great. They don't want folks asking to borrow money, and they don't want to be the odd one out, so part of socializing is acting like everyone in public, but doing otherwise behind the scenes. I knew a few such folks in college, party animals on the outside, but quiet studious when everyone else is asleep.
macspoofing 24 days ago [-]
From the article: "The country’s savings rate was around 10% in 2017, almost twice the euro-area average ... On average, Germans held more than 40% of their financial assets in the form of bank deposits in 2018."

It's usually perilous to extrapolate anecdotes to the population.

24 days ago [-]
rocqua 23 days ago [-]
How long until banks start investing in vaults and just store millions of euros in hard cash to avoid negative interest rates?

Is their any regulatory reason against doing this (lets ignore the cost of securing such cash against physical risks).

AdrianB1 23 days ago [-]
Why do that? When most money are just bits in some computers why bother printing it? Go digital, you don't need paper, you save on physical storage.
rocqua 23 days ago [-]
Because the only way for a European bank to have money as 'bits in some computers' is with the ECB. And the ECB gives you back less money than you gave them (negative interest).

Banks can also place money with other banks, but that is lending to other banks. Besides, this only shifts the problem to another bank, who now has cash on hand that'll be stored in the ECB if they don't do something else with it.

Besides that, banks can invest cash. But in a low-yield market where all stable investments give very low, or even negative, interest, that becomes less attractive.

RobertoG 23 days ago [-]
Where are they going to get the cash? Cash is a very small percentage of all the existing money.

Modern money is basically tree of connected electronic ledger. In the top of the tree is the central bank, lower there are the saving banks, lower all the firms and households.

rocqua 23 days ago [-]
Afaik they can just order cash from the ECB. Hence my question whether there is regulation that would block this.
acd 23 days ago [-]
Gold and diamonds or owning forest.
rocqua 23 days ago [-]
Gold is too volatile to replace central bank deposits. Diamonds are worthless, despite what deBeers wants you to think, and forests are an investment.

If a bank has continual deposits at the ECB, and is paying money for the privilege, they might just decide to hold those euros in a vault. Once the vault becomes cheaper than the ECB, it should become a matter of time.

345218435 23 days ago [-]
they actually do store printed money in vaults. but that costs money as well.

now, remember when everybody was wondering why they axed the 500€ bill?

rocqua 23 days ago [-]
That was much more about money laundering than control over monetary policy. Both come down to the same thing though, move away from cash into instruments that are under the government auspices.
umadon 23 days ago [-]
I think this is the message the investor class is trying to send to ordinary people: "If we can't find a place to invest at a reasonable rate of return, we will find a way to loot your bank accounts."
tempsy 24 days ago [-]
For your average retail bank customer you’d be lucky to get anything on your savings as is for the last 10 years. I’m speaking from the US bank perspective, but I imagine it has been the same or worse in Germany.

The saving grace in the US is the somewhat recent trend of online banks offering around 2%. I don’t know if other developed countries in the Eurozone have similar offerings.

segmondy 24 days ago [-]
I have been mulling over this for quite a while. What to do if USA one day enters the negative rate territory. I'm not yet so sure.

Go all into stocks, bonds? Buy real estate, lock up in long term CDs before it hits zero? I have thought about foreign savings, but without FDIC insurance, it doesn't even seem to be worth the risk.

What are your plans? bitcoins? gold?

23 days ago [-]
tunesmith 23 days ago [-]
My allocation model requires a certain percentage in cash. I send most of that cash towards my mortgage instead. Even a low interest rate mortgage of 3-4% beats current cash savings rates of 1-2%.
faissaloo 23 days ago [-]
Pool your money with others, invest in real estate and share the profits.
lixtra 23 days ago [-]
So as a high earner, what would be a rational thing to do?

German savings rate is about 10%, let’s assume it’s 20% for a high earner.

If she decides to stop saving, she can reduce her workload to 80%. This is generally easier than it might look like[1].

Because of progressive taxes, she will still earn about 85% of her income, so she can still save 5%, but rather outside of Europe with its faltering economy. Especially when more high earners decide to work less and live more.

Luckily few people act rationally.

[1] https://www.globaladvocaten.com/blog/labour-law-parttime-wor...

AdrianB1 23 days ago [-]
The biggest problem I find is financing the activities in the extra free time. Most of my saving capability comes from the fact I have no time to spend what I get, if I take more vacation and lower pay I am becoming bankrupt very soon, very fast. Not working and just staying at home because I cannot afford to go anywhere is not a positive use of my time, I can work and be productive.
triceratops 23 days ago [-]
> The biggest problem I find is financing the activities in the extra free time

Find cheaper hobbies. Video games, library books, walks in parks (city, regional, national), exercising or playing cheap team sports like soccer or basketball, local volunteering, playing music - all have a very low cost per hour. Other hobbies such as woodworking/carpentry, painting or other arts and crafts, have higher costs but also the possibility of making some money.

If you have more vacation time, you can also choose cheaper but slower modes of transport or book tickets and accommodation at non-peak times. E.g. you're not forced to travel around long weekends or Christmas holidays to get a decent-sized break.

acd 23 days ago [-]
Quality of life also increases if you work 80% as you now have 20% more free time.
marcrosoft 24 days ago [-]
Simply go where savings are better (like US treasuries). The yields will self correct.
gumby 24 days ago [-]
The whole point of keeping all that cash in the bank is to avoid risk. Few people can deal with exchange rate risk.

In fact the EU fiscal crisis came from people basically doing what you said: putting their euros in Greek and Spanish banks that paid higher interest than German banks were. They assumed they’d have no exchange rate risk (they didn’t, except at a macro level) but also assumed they’d have the same bank regulation and guarantees they had at home. Oops!

tialaramex 24 days ago [-]
For individual savers they did have the same guarantees. The EU operates a scheme that requires members to offer some amount of guarantee denominated in Euros. Brits whose local banks failed were bailed out almost immediately by the British government, in full - far more than was legally required, but every individual with an EU account got their legal due eventually. In fact some of the nasty corner cases were non-EU banks that outsiders would think of as British but are legally not, based on Man (an island between the mainland and Ireland) for example. Those had "guarantees" that are worthless because they're underwritten by a tiny island that can't pay. If London or even Madrid owes you money they're ultimately good for it. But Douglas (the closest the Isle of Man has to a city) doesn't have any money, so their guarantee is worthless.
haasted 24 days ago [-]
That would introduce an exchange risk for the savers. Euro and USD can fluctuate quite a bit between them.
davidgay 24 days ago [-]
There's no complete escape from exchange rate risk. Keeping it in Euro puts you at risk for all direct and indirect exchanges with countries not using the Euro as currency.
TomGullen 23 days ago [-]
Can't you fairly easily hedge against exchange rate risk? Costs money though.
skybrian 24 days ago [-]
I'm wondering why some German banks don't do something like that? Currency risk, maybe?
gumby 24 days ago [-]
Banking regulation tightly manages the level of risk permitted to deposit-taking institutions.
gmueckl 24 days ago [-]
This article picks up a discussion that is largely smoke and mirrors: courts have already ruled negative rates for private savings illegal under the current law. So any new law to that effect would be a politixal show only.
apexalpha 23 days ago [-]
Same here in NL. An entire generation is growing up with the idea that saving doesn't earn you anything. Borrow borrow borrow is the credo.

Our entire housing market is fucked thanks to the ECB, pension funds are cutting pensions because bonds literally don't give you a return anymore. All assets worldwide have been pumped into record heights.

All this so governments in southern Europe don't drown in their own debt.

If only the countries joining the Euro had agreed to keep deficits and debts below a certain level....

qaq 24 days ago [-]
There are developing nation in need of investment and developed countries with negative interest rates hmmm ...
23 days ago [-]
crb002 23 days ago [-]
This is bad. Germany goes insolvent from malinvestment and we have a global deep recession on our hands. All their creditors will default because why not when there is a run on their banks?
sdinsn 23 days ago [-]
Isn't that the point? People are saving too much in the consumer economy, so negative rates encourage people/companies to spend or take on debt to stimulate the economy.
Zenst 24 days ago [-]
Over the decades we have seen in many countries a trend from saving and responsible spending towards, credit and living on a have no, pay tomorrow. This of course is not solely down to interests lowering. But the opening up and diversification along with growth in marketing of financial products and that in itself has been driven by the increased marketing and fashion conscious mentality of certain consumer products.

Is this a good thing or a bad thing. Hard to say, but certainly when your populus is more exposed on credit and less backed up with saving and secured assets, any blips in the market can and will explode into financial meltdown with more dominos in the stack to fall down in a greater knock-on effect.

What we also need to know is that in the past when things got bad, governments would raise interest rates, that would have a negative knock-on effect. So the approach switched towards lowering those interest rates, more competition in financial markets and with that growth, we saw the rise in marketing and credit accessibility and the market competed with itself for your not only the money you have today, but more so towards the money you will have tomorrow.

There is only so far you can cut interest rates, and had you asked anybody a few decades ago about the possibility of negative interest rates, they would of laughed so much that your ears would bleed. Today, such things are a reality.

What I wonder is that Quantitative Easing ( fancy way of devaluing your currency and in effect currency manipulation that is accepted...these days) is the elephant in the room. If we never had such things, would we of ever seen negative interest rates?

What's more, we are now even seeing Government bonds with negative interest rates. How far will they go and with all that.

Will we see the bartering system becoming more fashionable?

Finally, is saving now classed as an obsession! Really, are we seriously at that stage in in fiscal devolution that we all seem flummoxed in a few decades time when nobody bothered to have a pension plan? Finance is about balance, sure have fun, have credit, but equally, have some savings. This drive to now demonise savings, just seems irrisponsible.

But do remember, savings can be in many forms, assets can be a form of savings, gold, art, shares in companies even. Some have larger risk, some more stable and with any financial blip/crisis - the same old things do better like gold. Which is also an indicator of financial crisis's, and it has been trending up recently, in a way indicative of a financial crash. Now with that in mind, and finance does have some smart people who not only see that and more, I wonder - are negative interest rates the new trick to staive of a financial market heading for a crash? Maybe, but it gets down to enough people buying into it. Now with government bonds, that may well happen as many pension pots have rules that force them to have a certain percentage of such bonds. As they have always been classed as stable. Times change, rules change and if those pension pots change there safe long term bets into another approach, things could become very interesting indeed.

I do hope that this new trick in interest rates pans out, but it is hard not to be blown away by the complexities at play the further and deeper you look into it.

jakeogh 23 days ago [-]
"Obsession" ay? The old guard newspapers make more sense if one notes their framing often tends towards increasing dependence on central power structures.
Despegar 24 days ago [-]
There's nothing I enjoy more than the plight of the German Saver, who's obsession with "fiscal responsibility" has led to shitty austerity politics all across the EU (to be fair some other northern European countries like Netherlands also share the same view) and depressed growth for the poorer southern European countries.

Germany has benefited most of all from the unfinished project of the EU. Without becoming a federal union like the US, but having a common currency, Germany's exports have been artificially cheaper and thus more competitive for over 20 years.

This is the natural outcome from the obsession with running fiscal surpluses. Now Germany is on the brink of recession and they're finally starting to make some noises about fiscal spending, but the politics will likely limit it to modest deficits than anything transformational. Enjoy the negative rates.

yborg 24 days ago [-]
Virtually nothing in this rant about German economic policy has anything to do with the article except for the expression of delight at the idea of individual Germans losing money.

Germany has absorbed a large number of refugees at huge social cost precisely because they believed they could afford it. It seems disingenuous to ignore Germany's role in overall European stability and suggest that the good German burghers hoard money in order to rape the rest of the continent with cheap Volkswagens.

Nimitz14 23 days ago [-]
It is absolutely relevant! The reason for these negative rates is because of Germany's fiscal and the EU's (influenced by Germany) monetary policy. This is happening because the average German does not understand that having a budget balanced is sometimes not a good thing. As this has caused a lot of misery to southern countries, I think the parent's complaints are totally valid.
repolfx 23 days ago [-]
The "misery" of the southern countries is merely one of not being able to spend profligate amounts they haven't earned on sustaining unaffordable social policies.

To take the most extreme example, Greece, and some problems evident when they hit the buffers a few years ago.

Hairdressing and playing the trombone are/were considered dangerous professions by the government, because that allowed people to retire at 50. The pensions in question are vast and the state cannot afford it.

Public sector wages rose 50 percent between 1999 and 2007.

Tax evasion was rampant.

Salaries were very high, industry near none existent. Its books were fraudulent - the country was only able to join the euro at all because it misrepresented the state of the economy.

Attempts to fix these problems triggered riots and political chaos, much of which had explicitly anti German rhetoric. The Germans, you see, were being totally evil by not shovelling all their savings into this money furnace disguised as a developed country.

What about Spain?

Home of the famous airport to nowhere: https://psmag.com/economics/airport-to-nowhere-spains-costly...

And a giant housing bubble: https://en.wikipedia.org/wiki/Spanish_property_bubble

Has a large (>2% GDP) government deficit but raised the minimum wage by 22% last year.

Germany isn't inflicting misery on southern countries, they inflict it on themselves, and it should by all rights be dramatically worse - and if it weren't for Germans sending them such huge wealth tranfers it would be much worse.

samsonradu 23 days ago [-]
And yet, here we are with people buying Greece 10Y treasuries yielding 2%. Almost risk-free...
Despegar 24 days ago [-]
It's not a rant, it's a slightly tongue in cheek but also slightly serious, analysis of the political and economic reality of Germany and the EU.

Individual Germans would actually end up benefiting the most from a change in national religion about saving if their government opened up the purse strings.

number6 24 days ago [-]
Yeah why not buy Volkswagen shares then?
Ancalagon 24 days ago [-]
Jesus, this comment sounds so bitter. You’re complaining that the average person in Germany wants to save money and be fiscally responsible? Coming from my viewpoint (in the US), we could definitely use more of that.
Despegar 24 days ago [-]
A poor economics understanding has led people to believe that saving is somehow a virtue. Government budgets aren't the same as household budgets. The former is what I'm talking about. I don't care if any individual wants to save his/her money and consume nothing.
samsonradu 24 days ago [-]
What you're missing is that the EUR is not the reserve currency of the world and by running a massive deficit the markets will penalise you. (much higher yields, debt spiral, inflation etc.)
the_why_of_y 23 days ago [-]
The ECB can put an end to that if it wants to, as it did in July 2012 when Draghi uttered the magic words "whatever it takes".
luckylion 24 days ago [-]
> Government budgets aren't the same as household budgets. The former is what I'm talking about.

Why though? The article is specifically about private savings.

Despegar 24 days ago [-]
Even though certain economists and politicians know better, they ultimately reflect the political will of the people. So while at an individual level it doesn't matter that someone saves all their income and spends nothing, if that becomes the "culture" then it influences politics (which it has). Even the leftist parties in Germany don't drift far from this orthodoxy.

The great thing is that negative rates are self-correcting. While the story mentions the German finance ministry is considering making it impossible for banks from passing on the negative rates to depositors, so clearly they're going to try literally everything to keep the delusion going, eventually after putting their banks at risk and realizing the negative rates aren't going away they'll figure out they need to actually spend on a national level.

rsync 24 days ago [-]
"Even though certain economists and politicians know better, they ultimately reflect the political will of the people. So while at an individual level it doesn't matter that someone saves all their income and spends nothing, if that becomes the "culture" then it influences politics (which it has). Even the leftist parties in Germany don't drift far from this orthodoxy."

I cannot believe that we are this far through this discussion, with 80+ points and 120+ comments and not one person has mentioned the underlying cause that is deeper than the "german culture of savings".

None of them had any kids.

Their birthrate is well below replacement.[1] You can't produce an inflationary environment when households aren't being established and the major, overriding driver of consumption has been removed from the lives of so many Germans.

There is a reason they have all this money to save ...

[1] https://en.wikipedia.org/wiki/Demographics_of_Germany "The total fertility rate was rated at 1.57 in 2017." (vs. a replacement rate of 2.1 ...)

JetSpiegel 23 days ago [-]
Well, Merkel took in 1M of (young) refugees and took flak from the same people that are now complaining about recession.

As we speak there are millions of people wanting (hell, willing to pay hundreds of euros to smugglers) to be European consumers, younger than the Euro average (I don't have hard numbers on this, but I would be real money), but they are driven away and left for dead in dinghyes.

There's more than one way to grow the population.

Despegar 24 days ago [-]
While the demographic time bomb is a long-term issue for a lot of advanced economies like Japan (but also China), it's kind of a separate issue than what's happening in the EU today (and has been for the life of it).

Ideally there'd be enough political will to finish the EU project, but that's even more of a long shot than Germany seeing the light on fiscal spending. Then there'd be actual transfer payments between rich and poor EU members, but barring that, Germany and the other rich EU members need to spend.

All the single Germans should probably start taking more vacations in Greece and Spain and the rich ones should buy some Ferraris.

michaelt 23 days ago [-]
Rsync isn't talking about the demographic time bomb. What they mean is: Consumers having children directly causes higher consumer spending, because the child needs food, clothes, shoes, transport, education, medical care, furniture, holidays, sport, childcare and suchlike. And less directly they might want more bedrooms, a safer neighbourhood, a safer car, a stay-at-home parent, and so on.

USDA figures [1] put the costs of having a child at 12% to 24% of household income (for richer and poorer families respectively) while some UK estimates [2] have put it as high as 38%

Of course a childless couple can build savings like crazy, if they've got as much income as their peers who are parents, but their outgoings are that much lower!

[1] https://en.wikipedia.org/wiki/Cost_of_raising_a_child#Dual-P... [2] https://www.lv.com/about-us/press/cost-of-a-child-2016

Despegar 23 days ago [-]
Sure but I guess my point is that how Germany ends up allocating their fiscal spending doesn't really matter, as long as on balance they run deficits for a long period of time.

Germany could give every German with a child a stipend to subsidize families (and if they're already doing that, increase the amount they get per child). I don't actually think that would make more Germans have children, but the ones that have families would be able to spend more.

majewsky 23 days ago [-]
The administration has been trying to get people to have more children for a long time. Around the early 2000s, our birth rate was actually 1.4 children per mother, so the current 1.6-ish is already a significant improvement. This increase is usually attributed to three things:

1. "Elterngeld" (parental leave money): After a child is born, parents can take up to 14 months off and the state pays a portion of their last salary (70% afaik). Employers are required by law to accommodate parents who wish to take parental leave.

2. A few years ago, a "right to child daycare" is introduced. If you're working and want to give your child into daycare, the municipality has to offer you a place in their daycare facilities or, if they don't have enough, compensate you for lost income.

(This isn't to say that you don't have to pay for that daycare, but "free child daycare" is now a popular slogan among many political parties and some states have already implemented it afaik.)

3. Not a policy, but there is ongoing pressure from society on employers to improve the work-life balance of parents. Things like making it easier to both men and women to work part-time after a child is born etc. It's still a problem that women are low-key discriminated against, as in "We cannot promote her into an important role. What if she has a child?", and the gender pay gap is still significant, and fathers doing parental work are still looked at funny sometimes, but it's all getting better. (Frustratingly slowly.)

kamyarg 23 days ago [-]
on a slightly related note; daycare thing does not work though, every couple I know of in Berlin has been looking for kita like crazy even before the baby is born.
luckylion 24 days ago [-]
> they ultimately reflect the political will of the people

That requires some proof. The German public loves to save, the German state doesn't. The German public hates bailouts with tax money, the German state loves them. Germany isn't a good example for "individual interests form policy".

> Even the leftist parties in Germany don't drift far from this orthodoxy.

Why would they, leftist parties love generous state spending and high debt. The somewhat surprising part in Germany is that the conservatives love spending and hate saving, too.

DiogenesKynikos 24 days ago [-]
Are you aware of the schwarze Null? Germany has had a balanced budget for many years. It's almost a political religion in Germany.
luckylion 24 days ago [-]
I am aware of it. I'm also aware of the fact that it's a lot of bookkeeping, i.e. not counting bank bailout costs, pension guarantees etc, the implicit public debt looks very differently. And keep in mind that the last few years with little to no new debt (on the federal level) were during record tax income and strong growth that is now turning into a recession. With explicit public debt hovering around 65% of GDP, Germany is pretty average in both the world and Europe.
DiogenesKynikos 24 days ago [-]
In this environment, talking about the German government as if it were spending money carelessly seems to me to not reflect the reality.

People are willing to pay money for the privilege of lending money to the German government. Yet the German government, including the supposedly left-wing SPD, is still holding to the schwarze Null ("black zero," meaning a balanced budget). A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus. Instead, they're dogmatically holding to the zero-deficit policy.

luckylion 24 days ago [-]
Look at Germany's spending, and then predict how it will be financed a year or two into a recession, especially with falling exports. Since it's hard to cut the expenses, you either increase taxes, or you increase debt. Taxes are already pretty high and unpopular. The "balanced" budget has been a thing since 2012, but hasn't in the past 50 years before that. It's not like it's virtually unknown for Germany to take on debt.

As for the SPD being left-wing: traditional political categories quickly break down when applied to Germany, the continuum is "far left, nothing, nothing, the super majority in the center, nothing, nothing, far right". There's very little actual difference between the "conservative" CDU, "social democrat" SPD, the socially progressive Green party and the "free markets will take care of that, whatever it is" FDP when it comes down to policies, which is also why Germany's policies don't change a lot when the government changes (the conservatives removed the military draft, the social democrats cut back the social system, and the pacifist Greens & social democrats went to war in Kosovo).

> A rational policy in this environment would be to take advantage of negative interest rates to finance stimulus.

In a time of growth, record tax income, strong-ish inflation (thank god for cellphones and smart tvs or it would shoot up like crazy)?

majewsky 23 days ago [-]
> Taxes are already pretty high and unpopular.

Taxes on income, yes. Taxes on spending, yes. Taxes on capital gains, not really. And taxes on property are virtually nonexistent. And where's that financial transaction tax people were talking about 10 years ago?

luckylion 23 days ago [-]
> Taxes on capital gains, not really.

The share of tax revenue they provide isn't that large, it's about as much as car tax. Even if they doubled it, it wouldn't really matter. Property taxes do exist, but they aren't a federal issue, they (together with a tax on company earnings) fund the local communities, the federal level is funded by income tax and sales tax, mostly.

> And where's that financial transaction tax people were talking about 10 years ago?

It was mostly activists talking about it in a "if we all got together and did this world wide, it would be so nice" kind of way. I don't see that happening any time soon.

DiogenesKynikos 23 days ago [-]
> In a time of growth, record tax income, strong-ish inflation (thank god for cellphones and smart tvs or it would shoot up like crazy)?

Germany is on the verge of recession. Growth was negative last quarter. Inflation is around 1%, which is rather low.

michaelt 23 days ago [-]
So is the rational policy you recommend to go into debt for stimulus, and pay off the debts in subsequent years, through lower government spending? Or would it be to go into debt permanently, passing the interest payments on to future generations?
majewsky 23 days ago [-]
Debt is usually paid off by inflation. As in: If you have a non-zero inflation, your GDP grows accordingly (all other things being equal), so you can take on new debt and still have your debt-as-percentage-of-GDP stay the same.
mdemare 23 days ago [-]
The interest payments here would be from the bond holders to the German state.
michaelt 23 days ago [-]
Right, but if you issue a 10-year €x bond and spend the €x, in 10 years you have to repay the bondholders, which means you either have to have saved up €x over the intervening years, or you have to take out another loan of €x at the prevailing interest rate.

Unless the state is expecting bond rates to remain negative indefinitely.

tonyedgecombe 24 days ago [-]
Yet the PIGSS have been struggling under a mountain of debt.

Government budgets might not be the same as household budgets but you can’t borrow endlessly.

RobertoG 23 days ago [-]
Government budgets of sovereign nations that own their own currency are not the same that households and can borrow endlessly, in fact they don't need to borrow at all.

The countries in the Eurozone don't own the Euro: for all effects is a foreign currency. Their finances work like a household.

ebalit 23 days ago [-]
PIGSS is the european version of "fly-over states", a derogatory term that should be avoided.

States or nations that are not doing has well economically deserve respect and help or we should stop calling ourselves a Union.

barry-cotter 23 days ago [-]
This is ridiculous. Flyover states is about contempt for people and a culture, PIIGS is about poor economic and financial decision making. Germans, Danes and Czechs don’t think the Irish, Italians and Spanish are racists who might assault a trans person or an Indian if they see them whereas some Californians do think that way about Texas or Wyoming.
mdemare 23 days ago [-]
Because Germans prefer saving money to buying exports of Italy or Spain or Greece, or go on holiday there.
samsonradu 23 days ago [-]
Ironically, for the time being, the British do all of the above.
Dylan16807 24 days ago [-]
Austerity politics aren't actually fiscally responsible, as far as I can tell. There's good reason to be bitter.
wongarsu 24 days ago [-]
I think a view of "while things are running let's not spend more than our income, that way we can make debt in a crisis" is fiscally responsible, and in essence what Germany does.

It's much more difficult when you then ask Germany what to do about a country like Greece, where years of spending and a recession left the government with more debt than it could bear. "just save money" probably wasn't the best response, but it's not like "just take on massive debt to fix your economy" was an option either (it would have been an option if Greece had taken on less debt in better years).

24 days ago [-]
mlamat 24 days ago [-]
If someone is saving, someone must be spending. It's the basic law.

The "stupid" and "lazy" southern countries (PIIGS) will have to spend again (buy German cars) with German credit (German savings) to keep the German economy going.

kevin_thibedeau 24 days ago [-]
Southern Europe couldn't possibly be suffering from high corruption and a massive untaxed shadow economy.
southerndrift 23 days ago [-]
Take a look at this list of wealth per adult [1]

Germany is at no 29. It's not like the median German has profited. If anybody has profited then it could be the average German, i.e. the top 1% that has made some money.

That said, why do you think government spending will lead to prosperity? They can get some people off the streets, but sooner or later, resources will be misaligned to the point that the economy is not competitive anymore. Germany had a state-run economy in one part, guess which one almost vanished.

[1]: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...

Despegar 23 days ago [-]
See my other comment in this thread about German capital benefiting from this arrangement more than German labor.

I'm not saying Germany has to nationalize industries, they just need to run large fiscal deficits over a sustained period of time. One thing they could do right away that doesn't cause "resources to be misaligned", is to cut taxes and increase the benefits for the poorest German workers.

chewz 24 days ago [-]
I enjoy making fun of Germans just as the next European but beware what you wish for. Other European economies suck up to German economy so at the end of the day what is good for Germany is also good for the rest of us.

Germany is at the brink of recession due to prolonged weakness in Chinese economy and inability of German automotive industry transitioning into XXI century. Both engines of growth failed simultaneously and lets hope German economy can avoid crash landing. Otherwise it will drag entire Europe down into abyss.

RobertoG 23 days ago [-]
>>"Other European economies suck up to German economy so at the end of the day what is good for Germany is also good for the rest of us."

If that was true we should be all in excellent condition because the Germany commercial balance surplus of the last years have been ridiculously high.

Dylan16807 24 days ago [-]
First paragraph I can agree with pretty well.

But you don't need to share a currency to have artificially cheap exports, do you? Selling things at a discount is usually very easy to accomplish.

Despegar 24 days ago [-]
If Germany switched back to the Deutsche Mark tomorrow, their currency would instantly shoot up in value relative to the rest of the EU. That'd make their exports less competitive and make the exports of Greece, Portugal, Spain and Italy more competitive.

It's not just the currency though. The "German model" has been to keep wages depressed. That's also how their exports are "cheaper". Make no mistake the result has been to enrich German capital at the expense of labor (even German labor).

https://www.economist.com/leaders/2017/07/08/why-germanys-cu...

https://theconversation.com/questioning-the-claim-of-germany...

Barrin92 24 days ago [-]
>Make no mistake the result has been to enrich German capital at the expense of labor (even German labor).

it's simply a cultural preference. Germans have accepted lower wages for general full-employment and job security even in times of recession. It is exceedingly rare for qualified German workers to ever have to switch jobs during economic downturns because the somewhat lower levels of negotiated pay give companies breathing room to act socially equitable.

the hire and fire and short-term consumption mentality that dominates american labour contracts has never been perceived as desirable in Germany.

freeflight 23 days ago [-]
> Germans have accepted lower wages for general full-employment and job security even in times of recession.

They haven't really, they ended up giving up more and more job-security, with stagnating wages, to keep the sham of "full employment" going. Something that's been especially affecting West Germany since reunification, where previously wages were extremely high.

But contrary to popular belief, even in Germany the labor markets were quite "liberalized" over these last couple of decades [0].

Nowadays plenty of low/middle-class Germans having to work two part-time jobs and still receiving government assistance, or unemployed people getting "loaned out" by the Arbeitsagentur to private companies as cheap 1€ labor force [1].

With programs like those, it's not very difficult to make your employment statistics look amazing: On paper barely anybody is actually unemployed because in reality most of them are "hidden away" in pointless training programs or straight up subsidizing the labor costs of private companies.

[0] https://www.diw.de/documents/publikationen/73/diw_01.c.56768...

[1] https://en.wikipedia.org/wiki/Working_opportunities_with_add...

Barrin92 23 days ago [-]
yes, the hartz reforms have liberalised the very low-end of the labour market, but it seems like a mis-characterisation to declare the German model dead as a result. If you pick up a vocational training path in Germany and you get hired by a large company, you're still in a very, very stable employment relationship.

Germany's middle-class relatively speaking to many other countries is still fairly intact which is reflected in the low priority that class issues or employment has in German politics. Not many people in Germany fall into the 1$ job market, and it should be pointed out that (IIRC) as time went on the majority of part-time jobs has converted into full-time employment.

freeflight 23 days ago [-]
> Germany's middle-class relatively speaking to many other countries is still fairly intact which is reflected in the low priority that class issues or employment has in German politics.

Employment is pretty much one of the main topics of German politics. High employment needs to be presented even if those employed can't even live from that income. While the low-income issue has been ignored with "Be glad you got at least some work!". As German culture is very quick and harsh to shame people for not working a job. Which has been one of the factors the AfD played on:

Many low and mid-income Germans feel like they've been missing out, the German right has pitted that feeling against the arriving refugees in a "We don't have money for German pensioners [0], but we do for Syrian economic migrants?!" way.

As such I never declared the German model as dead, I was merely pointing out that it ain't as perfect as many people from the outside often perceive it to be. There's a whole lot of shining up the numbers going on, not just in terms of "who counts as unemployed", but even with "who counts as poor/low income". [1]

[0] https://www.zeit.de/wirtschaft/2019-02/altersarmut-rente-arm...

[1] https://www.deutschlandfunkkultur.de/der-geschoente-armutsbe...

Dylan16807 24 days ago [-]
> If Germany switched back to the Deutsche Mark tomorrow, their currency would instantly shoot up in value relative to the rest of the EU.

I don't see how that stops them from selling things at the same price as ever, denominated in a neutral currency.

> It's not just the currency though. The "German model" has been to keep wages depressed. That's also how their exports are "cheaper".

Paying your workers less does make things cheaper, so I'm not sure why you used scare quotes.

southerndrift 23 days ago [-]
I don't disagree, but I think that switching back to Deutsche Mark wouldn't be such a big problem since it would essentially be the Swiss situation. The exchange rates don't have to be high because Germany could print money or go on a buying spree until a target rate is reached.
segmondy 24 days ago [-]
if German wages were depressed and labor was so cheapened, how come they are still able to save more than their counterparts?
adventured 23 days ago [-]
They consume less. Their economy is heavily tilted to being an export power rather than a consumer economy. Household consumption is around 52% of their GDP. For the US it's closer to 67-68%.

Germany's personal savings rate is about 10.x%. The US - infamously tilted toward consumer spending - is actually not far behind at 8.x% (up from a low of 2.2% in 2005).

gingabriska 23 days ago [-]
>Household consumption is around 52% of their GDP. For the US it's closer to 67-68%.

Wonder how much of that is healthcare and education which is wayyy expensive in US.

gumby 24 days ago [-]
Californians can buy cheap rocket parts from Alabama without worrying about exchange rate risk just as Germans can buy cheap olive oil from Greece.

However fiscal transfers between the two states (I.e. taxes -> welfare payments, labor standards etc) mean that the cheaper goods are more likely to be up to standards and that Alabamans can buy California almonds and Roku boxes. (This is one way cutting welfare hurts capitalism). The EU has no such fiscal mechanism thus the process drifts out of a crisis.

Germany’s Länderausgleich is actually more extensive than the US’s, which has made its economy so strong for so long, yet the country is loath to extend its benefits (much of which would flow back to Germany!) to the rest of the EU.

samsonradu 24 days ago [-]
It has been proposed indeed, the Surplus Recycling Mechanism: https://www.yanisvaroufakis.eu/2011/02/09/what-is-a-surplus-...
Despegar 24 days ago [-]
I'm amused that we're getting downvoted when our comments should be at the top of this thread.
gumby 24 days ago [-]
I know, it’s not like I wrote anything unorthodox. Most criticism of the Euro from both right and left come from claims that it is not an optimal currency area primarily due to lack of fiscal integration.

I assume the downvoting comes from economics being a popular topic on which people like to opine whether or not they understand it (insert joke here about economists being subject to this rule as well)

michaelt 23 days ago [-]
Seems to me it'd be tough to sell Germans on Länderausgleich to Greece without much greater European integration.

After all, the US is a single country, with common news reporting, a common language, common political systems and parties, common tax enforcement and so on.

I mean, if an Alabamian thinks that Californians are all surf bums he can find employment statistics for both states gathered under identical standards, read press coverage in his language, and even move there if he feels like it, as he already knows the language.

It seems unlikely the EU will ever achieve that level of integration.

gumby 23 days ago [-]
Remember that over the past couple of centuries the US went through several explicit processes of integration specifically to overcome the barriers (including linguistic!) you correctly describe for the EU.

> It seems unlikely the EU will ever achieve that level of integration.

I disagree but it's unlikely to happen in my lifetime.

JetSpiegel 23 days ago [-]
> Seems to me it'd be tough to sell Germans on Länderausgleich to Greece without much greater European integration.

Hopefully this threat of recession will light a fire under the correct asses.

benj111 24 days ago [-]
"labor standards"

These exist EU wide you know.

Additionally money is allocated to poorer regions to develop industries, not welfare payments but still wealth redistribution.

gumby 24 days ago [-]
Indeed that’s why I explicitly said “The EU has no such fiscal mechanism...”

Edit: oh I see that poor editing on my part implied that labour standards were part of fiscal transfers, a nonsensical connection. My apologies)

As a former EU resident of two different countries I have benefitted from EU labor laws.

Regional development funds are practically below the noise floor as a part of the Zone’s GDP (and are in fact EU-wide, not just eurozone-wide). Most of the money is squandered (not necessarily through corruption, just lack of macro efficacy) as it’s such a small amount it gets little attention.

adrianN 24 days ago [-]
I we wanted to we could always spend almost unlimited amounts of money on reducing our GHG emissions. Now would be a good time.
Despegar 24 days ago [-]
Yes that would be a great use! They should also repave the Autobahn, build some gas pipelines so they aren't dependent on a geopolitical enemy, invest in a broken military, and cut taxes and increase benefits for people with a high marginal propensity to consume, that is, the poorest people who work for a wage.
adrianN 24 days ago [-]
I don't think gas pipelines are good investments. Any investment into fossil fuel infrastructure creates vested interests in the continued use. Similarly, I'd prefer investments in rail infrastructure over investments in the Autobahn.
imtringued 23 days ago [-]
Power to gas will be necessary for a future with 100% renewables. The existing gas infrastructure will then come in handy but coal plants and their mines probably can't be saved.
adrianN 23 days ago [-]
The existing gas infrastructure is sufficient to distribute gas within the country. The pipelines that are currently being discussed are for transporting gas from where it's produced to Germany. Or maybe there are pipeline projects that I haven't heard about.
23 days ago [-]
majewsky 23 days ago [-]
> They should also repave the Autobahn

People are already complaining about too many construction sites on the Autobahn. The main issue there is that we don't have enough workforce in the construction industry, mostly as a result of demographics and everyone wanting to go to university instead of learning a trade.

24 days ago [-]
new2628 24 days ago [-]
Have you been reading Krugman recently?
ur-whale 24 days ago [-]
Krugman, leave that body, I command thee!
mnm1 23 days ago [-]
Why would you enjoy the suffering of others? That is truly monstrous regardless of the form that suffering manifests in. It's frankly disgusting.
AdrianB1 23 days ago [-]
So borrowing and overspending at the cost of the future generations is the way to go? Then go Greece style, default every decade until nobody will ever lend you any money?
RobertoG 23 days ago [-]
It's not overspending, it's investing in the future generations. The quantity of Euro it's just a number in some computer.

Infrastructure, knowledge, education, and a better life in general is a real thing.

Inthenameofmine 23 days ago [-]
TBH, that works as long as your demographic pyramid is healthy. For most of Europe that is not the case. On top of that, return on additional debt has been stagnant since the 90s in OECD countries. There's simply almost no place to put your money in the developed nations. IMO this is the first time since the beginning of the industrial revolution where allocative efficiency has a higher return than investment efficiency.
benj111 24 days ago [-]
What the hell?

Who do you think managed to maintain the Euro as a going concern?

And don't forget Germany suffered quite a lot after the introduction of the Euro, and it didn't really have anyone else to bail it out.

Edit: In the first paragraph in referring to the aftermath of the financial crisis, when PIIGS was an acronym, and France wasn't looking too great either.

And in the second paragraph in referring to immediately after the introduction of the Euro. The Euro appreciated, German exports lost competitiveness whilst it lost the power to devalue its currency. It managed to increase its productivity per worker though and has reaped the benefits since. It too has seen the downsides of not having control of its own currency.

dboreham 24 days ago [-]
Especially bad for the Restaurant at The End of the Universe.
mlamat 24 days ago [-]
The negative rates are limited by the cost of bank vaults, where people can stuff cash.

The ECB stopped production of the 500 Euro note in April to make the stuffing of cash more costly.

persia_hodl 24 days ago [-]
Bitcoin fixes this.
AdrianB1 23 days ago [-]
It does not. It just provides a high risk playground.
Izkata 23 days ago [-]
In that regard, it works quite well. For example, until trying it with bitcoin and litecoin, I only kinda understood dollar-cost averaging. Afterwards, with its rapid feedback, it makes a lot more sense now.
faissaloo 23 days ago [-]
Not so much if you're using it as an actual currency
Havoc 24 days ago [-]
Unhappy Germans is not, historically speaking, a recipe for world happiness.
dang 23 days ago [-]
Maybe not, but please don't post unsubstantive comments here.
b212 24 days ago [-]
Confirming as a Pole.
345218435 23 days ago [-]
„germany in uproar“ made my day, thanks. as a german i can report that nobody is roaring. the herd is eating their cake calmly.
apta 24 days ago [-]
Once again, the destructive effects of usury/interest on the economy are manifesting in front of us.