tommyguns2
Senior Moderators
Staff Member
- Dec 25, 2010
- 6,337
- 5,061
An interesting article about Germany in the NYT today. It's correct in IDing that a problem exists, but laughable in discussing solutions. As predictable in the NYT, the problem is not enough government action and spending... LOL
1ft.io
Here are a couple of example paragraphs that'll make someone with even a modest understanding of macroeconomics chuckle.
NYT: "The restrictions on borrowing are preventing the government from making badly needed investments in public infrastructure, from schools and public administration to railways and energy networks."
My comment: what a joke. Germany didn't contract last year by 0.3% because there was insufficient gov't "investment" in public schools, public administration (gov't employees) and energy networks. That's laughable. Economic growth stalled because it's too expensive to run a factory in Germany with energy prices having increased 20-40% in the past 18 months. The cost of goods has to rise when the cost to produce increases dramatically, and the demand for more expensive goods (at no change in quality) goes down. That's basic. Why are energy prices going through the roof? Well, Germany got in bed with Russia on a natural gas supply agreement. Their previous German PM was lobbying for the Russians, and I'm sure has been well compensated. Putin then decided that since he had Germany by the balls, he'd threaten their gas supply unless they shut up on Ukraine. I recall Trump telling Germany not to be stupid, but they laughed at him, because he's so unsophisticated. Trump is classless, but he was absolutely correct on Russia energy. Also, Germany proceeded to shut down all their nuclear power plants because Fukushima. You read that correct, a tsunami in Japan caused the greenies in Germany to kill their nuclear power program. When was the last time in the last 50,000 years that Germany has experienced a tsunami? LOL Don't worry, they killed a clean, cheap source of non-intermittent power with wind and solar that are expensive and intermittent. What could possible go wrong.
NYT: "He pointed to the country’s growing green tech sector as a bright spot in the economy, those industries that develop technology for environmental protection, renewable energies and the efficient use of resources. Semiconductor makers are another source of investment. Intel and Taiwan Semiconductor Manufacturing Company plan to build factories in eastern Germany, helped by subsidies worth €20 billion, which have survived government budget cuts."
My comment: Gov't doesn't "invest" in anything. It subsidizes things. Green energy is all well and good. Let it develop with venture capital investment, but it has to stand on its own. Otherwise, when gov'ts pull back on the subsidies the entire sector collapses because the market is artificial. And why wasn't Intel and TSMC building $20B fabs in Germany before the gov't shelled out free money for them? Because the regulatory framework didn't make it a good idea. I'm intimately familiar with both companies, and I know TSMC is not averse to building fabs elsewhere in the world that isn't a stone's throw from China that wants to invade them. But a skilled, hard-working labor force is crucial, and significant environmental compliance issues exist, and Germany is not easy to deal with. So now fabs will be built in Dresden that would not otherwise have been built. that creates the possibility of supply gluts in the future and the semiconductor industry is well familiar with these boom and bust cycles. When gov'ts create incentives to build that were not otherwise there, you get dislocation in the supply/demand cycles. The DRAM industry is a graveyard of such cycles (anyone remember Qimonda, FASL, and other memory manufacturers?)
Germany needs to talk to German industry and find out what is driving their de-industrialization, and then make the structural changes that create a business environment where private industry will make the investments that make sense. It's really not that complicated. But the solution is the gov't getting out of the way.
Germany, Once a Powerhouse, Is at an Economic ‘Standstill’
The economy shrank last year and is not predicted to grow much in 2024. Farmers are angry, industrial output is falling and the government is bickering.
Here are a couple of example paragraphs that'll make someone with even a modest understanding of macroeconomics chuckle.
NYT: "The restrictions on borrowing are preventing the government from making badly needed investments in public infrastructure, from schools and public administration to railways and energy networks."
My comment: what a joke. Germany didn't contract last year by 0.3% because there was insufficient gov't "investment" in public schools, public administration (gov't employees) and energy networks. That's laughable. Economic growth stalled because it's too expensive to run a factory in Germany with energy prices having increased 20-40% in the past 18 months. The cost of goods has to rise when the cost to produce increases dramatically, and the demand for more expensive goods (at no change in quality) goes down. That's basic. Why are energy prices going through the roof? Well, Germany got in bed with Russia on a natural gas supply agreement. Their previous German PM was lobbying for the Russians, and I'm sure has been well compensated. Putin then decided that since he had Germany by the balls, he'd threaten their gas supply unless they shut up on Ukraine. I recall Trump telling Germany not to be stupid, but they laughed at him, because he's so unsophisticated. Trump is classless, but he was absolutely correct on Russia energy. Also, Germany proceeded to shut down all their nuclear power plants because Fukushima. You read that correct, a tsunami in Japan caused the greenies in Germany to kill their nuclear power program. When was the last time in the last 50,000 years that Germany has experienced a tsunami? LOL Don't worry, they killed a clean, cheap source of non-intermittent power with wind and solar that are expensive and intermittent. What could possible go wrong.
NYT: "He pointed to the country’s growing green tech sector as a bright spot in the economy, those industries that develop technology for environmental protection, renewable energies and the efficient use of resources. Semiconductor makers are another source of investment. Intel and Taiwan Semiconductor Manufacturing Company plan to build factories in eastern Germany, helped by subsidies worth €20 billion, which have survived government budget cuts."
My comment: Gov't doesn't "invest" in anything. It subsidizes things. Green energy is all well and good. Let it develop with venture capital investment, but it has to stand on its own. Otherwise, when gov'ts pull back on the subsidies the entire sector collapses because the market is artificial. And why wasn't Intel and TSMC building $20B fabs in Germany before the gov't shelled out free money for them? Because the regulatory framework didn't make it a good idea. I'm intimately familiar with both companies, and I know TSMC is not averse to building fabs elsewhere in the world that isn't a stone's throw from China that wants to invade them. But a skilled, hard-working labor force is crucial, and significant environmental compliance issues exist, and Germany is not easy to deal with. So now fabs will be built in Dresden that would not otherwise have been built. that creates the possibility of supply gluts in the future and the semiconductor industry is well familiar with these boom and bust cycles. When gov'ts create incentives to build that were not otherwise there, you get dislocation in the supply/demand cycles. The DRAM industry is a graveyard of such cycles (anyone remember Qimonda, FASL, and other memory manufacturers?)
Germany needs to talk to German industry and find out what is driving their de-industrialization, and then make the structural changes that create a business environment where private industry will make the investments that make sense. It's really not that complicated. But the solution is the gov't getting out of the way.
