Reader Mel emailed the following comment:
For some reason I was blocked from commenting on today’s blog. Here’s what I wanted to say, and you can feel free to post it:
As always, I’m grateful for your posts, including the ones that re- post something interesting from elsewhere, but in this case I was especially interested in your comments. I know you’ve been an American long since, but you do have a former insider’s view of Europe and especially Germany, and I hope you’ll write more about the mood and thoughts of Europeans, especially the ever-pivotal Germans, as this crisis unfolds for better or for worse. You can surely do this more authoritatively than most Americans.
I’d be particularly interested in your evolving views of the Euro- style welfare state–whether you were always a skeptic, whether you think it can survive in some form, how different we are if we have such a heavy burden of future obligations anyway, etc., etc.
First, as you may have noticed, a few weeks ago I disabled the anonymous posting function due to abuse and ever increasing spam attempts. While you can still post, you need to identify yourself.
A quick check of other blogs dealing with economic/investment issues confirmed that most do not offer anonymous posting—very likely for the same reasons. If you wish to remain anonymous, you can always email me with any questions, and I’ll address those in future posts.
Second, in regards to my view of Europe, or Germany in particular, I must admit that I have been gone for a long time (35 years) and at times feel like that I am on the outside looking in. Nevertheless, every time I visit, I seem to become reacquainted with their way of life fairly quickly.
The most obvious difference I notice every time is the much more conservative behavior of the consumer. Despite the fact that purse strings have been loosened quite a bit, the overriding desire and priority number one is still to save money first.
This was confirmed during my recent visit when it was announced on the business channel that the average German nowadays saves 15% of his net income every month. That’s truly an impressive number and certainly does not contribute to any reckless spending sprees such as are/were common here in the U.S.
Additionally, some frugality or new thinking seems to have even struck one of the most unlikely places, the German government. During the recent G-20 meeting, I read on Bloomberg that Chancellor Merkel uttered these words “we can only spend what we receive in income.” Certainly that is not an attitude that Treasury Secretary Geithner wanted to hear, since he seems to be operating more in line with ‘spend now and worry about pay backs later.’
My point is that Germany, along with most other European countries, is forced to initiate austerity programs to varying degrees, which will not bode well from a U.S. or Asian export point of view, since it will most certainly limit/reduce future consumption and not increase them. Subsequently, global economic output will suffer down the line, which eventually will affect stock markets around the world.
Future debt obligations are a problem in Europe just as they here and in most industrialized nations. For a comical view of how Europe got into this mess, hat tip goes to reader Robert, who sent in the video below. Enjoy!
[youtube=http://www.youtube.com/watch?v=brb8u0WV9ZA]
