Sunday, November 3, 2013

The Nature of Economics (or the two-cent economics explanation)

This week, an amusing piece was put out by the US Treasury....aiming at Germany and it's economy.  It's a short piece....which basically says....Germany is exporting more than it's importing, and this is all negative for Europe and the rest of the world.  There's a few pie charts, graphs, and detailed lines to lay out some objective economic analysis.

The general problem with economics....this being spoken by a guy from that you could have a thousand economists meeting in Miami and asked to explain some problem, and there would be a thousand different answers to the problem.

There are economists who would tell you that Wal-Mart's general business strategy plan....was all screwed up and has threatened the stability of America.  Some economists would say that Wal-Mart's strategy is the most brilliant plan in fifty years, and helping to stabilize America.

It's a sad fact.....economists aren't much in terms of facts, reliability, or stability.  One day, their ideas could win them a Nobel Prize for Economics, and the next month....they'd be noted as idiots.   One twenty-year old kid could devise a simple math and business some stupid platform for people to interact with friends in terms of the internet.....think it's worth a ton of money, and the plain truth is that it's a fifty-cent idea at best, yet economists would marvel at the suggestion of profits possibly coming off this concept.

So we come back to Germany.

Ten simple facts....from a guy who has lived off and on in Germany.

First, going to one-united currency in Europe was a threat to the stability of the Germans and French.  The deck of cards was being loaded with losers, and both knew it back in 2000.  Yet, they continued on with the losers in the deck.  The general reason today why the Euro is still stable?  Germany, period.  So they've gotten some unintended respect.  Yeah, they are the fifty-thousand pound anchor.  Other nations disliking that?  Pretend to have a better currency and leave.  I just don't see anyone at the door to exit.

Second, wages are stagnant in Germany.  They've been stagnant for several years.  It doesn't matter if you work for private industry or the government.  Ahead of their neighbors?  Yeah.  Without the wage increases, they are now tapping on the door and admitting they can buy things for the same price....yet with German quality.  Yeah, you can make really cheap tennis shoes in Vietnam.....with cheap labor.  Well....the Germans figured the scheme to build products that people want.....with reasonable labor, unlike their neighbors.

Third, German banks have expectations.  With the 2008 US stumble and banks failing all over the place.....the Germans only had a couple of banks that dissolved or went into chaos.  They didn't create some Congressional committee to whip up some Frank-Dodd masterpieces.  They simply emerged, carried on, and avoided the general stumbles that American banks suffered.

Fourth, for some stupid reason.....German quality matters.  If you had a choice of buying a German septic tank for a higher than normal price, but knew that it'd be around for thirty just might buy a German-made septic tank.  A fault of the Germans?  No.  I noted this morning that some idiot wanted to highlight that France and Italy manufacture upscale luxury brand items.  Regular people don't buy luxury items.  When a regular guy shops.....if he's intending to buy something of quality that won't be screwed up on day six of operation.....he buys German.  The water faucet made in Germany?  It probably won't fail for twenty-plus years.  The water faucet made in Bakersfield?  Well...if you get four good years out of'd be happy.

Fifth, competition is the cornerstone of capitalism.  If you don't compete, or just perform fake competition for the benefit of the viewers.....then don't expect real results.  Germans tend to compete.  They want to build the best items.....sell them for a reasonable price....and come back tomorrow to build and sell more.  Talk is cheap for a German, unless you back it up with actions.

Sixth, austerity.  Germans tend to get down in the weeds and describe austerity as buying only what is the best price....and not wasting one's money.  Austerity means you buy a product that has a tendency to be around for years.  Austerity means you pay for your vacation with cash, not credit cards.  Austerity means you get a couple of extra years out of your used car, building up a cash reserve, and smartly buy its replacement one day.  Austerity means you eat out.....only when you can afford it.  Austerity means you buy heavily on discounted-priced items, and don't load the cart up with regular-priced items.  Austerity means you go only to the theater when you really do have money budgeted for it.

Seventh, food scandals tend to be a normal theme for most countries.  Compared to most countries....Germans has tended to avoid these episodes.  There's a handful that could be brought up (like the horse-meat episode of last year), but scandals are rare.  Consumers in other countries tend to know this.  You could laugh over the general public worry about food scandals....but the Germans don't laugh, and have made this a point in their sales.  Someone down the line buys into that effort.

Eighth, reckless spending....from the private individual to the state.  It might be difficult to get across to an American, but Germans tend to frown on reckless spending.  There are a number of bankruptcy episodes occurring on a daily basis in Germany....but it tends to be of a lesser nature than in the US.  Of course, the attitude for a German might be to avoid bankruptcy at all cost, while the attitude of the American is that bankruptcy is always "plan b".  Then you bring up reckless spending within the federal budget.....bridges built with no value....grants given to study butterfly traffic in Brazil....airports built to significant standards but only serving forty passengers a day.  The list goes on and on.  Germans have some element of reckless spending as well (the new airport up in Kassel and the oddball job in Berlin). But overall, it's just not at the same level.

Ninth, Germany has this odd success rate with small and medium-sized family-run business operations.  You can drive around any town or city, and note business operations that are on the second, third, fourth, and fifth generation of a family.  The blunt truth is that these operations are geared to long-term survivability, not simple fix-it-today strategy episodes.  You don't see operations appearing out of thin-air....dissolving five years later....with a family operation.

Tenth, the plain truth is that no one much in Germany listens to the US Treasury anymore.  Call it a lack of respect, or just a nod to the idea that genius in the Treasury has come and gone.....times have changed.  The US Treasury has been told a thousand issues with the US economy.  So far, no one much there has taken off to find a job solution in the US, fixed the broken nature of US banks, figured out the way out for thousands of homes below value and tied to people who can't escape ownership, and found the magical way of providing cheap health insurance across the nation.  In fact, there's not that the US Treasury can produce....except reports to knock other nations and their economic policies.

So I finally come to the last comment of this US Treasury report hitting on Germany.  It would be curious to know which gifted recent graduate of Harvard Economics School....was detailed the job of writing this report, and how many hours he or she put into the project.  It'd also be curious to know how many spreadsheets had to be finally find one that works with this report.....and if he knows anything about global warming.  They might need his services over there to write a new fictional piece to show both global warming and global cooling....on the same the same cow field, while observing the one cow chip.

1 comment:

Don said...

This morning I read "Passat, VW sales slide in October" at

I wonder why VW sales are down when auto sales in general are up.