It’s better to make stuff

Larry Elliott of the Guardian Newspaper wrote a good article on the German economy stating that whilst a lot major developed nations like the UK and the USA focused on financial markets, Germany continued to do what it does best – manufacturing and the idea of making stuff. There are a few reasons why the German economy has performed so well of late:

1. Government wage subsidies allowed firms to keep their talented labour force employed on a part-time basis. This meant that the firm could take advantage of more bouyant market conditions and not have to re-employ staff.

2. Falling unemployment has led to higher wages which has boosted domestic demand.

3. Wealth is spread across the country with none of the excessive concentration of affluence in one area like that of the UK.

4. The German investor didn’t put too much of their resources into real estate like that of the US and UK. Germany benefits from an old fashoned structure – a prudent investor.

5. It is not uncommon for a German company to have an 80% share with a particular piece equipment and, even despite higher labour costs, demand seems to remain strong.

6. With the recent financial crisis the majority of investment has stayed in Germany and this has led them to be very competitive in world markets.

7. China has been a very favourable location for Germany’s exports. With a growing middle class in China there is a huge increase in demand for cars especially.

8. Interesting to note that the fixation with property in Germany is not as prevalent in the UK and the USA. In Germany approximately 60% of the population rent.

If you have read John Lancaster’s book “Whoops” you will find out that by June 2008, the International Swaps and Derivatives Association estimated the total size of the market as $54 trillion which is close to the GDP of the planet. The problem was that these Collateral Debt Swaps (CDSs) and related financial instruments had been around and sold from bank to bank in an entirely untransparent way, in a gigantic game of pass-the-parcel. It’s as if people used the invention of seatbelts as an opportunity to take up drunk-driving.

1 thought on “It’s better to make stuff

  1. Robin Watkins

    Bill English. Is he living in cloud cuckoo land. He wants to borrow money to rebuild Christchurch. Where is the money coming from now that Japan requires credit? Japan is a much bigger economic power that the world requires to be up and running ASAP. It has to borrow and the interest rate is going to be high. NZ would have to borrow at the same rate( whatever that will be), but will there be enough credit. Is Bill english being honest with the NZ public-his Masters who keep him in power with their tax dollars. Japan will unlikely borrow from china (old enemies). It will look to US and that country is BROKE. The USA owes trillions to China andthey probably want to call in the debt. One huge F…… mess! New Zealand was told that the Pike River mine should have been opencast, that mistake cost several lives and millions of dollars. There is $5 Billion dollars of coal in the mine. It is going to have to be mined and opencast, this is the economic reality. So Mr Politician break your code of silence on reality and tell the NZ people the FACTS of the MATTER. Then this country can move forward in the reality of the New World. Lets stop having luddite comments from other MP’s of Rail being archaic. China is building Linear Trains that move at 300kph. Lets build a modern country and join up the cities with fast rail and boost the economy with infrastructure. Lets have politicians that don’t pontificate on their own egos and do something for the country or B….. off.

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