2/5/17

If I were to ask which country around the world received the largest largess, help, subsidy from the world—mostly from the US and its Western allies (the “usual suspects” when it comes to giving help to others)—the name Germany would not be at the top of the list, to say the least.

While I do not have exact numbers and have not attempted any sort of deep research, I am here to suggest that Germany is at the top of the least—maybe not per capita, but certainly in absolute numbers.

I am also here to suggest that Germany is ungrateful, egotistical and, overall, a leech on the world.

Tough language, but I really believe that and have had this feeling for a long while.

I admit to never liking Germany or the German people. I always found the country to be cold (I do not mean weather wise) and regimented, and the people to be arrogant, strict and unfriendly. Could my view and feelings be influenced by the terrible history of WWII? Possibly, although none of my family perished in that atrocity.

Here are the facts:

  • Following WWII, Germany was devastated. Practically destroyed. The US provided significant assistance in the form of actual money (the Marshal Plan), investment (just being in Germany as an occupation force meant significant amounts of money spent locally), and liberalizing influence on the economy. I will fully concede that the German people, very industrious and disciplined, made absolutely the most out of the assistance that they received (unlike many other nations that received assistance and wasted it in part or in total) but the basis was still the assistance provided by the US. Paradoxically, given the mass destruction, that assistance allowed Germany to build itself as the most modern, state of the art economy in Europe at that time.
  • The boost provided by being the most modern industrial economy lasted for many decades. It is like someone gave you a present of a new modern factory with no debt. If you are industrious and hard working and continue to invest in modernizing your factory instead of having to pay off the debt of constructing it in the first place, you can extend the benefits from that gift in perpetuity. Your competition is less modern due to legacy issues and they have debt payments to make. That gives you a great advantage. Germany made the most of these advantages and has become the largest exporting economy in the world (export is about 46% of the GDP compared to, say, USA at 12%, China at 22% and Japan at 18%) and consistently running huge trade surpluses, amongst the top three in the world.
  • In spite of this huge advantage triggered by the boost given to it by the US after WWII, by the mid-80s Germany’s economy was not in great shape. The social-democratic experiment has proven once again to be unproductive and Germany needed another boost. Enter “reunification.” Against some low level objections from Margaret Thatcher (whose instincts, as usual, were correct), which were overwhelmed by a strong push from George H.W. Bush and the rest of the EU powers, West Germany was allowed to reunite with East Germany in 1990. While this was initially thought to be a great burden, given the depraved situation of East Germany’s economy having suffered from a Communist regime for 45 years, it very quickly turned out to be major boon for the reunited Germany due to the large supply of cheap educated labor with the same language, heritage and culture. Again, one should give credit to the Germans for making the most out of it, but the fact is that the World powers (US and the rest of Europe) allowed it to happen. Germany, yet again, became an economic powerhouse.
  • Since 1945, and continuing even today, Germany has been the beneficiary of very significant additional economic assistance that few even mention (except…drum rolls…Trump); an assistance that directly relates to their defense budget. Initially barred and then limited in its allowed military, even to this date Germany spends only 1% of its GDP on its defense while on average since 1945 that percentage is even lower. Compared to the US, whose average is about 5% of GDP, that is a bonus of 4% of GDP. EVERY year for 70 years!!! This is a huge assistance to Germany, who is basically relying on the US and NATO for its defense and is milking them by not even spending the 2% of GDP it is OBLIGATED to spend per NATO. The cumulative effect of this subsidy to the German economy simply cannot be over emphasized. Yet again, Germany is given a gift, mainly by the US, that allows them—yet again—to invest in and have the most modern factories with “no debt” in comparison. Is it any wonder that exports are the biggest share of their economy if they have such a HUGE advantage compared to, say, US exporters???
  • And, if all that was not enough, then comes the biggest assistance of them all: A complete highway robbery under a “benevolent” guise called the Euro. Since the introduction of the Euro in 1999, Germany has enjoyed a subsidy to its economy so large as to be incalculable. Given its large trade balances, a standalone German currency would have been valued much higher than the Euro, which represents the average currency of many other economies, most of which are significantly weaker than the German economy. The result is that Germany’s economy is boosted significantly by the lower than otherwise currency positively effecting and enabling its outsized export economy while the vast majority of the other participants in the Euro are suffering under the boot of what amounts to a German economic “occupation” of Europe. These participants, tempted by the drug-like effects of low interest rates, are slowly but surely driving themselves to bankruptcy (see Greece, Spain, Portugal, Italy, etc.) while the Germans are enriching themselves.

As I said before, I do not like Germans or Germany. However, I believe that this analysis, while not supported by detailed research, is correct in its direction and magnitude.

The bottom line is that Germany is again extracting the lifeblood from Europe, but this time no one seems to notice or care.

In the process it is negatively affecting the US, too, directly by having unfair competitive advantage against US exporters and indirectly by weakening the rest of Europe.

President Trump has rallied against Germany on the issue of its defense budget and it seems that he instinctively does not like Germany and its leader mainly due to its immigration mess.

President Trump also rallies against currency manipulators in general, mainly China (where he is only partially right). However, even he has not yet combined the two.

Germany is the biggest currency manipulator the world has ever seen.

It is time for Trump, or someone else, to raise the alarm and call their bluff.

Otherwise, we may just see Germany occupy Europe yet again, this time without blood but with the same negative consequences for the world.