Mathew Lynn Has It Right

Bloomberg’s Mathew Lynn has the German enigma more or less right: it’s a toss up.

Flip the coin one way, and Germany may be about to enter a sustained period of growth, after some painful structural change, which would boost exports further and give consumers more confidence. It would be a re-run of the “Wirtschaftswunder,” or economic miracle, of the 1950s.

Flip it another way, and costly welfare, an overvalued euro and a demographic imbalance will combine to pitch Germany into permanent decline“.

Well I think I’ve clearly placed my bet, so come on ladies and gentlemen, there is just a little time before they call Les Jeux Sont Faits.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

4 thoughts on “Mathew Lynn Has It Right

  1. West Germany has still a growing population because they are sucking East Germany dry so i think you will loose hat bet

  2. Unfortunately for your argument Germany is now unified in a single Federal State, so the movements you describe will have no more impact on aggregate GDP than those from Scotland who move to London do in the UK. Of course, if they move from being unemployed into employment this *will* improve things, but it doesn’t change the demographic issue.

  3. The Candide in me throws down on their unscrewing things well enough to post respectable growth. Such unscrewing mostly to include a decent level of labor reform in the near term and entitlement reforms over the longer haul. With structural employment relieved and decent growth in place, immigration can ease the demographic burden over the medium-long term. Generally, moving toward a more American model.

    I doubt there is enough to be wrung out of this to rerun the ’50s, given they are (thankfully) starting from a much better situation.

    Not sure how we make a market in this, tho — the term is long enough to make the counterparty risks meaningful.

    [at which point his pouty hedge-fund manager side slaps down Mr Optimist, and makes him go back to work]

  4. A 2nd “wirtschafswunder” is out of the question for Germany. This sure ain’t the 1950’s anymore.

    However I was in Germany this week and the demographics issue “finally” is getting some serious attention from the politicians and there is a push for “rentenreform” now. I think Germany could get some decent growth if they can manage to push through some tough reforms (a Hartz 5,6,7,8…)during this and the next election.

    However if they don’t manage to do this by 2012 or some reforms are rolled back, I’ll have to choose permanent decline.

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