Saturday, February 27, 2010

Germany and the U.S.

This NYTimes article discusses how Germany's family-owned exporters are the economic shock absorbers against the worldwide recession.  Although the article is focused on the impact of the trade imbalanced on the rest of Europe, the comparison to the U.S. and China is false. 

Germany's trade surplus is not due to an artificially low currency (China) nor is it due to begger-thy-neighbor subsidies and tariffs (U.S.) Germany enjoys a trade surplus because its customers are willing to pay a premium for quality goods and services and German households are the largest savers in Europe. 

The Administration should take note.  Economic recovery does not come from sleight-of-hand tax and spend.  Neither from force feeding money into an economy laden by historic levels of household debt.  Economic recovery comes from innovative companies unfettered to invest and households spending less than they earn.

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