
The World Has a Germany Problem: Debt Obsession Ate the Economy - js2
https://www.nytimes.com/2019/08/19/opinion/trump-germany-europe.html
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throw0101a
Given that German bonds are in negative territory out to thirty years, the
government would actually profit by issuing them:

* [https://www.bloomberg.com/markets/rates-bonds/government-bon...](https://www.bloomberg.com/markets/rates-bonds/government-bonds/germany)

* [https://www.reuters.com/article/eurozone-bonds/update-3-yiel...](https://www.reuters.com/article/eurozone-bonds/update-3-yields-across-entire-german-bond-market-dip-below-zero-for-first-time-idUSL8N24Y326)

Is there any reason not to "borrow" when you're being paid to do so?

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chewz
> Is there any reason not to "borrow" when you're being paid to do so?

If negative yields forecast shrinking economy and smaller tax base in a
future.. You will pay back less nominaly but more in proportion to your
revenues. But this is a topic for another time..

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viklove
It's still better than _not_ borrowing, isn't it?

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chewz
Goverment budgets are highly unelastic - railways, submarines, healthcare,
pensions must be paid. So even small increase in costs of servicing debt
results in embarasing and painfull cuts in elastic areas of the budget.

So in general MoFs avoid that unless they are going to pass the ball to the
opposition.

But of course you have to borrow to roll old debt.

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RockIslandLine
"But of course you have to borrow to roll old debt."

Not if you have your own currency. Currency issuers never need to borrow.

It makes no sense to even suggest borrowing something that you can create at
will.

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Shivetya
Austerity, is it really? How about not increasing spending at the same pace as
other countries. Many countries could be come debt free by simply keeping
spending increases under the rate of inflation.

Krugman was having a hissy in 2014 about Germany for similar things, yet it
worked for the Swiss. They have a cap! So staying under three percent paid off
for the Germans and this upsets those who subscribe to the idea that
government spending is never bad, well if you never plan to pay it off in your
lifetime you can borrow against the future quite easily.

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Aperocky
Why going debt free though? What's the point of going debt free? The real
economy is dictated by production and consumption, not amount of number that
you have on the either side of the balance sheet. If going into debt creates a
bigger economy by balancing/revitalizing production/consumption, it should be
done. The debt gets larger but so does the economy.

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toomuchtodo
This assumes the debt you’re incurring is going to grow the economy. This is a
big “if” in most developed countries, where no amount of debt will change
foundational demographic transitions (see: Japan).

But as long as you control monetary policy and can inflate debt away in the
future, no one today really cares as the can is kicked down the road.

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Aperocky
And that's correct too, how much debt you have doesn't nearly matter as much
as the perception that it will be paid eventually. And sovereign countries
(Might only be a few on this planet) have almost unlimited choices there. The
only kind of debt that matter is the debt denominated in another currency,
which is dangerous.

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starbugs
Uhm, sorry, but is the author serious?

I mean, how did we come to the point where not being indebted is bad and
should be condemned?

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40acres
Because government finance is not the same as personal finance. Debt craze
gripped the US in the early 2010s shortly after the lows of the great
recession, defecit spending would've boosted the economy and allowed the US
economy to recover quicker, instead we have a 10 year recovery that only
recently started to provide gains for the most marginalized workers. Also,
climate change is a existential risk, I'd rather finance solutions with
defecit spending now than finance a war over water in the future.

~~~
starbugs
If I remember correctly, it was a debt crisis that caused this. You basically
allowed people who couldn't pay to "own" houses that were so beyond their
means that (combined with a couple of financial derivatives) it collapsed the
economy.

Now the solution is clearly more debt?

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40acres
Once again, there is a difference between sovereign debt and personal /
corporate debt. Subprime mortgages are subprime because the debtor has a risk
of default, the US prints it's own currency, issues debt in its own currency,
has some of the strongest institutions in the world, and controls the global
reserve currency. The risk of default is essentially nil. When governments
spend money on infrastructure and health / education the ROI is positive.

~~~
starbugs
Germany is not in a position to print the reserve currency of the planet.

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40acres
I'm not advocating for Germany to go all MMT here, but negative bonds are a
clear indication that government has ample room for debt financing. Germany
has notoriously poor internet service, investing in broadband infrastructure
could help them transition into more of a service economy, which would be a
smart hedge as the slowdown in Chinese consumption led to a slowdown in
consumers buying German cars and a contraction last quarter. Also as
mentioned, all the European players are big on tackling climate change -- why
not fund solutions? Instead, Europeans leaders like Macron have gone with the
politically infeasible route of higher petrol prices.

~~~
starbugs
Germany has invested substantially into tackling climate change. Google
"Energiewende".

Maybe also do some research on the internet infrastructure in Germany. It's a
cartel. That's why service is so bad.

I'm not saying I'm against good infrastructure investments. But just telling
us to "keep spending" because "debt is cheap" won't cut it.

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Tomte
In both governing parties, SPD and CDU/CSU, many people including government
ministers and the chancellor-to-be are now willing to give up on "no debt"[1].

Even fiscal hawks are now playing ball with that new party line.

Expect Germany to make debt again.

[1] This refers to the policy of "Schwarze Null"/"black zero" which means
revenue and expenditures shall be balanced. This has only been a policy
statement that the former finance minister achieved for the first time in
decades and the current finance minister adhered to. This must be
distinguished from the "Schuldenbremse"/"Debt Brake" which is actually in our
Constitution and limits the amount of new debt the state is allowed to take
on.

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inflatableDodo
Germany had a Harvard problem -
[https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt](https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt)

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hn23

      > Realistically, America has no ability to pressure Germany into changing its domestic policies.
    

This statement is so false. US is already pressing to spend idotic amounts of
money for military budged.

Next time in NYT: Germany has too much debt. Us rating agency about to drop
rating...

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5partan
Hacker News has a paywall problem.

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thrill
Here's a simple fix to getting people to not obsess over debt - eliminate
debt. Recognize it as the nonlinear burden that it is, and that, unlike
Krugman's belief that ignoring it makes it a'ok, that it needs to be addressed
and not kicked to the next generation. Make it unacceptable for politicians to
incur debt for anything other than a catastrophe, and absolutely not as a
normal way of doing business. Yes, America, I'm especially criticizing you,
for 20 trillion reasons and counting. After all, if it's so unimportant, then
it should be trivial to eliminate.

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inflatableDodo
>After all, if it's so unimportant, then it should be trivial to eliminate.

I think you would have to scrap nearly every piece of fintek since at least
the time of Newton and completely reinvent how modern monetary systems and
economies work from the ground up, to eliminate debt.

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lota-putty
This reminds me of :

Daniel: Drainage! Drainage, Eli, you boy! Drained dry. I’m so sorry. Here: if
you have a milkshake, and I have a milkshake, and I have a straw — There it
is. That's a straw, see? Watch it. Now my straw reaches across the room, and
starts to drink your milkshake. I. Drink. Your! Milkshake! [makes a loud
slurping noise] I DRINK IT UP!

USA asking everyone to give up their milkshakes!

World has the USA problem.

