Germany's Social Policies Benefit Retirees

Germany's economic system with it's firm commitment to social values (as opposed to the cowboy voodoo economics of the anglo-saxonian shareholder value type, if you know what I mean), resting on the country's long humanitarian tradition, has again produced a shining example of success:

Pension growth of retirees in Germany in 2007 will be: zero.

Pension growth of retirees in Germany in 2008 will be: zero.

On top of this dynamic development, there will be a whopping increase of 0.2 percent in 2009, after 5 consecutive years of zero growth.

And we didn't even mention Germany's low unemployment figures and decade-long rocket style economic growth...

The country benefits from a hefty peace dividend, obviously.

Comments

[Amelie de Saintronges]

So if Germany had joined the Iraq War the pensions would increase?

[Carl Spackler]

"So if Germany had joined the Iraq War the pensions would increase?"

Well in a way, yes. Money for pensions for Germany is a function of economic growth. Economic growth is a function of seeing the future positively and making necessary investments. Germany (This is a gross overstatement) didn’t act (invest) in overthrowing Saddam, nor (invest) in forming civil government in Iraq. Germany was not optimistic. Maybe you might remember the crying right after liberation that Germany wasn’t going to be on civil construction projects. All of a sudden, by the acts (investment) of others, Germany was optimistic about Iraq.

The Arab world has a per capita Gross Domestic Product of around one dollar per person per day. Save a few small population oil states, the average Arab doesn’t have much money to buy German goods. One would think that for economic self-intrest alone, Germany would be interested in half a billion Arabs acquiring wealth. Some people think that for genetic reasons Arabs are not capable and nothing will change. This is a very pessimistic, Marxist determinist and racist view.

Germany, Europe, Japan need to work to change the world. It is in their intrest.

[Jörg Brörmöller]

(Notiz von David: Ich habe den vorliegenden Kommentar gekürzt um irrelevante Teile)
Der verdutzte Leser fragt sich nur, wo denn hier die "Medienkritik" sein könnte.

Was hier vorliegt, hat mit Medienkritik nichts zu tun. Es hat auch nichts mit dem Missionsstatement zu tun. Es ist im besten Falle Retourkutschenfahren und im schlimmsten Falle "hate mongering". Da, wie Sie selbst sagen,... ist dieses vorliegende Posting in Bezug auf Ihre eigenen moralischen Ansprüche lausig. Einem deutschen Medium würden Sie derlei Geseiber nicht durchgehen lassen, und das mit recht. Wollten Sie nicht eigentlich besser sein als das was Sie kritisieren?

Notiz von David: Solche Reaktionen wie die von J dürfen wir regelmäßig erwarten, wenn wir das deutsche Vaterland kritisieren. Dabei haben wir an anderer Stelle klar gemacht: "Davids Medienkritik ist eine Sammlung kritischer Stellungnahmen der Betreiber dieses Blogs zu Inhalten deutscher Medien. Gelegentlich veröffentlichen wir politische Stellungnahmen auch ohne Bezug zu bestimmten Medien, wenn die Thematik in der öffentlichen Diskussion gerade eine wichtige Rolle spielt." Und dabei bleibt's.

[Buckeye Abroad]

You mean Gozprom won't pick up the tab?

[niko_kr]

You could also mention that the unemployment rate is going down and economic growth is higher than expected. Still by far not comparable to the US, but it's a start.

[Jörg Brörmöller]

del.

Notiz von David: J, keine Notwendigkeit und - auf unserer Seite, und die ist entscheidend - kein Wunsch, die Diskussion über unsere Blog-Strategie fortzusetzen. Und, bitte, maskieren Sie sich nicht als um die Glaubwürdigkeit unseres Blogs besorgten Leser. Jeder Ihrer Kommentare ist gegen die Linie dieses Blogs gerichtet - wozu also die Aufregung, wenn wir (nach Ihrer Ansicht) diese Linie verlassen?
Aber wie gesagt, Ende der Diskussion.

[Mir]

Es scheint, als wären vor den letzten Wahlen recht viele Amerikaner auf das Märchen vieler Medien hereingefallen, ihrer eigenen Wirtschaft ginge es schlecht. Ein Vergleich mit Europa und Deutschland hätte sie da eines besseren belehren können. Daß dagegen typische Deutsche wie Jörg den Vergleich mit Amerika scheuen, wenn das Ergebnis nicht in ihr Weltbild paßt, ist doch nun nichts neues. Abschließend sei gesagt, daß DMK einen guten und wichtigen Job macht. Bitte weiter so.

[joe]

I find this a bit hard to believe. This has to be some mistake. I am serious.

The increase in VAT at 3% and inflation approaching something like 2.5% means retiree standard of living will decrease. So a German in 2007 cannot do the same things he/she did in 2006 and will be able to even less in 2008. The decrease in 2008 resulting from the impact of inflation.

I can understand why there is such a high saving rate in Germany.

In the US for retirees a percentage of their investment portofilo should in stocks as a hedge against inflation. This percentage ranges from 20 to 40%. But what little I understand about the German tax code, capital gains and dividend income are highly taxed so the market offers little protection.

No wonder then for those who can afford it, so much money has been hidden overseas from the tax man.

This is a bit sad. But it does add factual information to the growing body of evidence that the standard of living in Germany is declining.

[Pamela]

There was an interesting piece in yesterday's Financial Times (sorry, no link, all typos mine)

Germans turn to demographic robbery as jobs go unfilled

With one in 10 people of working age looking for a job, Germany is a high-unemployment economy, yet its fastest growing companies still complain about how hard it is to fill vacancies these days.
[]
A survey conducted in January by the DIHK federation of chambers of commerce showed 25 percent of IT services providers, 30 percent of pharmaceuticals companies, and 64 percent of temporary work agencies were failing to fill all the positions they opened.
[]
Experts say recruitment problems mainly reflect the inadequacies of Germany's education system, which is struggling to keep pace with the needs of its export-oriented companies for engineers, IT experts and specialised industry workers. But they warn the real crunch could come in five years when the vast cohort of baby-boomers begin to reach retirement age, heralding an era of bitter competition for the country's shrinking pool of qualified hands and heads.
[]
"The nightmare scenario is a future with persistently high unemployment affecting the unqualified and a scarcity of qualified workers," says Reiner Klingholz, head of the Berlin institute for population and development. "In some segments of the labour market, it is already happening."

[Pamela]

oops! sorry

[Carl Spackler]

Pamela,

""The nightmare scenario is a future with persistently high unemployment affecting the unqualified and a scarcity of qualified workers,"

True in the US too. So what we have are citizens who by and large receive government education that don’t fit a private world economy. Who would of thought that at ever higher cost, decreasing quality and outdated modalities (I love that word, although I don’t know what it means) that defines socialistic provided education that this would happen?

Government schools are becoming more and more superstitious temples. The same people that where once employed in various religions with all sorts of unproductive and time wasting ceremonies are now teachers. Naturally, most children raised in such ‘churches’ can never escape the indoctrination. (Odd note; Stalin attended a Catholic seminary and Al Gore a theological institute. Both fluked out)

Technology industries require precision, logic, science, math, finance and rational thinking. Not strong points amongst the teachers unions.

On the plus side a lot of really bright people from the less developed world rocket right up as science and business seems to be culturally blind. Odd, isn’t it that the lefty arts and trades are so closed and business is scowering the world for talent, trade, sales and products?

[Pamela]

@Carl
Technology industries require precision, logic, science, math, finance and rational thinking

I was a software developer for decades. In the last few years of that career, it was really difficult to hire new grads w/IT diplomas. Their reading comprehension was minimal, their writing skills non-existent and when asked what their least favorite aspect of the job would be the answer was almost always 'debugging'. (Good luck with that one, sweetie.)

And it wasn't just kids from American schools either. India was turning out robots and about half the kids from mainland China could not cope with anything other than coding from spec. The whole idea of independent analysis terrified them.

[Pamela]

@joe
But what little I understand about the German tax code, capital gains and dividend income are highly taxed so the market offers little protection.

And so why is the dollar falling in relation to the euro? (It's steady against the yen.) The euro is still from countries with no real growth, high taxation, etc.

I don't get it. I'm thinking it has to be something about the differential of interest rates, but still......

[joe]

Pamela,

I think it is a function of the current account (trade deficit) as anything.

We import more than we export so we flood the world with dollars. Those dollars become less valuable.

If you follow the free trade agreements with various nations it is always about openning up their markets to the US. In many cases they have already have free access to our own market.

One of the themes which played out in the mid-terms was free but fair trade. People just as in euroland worry about their jobs and future.

It will be interesting to see if economic populaism becomes a big issue in 08.

[german observer]

The country benefits from a hefty peace dividend, obviously.

I find the link between German pensions and the Iraq war a bit weird. Though I agree with the rest of the statement. But the latter remark is a "I'll show the Bushitler-ramark down your throat"-statement, which I understand but don't approve of.

Fight fire with fire, but don't fight stupidity (of the Left) with stupidity.

[german observer]

@Pamela:

And so why is the dollar falling in relation to the euro?

The bigger problem will be that one day, the Chinese might decide to stop buying dollars like madmen and invest in their own infrastructure. Crash Boom Bang

[James]

@Joe

In the US for retirees a percentage of their investment portofilo should in stocks as a hedge against inflation. This percentage ranges from 20 to 40%. But what little I understand about the German tax code, capital gains and dividend income are highly taxed so the market offers little protection.

Sorry mate, but that is completely wrong.

I'm an American living in Germany and I know for a fact that capital gains are not taxed at all in Germany after 6/12 months. If I buy a stock and hold it for one year, any gains I get on it, are free from German taxes. The real penalty here is being an American. The IRS requires all Americans to file, regardless of where you live and where you earn it from. Meaning, that same gain on the stock, uncle same takes his pound of flesh, being 15%.

Taxes are rendered on dividends. As they are in the US. Twice.

[joe]

James,

Thanks for the information.

Captial gains are not taxed at all. That is really a good deal.It would seem if anyone in their earning years had money to invest then the equity market would be the place to be.

[QuagmiredInTheBRD]

@James:

"I'm an American living in Germany and I know for a fact that capital gains are not taxed at all in Germany after 6/12 months"

I, too, am an expatriate and can confirm that capital gains tax does not apply to stocks held for >12 months. But I'd be willing to wager that such "generosity" will change radically as residents of Germany begin seizing the initiative and providing for their retirement privately. There has been chatter in government circles about applying a flat capital gains tax of 25% - regardless of how long the stock was held. As you well know as a 4/15 victim, the long-term capital gains tax was reduced. This measure was not designed as one to make the rich richer but rather as one to motivate US citizens to take care of themselves. Given the demographics resulting from, among other things, the "Baby-Boom", Social Security cannot hack it. The German government is still in a state of semi-denial on this score. The so called "Riester-Rente" is a step in the right direction but, because it is state-sponsored, I won't touch it with a 10 meter pole.

[Pamela]

@german observer
The bigger problem will be that one day, the Chinese might decide to stop buying dollars like madmen and invest in their own infrastructure. Crash Boom Bang

Thank you for the nightmare scenario.

;)

[joe]

Pamela,

Well that sure will be something if the Chinese stop buying US bonds. I guess they will just have to sell all those goods to the euros. Then again the euros might not have as much to spend given 20% of their exports go to the US.

But I would not consider this a nigtmare scenario because there is a good side too....maybe even a better side... The euro's would have to provide for their own defense. That should be the first cost cut from the US budget.