Is this radical economic idea ruining Germany?

[@MoneyMacro]

Get access to global coverage at an exclusive 20% discount at economist.com/moneymacro Further reading from the Economist about the role of debt, when it is too high, and how to reduce it: 1. www.economist.com/finance-and-economics/2024/11/24/how-trump-starmer-and-macron-can-avoid-a-debt-crunch 2. www.economist.com/finance-and-economics/2024/11/17/how-to-make-elon-musks-budget-slashing-dreams-come-true 3. www.economist.com/leaders/2024/11/20/germany-cannot-afford-to-wait-to-relax-its-debt-brake

[@DavidFilskov]

If they raise their taxes more and more they can spend more and more :) ... and then cancel the debt brake later.

[@paxundpeace9970]

Lack of investment has been seen in many sectors on the german economy for years if not decades. Spending on Education is on the lower third as share of GDP. Massiv shortage for teachers and backlog to get to get new school buildings build. Severe shortage of childcare is a massiv issue for families (income loss) and child development. Medical infrastructure does lack investments in new buildings and capacity. (Now often paid by hospitals, insurance or charity). Defense: Bundeswehr (german military ) does lack in many fields in manpower and equipment and experience. For expample the loss of the anti branch of the Germany army. It is a massiv lack in quantiy and quality. In addition to a massiv lack of even basic munitions (small arms and autocannon) Transport: massiv delays in purchasing new rolling stock. Lack of staff for nearly all train operators. Decommissiong of services an station and entire routes. They even had to sell it's Truck Cargo business for 18 billion Euro.

[@süsike-has-cute-ass]

I like how "top gear economists" talk so many smart words but still lack some basics understanding about fundamental things. 1. Government is not owned by people. It is owned by several wealthy families which invested into political project to protect their own interests. This circus which happens once in 4-5-7 years is just a joke, which more or less intellectual people just ignore. 2. If the author would understand accounting at least a little bit, he would never say that "debt is an asset". Debt is a liability. Which is opposite of an asset. That if why financial statement of a company is "assets versus liability and equity". If I take a loan from a bank, I have a burden - a debt and I have liability to pay this debt back. Meaning that the more debt we take the more money we will need to withdraw from economy, meaning that we will need to take more debt. 3. Still I agree that taking debt is not exactly a bad idea. It is all the question of what is the purpose of this debt and what is the cost of money. If we take debt to build some infrastructure and increase competitiveness of our economy is one thing. If we take it to cover social obligations and current expenses it is another thing. 4. If price of money (interest rate) dropped and we have a debt already, then we are interested in taking new debt to repay previous one, since in this way we will reduce our burning rate (the amount of interest we have to pay on a regular basis).

[@Siegi-w8j]

What about Flassbeck (form. chief economist of unctad)? As far as i understood his point, he said the amount of money is the same as debt. And in the old days companies made debt, but they stopped doing so. Private people never made debt as a whole, so the state got to. He favors a state deficit in the amount of savings by private people + companies. Today the abroad are taking those debts, but they will not do so forever. U think that point is wrong?

[@DavidFilskov]

@@Siegi-w8j I think that it's certainly correct that today all bank account money is created as debt. New bank account money is created by each bank primarily when someone takes a loan - but the amount of each loan always exceeds the amount of new bank account money created by the bank. Therefore the amount of debt is always much much larger than the totalt amount of bank account money.

[@derradfahrer5029]

What is missing also is, that the Parlament can - with a 2/3 majority (in both chambers I believe) - bypass the debt brake by passing another constitutional amendment. This has been done with the 100 billion euro military fund and could also be done for e.g. an infrastructure fund.

[@peterfmodel]

Very true. The current issue is not a debt issue, its a political issue. The current government is driving the country into the ground and are desperately trying to spend their way out of it, while the CDP wants an early election. The FDP is trying to save itself considering it was tied to a very unpopular government. If spending is really needed the next government can do what you suggest, although it may require support from the AfD, which may be a political issue.

[@karldergr0sse]

That’s such a short sighted view tho. 16 years of underinvestment and Missmanagement (esp military & energy) have created a massive backlog of investment that Germany has to tackle now. The 100 billion for the military is not nearly enough if trump would leave NATO. We would have to rethink our whole security policy in Europe, including nuclear deterrence for which we rely on the US currently. The infrastructure fund is a joke compared to the backlog of investments that were piling up. The only reason the CDU didn’t want to abolish the debt break with the Ampel government is because they wanted to fail the government and take over. Even the head of the CDU now said we have to reform the debt break - why now and not 6m before? Just political gamble to make the current government fail - and it worked, you gotta leave him that. BTW there is now way the AfD will get strong enough to make a coalition with them needed. The AfD will in no shape or form get over 33% in the election and it has 0 seats in the Bundesrat (second chamber).

[@SianaGearz]

@@peterfmodel Pardon driving the country into the ground how? Look you have an act of god type of situation, external circumstances, things aren't going to look too rosy, and indeed spending your way out of it is the only way. It's not like you started this war at least, so i guess that's nice.

[@peterfmodel]

@@karldergr0sse Its true the issues Germany is facing now is the result of a number of poor decisions in the past. At the time many of those decisions looked good at the time, although some were clearly always wrong. As for the reason why the Christlich Demokratische Union Deutschlands did not abolish the debt limit, there was no reason to do so prior to 2020. Today its an opportunity to damage the Sozialdemokratische Partei Deutschlands and that is what most parties do, so no surprise there. The Alternative für Deutschland will be unlikely to form government, but a 2/3 majority is required to override the debt limit; the Alternative für Deutschland may be required for that as its likely the Sozialdemokratische Partei Deutschlands will want revenge. Its very unlikely the Christlich Demokratische Union Deutschlands will get rid of the debt limit, although they may adjust it.

[@peterfmodel]

@@SianaGearz Germany faces a perfect storm which evens the most pessimistic German’s would have been unlikely to believe could be possible. I cannot suggest any immediate solutions, but a good starting point would be to stop the decommissioning of the nuclear power plants still operating. I am uncertain why this did not occur. Another suggestion would be to temporarily stop unnecessary spending and redirect it where it will do more good. Clearly the current collation is unable to deal with this storm. I have no idea if the CDP and its partners could deal with the issues, but I see little alternative to try. Germany has suffered previous crises so I have very hope Germany will deal with it today, but they do need effective leadership.

[@MattsMkia]

No economy cannot survive without continuous credit and debt creation. The government will print more money and the average Citizens will go just that much further in debt. Meanwhile, foreigners lust for the greenbook. Their economies are in worse condition than other countries... if that's even possible. Someone is going to be left holding the bag and a cautious outlook regarding a potential recession..

[@winifred-k9e]

They do say gold will crash in a liquidity crunch However, many of those holding precious metals are preparing for such an event. So they are unlikely to be forced sellers. The paper market would tank and hopefully collapse.

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[@Unprotected1232]

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[@Someone1337.]

@@Unprotected1232 they're bots trying to scam people

[@hamzamahmood9565]

All debt isn't bad debt. If you can deliver modest economic growth reliably then debt is justified

[@roccociccone597]

it is. We've just convinced ourselves that it's required.

[@termitreter6545]

Idk if thats intentional, but "its not all debt is bad debt". Because there is definitely bad debt. Even if you look at America, you see a ton of growth, but the debt increase is much, much faster than the growth. The amount of money spent to pay back debt interest is growing ever higher.

[@thomask.9850]

Demography in the western world doesn't look too good. With such an outlook we would need a massive rise in productivity to be able to afford high debt in the long run. Otherwise there are enough examples of what will go wrong.

[@erikouwehand]

I disagree, look at France, what a mess.

[@moxopal5681]

@@termitreter6545 this is because USA doesn't tax the main recipients of its growth, the rich class. For example 9 out of 10 dollars google took as investment was from the central bank, aka national debt. Did 9 out 10 dollars of google's profit go back to the government? I don't think so.

[@Narada-nu3nx]

German writing here, thanks for the video. Fortunately, the debt brake is now being questioned even in Germany after many years of widespread acceptance. Pretty nice to get a foreign and unbiased view on it, because sometimes you get the feeling that big German politicians, economists and others have never really looked at other countries and their experiences with certain issues, not only with the debt brake.

[@Alexander-z6x]

I find the debtbrake to only be the first step, it would be ever more prudent to install a reducing debt brake that slowly forces the acceptable debt to be lowered each year. 33k>x88m is horridly much, if the brake would include a yearly debt service quota that actively seeks to reduce debt and thus debters debt payments to be more beneficial to any economy. Repay debt and never take up debt again

[@Mailb0x1]

I think debt break sounds good to people who don't know anything about economies. Like in a house hold it is very smart to not spend more than you earn but in a company or a economy you have to invest to stay competitive

[@puma7171]

​@@Mailb0x1 It's the opposite. The debt brake sounds good to people who have no idea about political economics (short term debt bias) and fiscal policy. Many economists know nothing about both of these.... Debt is never used to invest in long term projects that produce returns (either financially or through economic growth). The debt brake is the only way to go in a world where politicians are maximising their self-interest.

[@puma7171]

It's good to question it, but there is no good argument against it, except for politicians who like to spend too much. That said, Germany has completely missed out on investments in the last years, notably infrastructure investment. This means that there is no good way out. Probably the best thing would be a temporary weakening of the rule for the next 10 or 15 years or so.

[@Alexander-z6x]

@puma7171 raise taxes on the rich, paydebt and invest that way. It cant be that there are ppl who own 2 castles and still want more whilest infrastructure crumbles, vote left to fix the budget and make investments where needed. Spd had 50% of the gov for 4 years. Give em another 8 and watch sol rise

[@Here0s0Johnny]

Switzerland also has a debt break! #Edit: clearly not a major government, though, so M&M is right.

[@japorto100]

Yes, but if nothing is working you may need make debt. The problem is more that germany is pretty damn corrupt so as a citizen i wouldnt trust the goverment to spend it the right way. Im also from switzerland btw. and do you think our goverment is spending it in a good way? I mean SBB is literally throwing out their money. all goverment branches just spend to use their budget :D doesnt matter if it makes sense or not. At least corruption is not high on the low to mid level

[@rickardnorlen]

Sweden also

[@TheAweto]

Both are way smaller and not major economies like US, Japan or Germany

[@Here0s0Johnny]

@@TheAweto They do have a debt break, that's all I said. A minor mistake in the video.

[@entropiceffect]

They could really do with a money laundering brake though

[@25Soupy]

Well, to be honest, politicians decrease debt through inflation. Then we end up with currencies with a whole lot of zeros on it. Back just 30 years ago $1 million was something now everyone that owns a house in Canada and Australia is a millionaire.

[@frezzingaces]

Don't basically all major lenders (the types lending to governments) inflation adjust their debt?

[@bobalot2]

As long as wages grow faster than inflation, who cares? The issue is the wage share of income in Australia is at historic lows.

[@ThomasVWorm]

Inflation is better than having no income at all.

[@bjorntorlarsson]

No, politicians create inflation by printing bonds = YOUR debt! Government is tax with interestm and a huge extra costs in the shape of chaotix price changes that cause bankruptcies and starves the poorest to death, If you believe that Weimar Germany 1923 was good, then you are brain dead!

[@phunweng962]

Inflation is a good thing in this case if you have basic understanding of economics. If you have borrowed any money, the inflation also benefits you.

[@gregorluft81]

German economist here, fitting the stereotype of supporting the brake..Germany has a long history of responsible public finance compared to its European peers (partly due to the crisis of the early 1920s). Thus, the country has the luxury of only having to pay a fraction of interests compared to most of the peers. If we are talking about ruining the economy for future generations we should maybe look at the excessive pension system instead which is not only eating up 20% of net wage but also creates a hole in the countries budget year after year…if it was possible to reduce payments here e.g. by now allowing civil servants and other desk workers to go to pension at 63 (and many go before) there would be more than enough money for infrastructure, education and all the other common sense public goods

[@travcollier]

Who is that interest paid to? The Euro makes it more complicated, but Germany really doesn't need to worry about debt. Inflation, yes, but debt, not really. They (and other major economies) might want to think about how they manage monetary policy a bit though. Central banks don't actually have to pay private parties to "borrow" money... That's mostly a legal fiction left over from times long past.

[@Eoin-B]

@@travcollier The people, companies and countries that buy up the German government debt. You might be thinking of euro bonds, which are not a thing yet (except the post-COVID recovery fund), where we all pay the interest on that debt. Or are you thinking of the ECB buying up government debt? but the ECB only does that with countries that find it difficult to sell it like Spain or Italy. In their case it goes into the ECB to use or hold onto.

[@travcollier]

@@Eoin-B Unless I'm mistaken, the overwhelming majority of German government debt is held by Germans... the same entities which pay taxes to make payments on that debt.

[@kerimgueney]

@@travcollier Yeah but the make up of the debt holders isn't evenly distributed across German society. The vast majority of taxes are paid by the so-called middle class, but the vast majority of German bonds are held by the upper class (either privately or through various funds). Essentially making it another mechanism that funnels money up to the wealthy.

[@travcollier]

@kerimgueney Yep. The problem with national debt in Germany (and especially the US) isn't the government going broke, bond vigilantes, or whatever else folks in power typically wring their hands about. It is an internal transfer of wealth. Of course, that could be addressed quite directly through tax and fiscal policies. Or even just not going through the Kabuki theater of pretending the government needs to borrow money to spend. PS: The situation in Germany is a bit more complicated, but the US really has no excuse

[@fatdogonsand6816]

Thanks!

[@walli6388]

8:58 That sounds like a system where everyone collectivly owes the debt while those that can afford it make money from this...

[@gregorluft81]

I think he wanted to allude to the example of Japan with this, a country famous for a high debt but being ok since most of it is hold internally..the point of the story is a different one from the one he portrayed though

[@walli6388]

@gregorluft81 It still doesn't work like that because Germany can't just inflate their debt away.

[@richteffekt]

Also consider major debt holders like insurers and pension funds (e.g. Deutsche Rentenversicherung) invest a substantial part of their funds in German government bonds due to their ultra low risk class. This makes a big chunk of the domestically owned debt and it secures fulfillment of their future payout obligations.

[@walli6388]

@richteffekt the German pension fund didn't invest anything until 2 years ago. It's a direct transfer system. The money coming in is payed out to the pensioners. They now did start a small fund but it's tiny in comparison and they did find it by taking debt which is pretty much the worst investment decision a person can make. Thought I don't think it matters here that much as they should be able to sit out problems given how low the fund is.

[@richteffekt]

​@@walli6388 Thanks for adding this context. I'm was not aware the scale of money actually invested by the state insurer was so small when domestic pension funds combined hold roughly 1% of of Bunds in Germany with sth like 8% (of all Bunds) being held in Europe outside of Germany by other european insurers and pension funds (these numbers are six or seven years old though and ofc it's the insurers that are mostly are holding those bonds). And while there are worse investment ideas floated on TikTok, I agree that using leverage to buy Bunds when you effectively pay back your debt by backing the German economy anyway, if true, looks pretty redundant and dumb indeed.

[@Bermeslivre]

Why are we listening to the Cato Institute as if they have anything logical to say

[@theprofessionalfence-sitter]

Because sometimes they do.

[@Bermeslivre]

@@theprofessionalfence-sitter Broken clock etc.

[@victoneter]

​@@Bermeslivre People across the political spectrum have important insights. Both left wingers and right wingers should be taken seriously. It's only hard to see from within an echo chamber.

[@Bermeslivre]

@@victoneter No, I don't take the equivalent of flat earthers in economics seriously.

[@CitizenSnips314]

@Bermeslivre Asking the real questions.

[@julonkrutor4649]

The thing that is missing in the debt break: 1. Taxes that can only spend on the thing, they are raised for. 2. Ministeries - defense for example - should be able to build up a reverse instead of returning the surplus at the end of the year.

[@paxundpeace9970]

You can say this for health in case of pandemic. Interior incase of terrorism or emergency preparedness (extremly underfounded). Social services in case for mass unemployment.

[@azmah1999]

A government isn't a Mom's and Pop's shop, what's good for one isn't necessarily good for the other. What you propose just doesn't make sense for a government. 1) The whole point of taxes is redistribution. The flexibility is very important for multiple reasons. For instance, giving money to aspect of the government that are important but expensive and doesn't generate revenue. Or using taxes to incentivize some behavior or investment 2) This doesn't make sense, because as I stated previously, the whole point is to bring money where it needs to be. If a ministry is sitting their ass on a pile of cash, it helps nobody. If they're "saving" for something big, they're better off just contracting a debt for the rest of the money and doing what ever they need to do now instead of latter. The debt of a government really has nothing to do with the debt of an individual like you and me. They only pay each year for interest and when they have to pay for the principal at the end of the contract, they just roll their debt over (which is not just a move governments do, every macroeconomic structures like big companies for instance do it as well). And that's not even taking into account the fact that government bonds are a sought after delicacy in finance and are absolutely vital to them. And let's not even talk about the fact that paying back debt literally destroys money, which is the last thing you want when you're trying to invest in and grow your economy

[@karldergr0sse]

This is simply not true. Example: you run a very profitable food shop. You want to start a second business. You don’t finance that out of your expenses - you take debt with a bank to build the second shop. If this is a correct or incorrect decision solely depends on if the second shop is profitable. If it is, it’s a good investment, if not, not. The same is true for the government and the economy. If you take debt to build infrastructure that usually stimulates the economy. It comes down to execution then. And that’s where we have major issues in Germany (Stuttgart21, BER, Elbphilamonie). But that doesn’t mean that infrastructure investments are bad, it just means we have to execute those projects well - maybe rethink some regulation etc. Staying with the example, if every shop around you takes on debt to modernise their shops and add new dishes to the menu, if you don’t follow your food shop will simply go out of business, because your competitors are more modern. Same happens to Germany in comparison to the US, China, Japan if we don’t abolish or reform the debt break.

[@baronbrummbar8691]

in germany Taxes are defined as having no conection to spending ...... which is why forexample the GEZ (which is linked to radio and TV chanels) isn´t defined as a tax in germany

[@michaelogolla9350]

For developing democracies like Kenya, I think the idea of a debt brake makes a lot of sense to prevent politicians from excess borrowing and squandering the debt in white elephant projects, which do not add value to the economy but are conduits to siphon money through kickbacks, bribes, and inflation of project costs. After a decade of excessive borrowing and mismanagement, the country is now in a debt crunch, which has forced the government to raise taxes, culminating in massive protests in major cities in June 2024.

[@sharpasacueball]

That is a good point

[@nietur]

It prohibits white elephant projects as much as senseful infrastructure investments.

[@danielsan901998]

A debt brake does not avoid that politicians continue to spend money in kickbacks to friends while instead cutting spending in necessary projects.

[@paxundpeace9970]

A debt break is Even worse for developing economies. It is the job of parliament to ensure spending being allocated. They have to spend on infrastruce and education a lot. This is only possible with debt. Education has the highest return. Developing economies have a higher need for investment schools hospitals infrastruce insentives to employment. Still also emergency Preparation and defense.

[@SurmaSampo]

​@@paxundpeace9970Debt as the only avenue for improving education is false. There are other strategies to achieve the same result. Funding a large chunk of the annual budget on a program that will only ever increase in size mostly or entirely from debt is insane. This is especially true for developing countries where the majority of debt is externally sourced and at relatively high interest rates. Remember that it takes 1-2 generations for that education to return its cost in value to the economy.

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[@sephondranzer]

I know economists hate when people compare personal finances to country economies, but isn’t this the equivalent of never using credit?

[@steemlenn8797]

Yes. It's like saying "I rather starve to death than using my credit card!!" or "I have a stroke right now, but I first need to work 5 more years to gather the money for the hospital bill."

[@fappylp2574]

@@steemlenn8797It's more comparable to having a stroke right now and your family wants to lend money to pay the medical bills. Once they have the money they spend most of it on a flatscreen TV. Any future German government will not be stable enough to make sensible investment decisions and will instead make irresponsible gifts to their voter base. The vast majority of people arguing against the debt brake right now are people hoping for an all-out post materialist welfare state that benefits them in the short term.

[@ravanpee1325]

​@@steemlenn8797 The problem is more to use your credit card to buy things you don't need to impress people you don't like

[@aurelspecker6740]

Switzerland also has a debt brake, and noone would say "Switzerland doesn't investment enough". And just because there are countries without debt brakes, that don't pile on debt, doesn't automatically means debt brakes are bad/useless. It's like saying "Not drinking alcohol is stupid, because there are in fact people drinking alcohol but aren't alcoholics". The question is: Is a debt brake causing underinvestment? I personally do not think so. Switzerland has a debt brake, and does not have an underinvestment problem. Many countries like the US, Italy, France and the UK all have no debt brakes, a lot of (growing) debt and still have an underinvestment problem. I work often in Germany, in fact our factory is in Germany. And I do see a huge real problem: Bureaucracy! This is the big culprit of the downturn. The amount of buraucracy you need to do to make important business changes is insane. For example, laying off people, when the business runs inefficient. For example: You can't lay off the bad employees. In fact, you are forced to lay off the best employees. And are left with the incompetent, lazy people that simply want to sit tight until retirement. And this is exactly in a position, where you really need those overperformers to get back on the road. (Not just a random rambling. I am living this live, in a daily matter.)

[@robertmusil1107]

Investment also isn't always good. This guy has no idea about real economics. None would invest into Germany because of their pointless laws. You legit have to pay incompetent workers because firing them is such a complex process. No wonder no one invests into their companies. It's not an environment for success. No one invests into a unsecure economically environment. They need to clean up things before.

[@bobalot2]

Germany has the same problem as other perpetual net exporters. The household share of national income is too low due to various policies that reduce the consumption share of the economy. Anything that isn't consumed is saved by definition. If you look at any graph of wages since the Hartz reforms, wages have decoupled from productivity and GDP growth. This strategy relies on trade partners running perpetual deficits to absorb German underconsumption. This is not sustainable in the long term (trade partners will either follow suit or increase trade barriers) and it will result in an economic adjustment. Every country that has followed this model has either had a crash (the US in the 1930s or a long period of stagnation like Japan to rebalance the consumption share of the economy).

[@rhel373]

Oh boy. The problem is that we can't fuck over people any way we like and that all the workers are just too lazy. God. Listen to yourself.

[@aurelspecker6740]

@@bobalot2 Interesting take. I see where you are coming from. I am not sure if this really is the way it works, but I do see your logic. I guess smaller countries can get away with it for longer, like switzerland.

[@aurelspecker6740]

@@rhel373 You apparently have never worked in a company that got into this layoff-underperformance spiral. I am definitely not saying all are lazy, but SOME people are lazy, incompetent or just have skills not suitable for the job. Now, with every layoff you have to do, you have to fire the people that do the job the best way. So, eventually, you have no overperformers anymore, and are just left with underperformers. This is just a logical consequence. And noone is talking about "fucking people over" especially, since I am certain, most are not actually happy in their job. Because they know, they are not fit for it. However, because German law scales the layoff-payment with time in the company (without limit) these people get superexpensive to "release" from their obligation. I am talking about hundreds of thousands of euro. No company that is struggling can afford that... The problem is also, people will not leave by themselves, even though they are super unhappy. Because they feel like they "lose" the payoff money. This is so stupid, it's just a lose-lose situation. I come from Switzerland. Rules are: 1-3 months layoff period. No specific reason needed. Wages are a lot higher. People are in jobs they are actually happy in. Companies thrive and can renew themselves. And most importantly, employees and employers are actually working TOGETHER to achieve success, instead of everyone optimizing against each other. Definitely the better system.

[@Diskurswerfer]

One correction. The court ruling that prohibited shifting money to the green transformation fund was not based on the idea that you could not suspend the debt break for such projects, but that you would have to spend or plan with that borrowed money within the year of the suspension (they possibly would have been fine, if they had just suspended the debt brake again for transformational reasons).

[@maciejs5763]

This example with comparing investing in company which is never going into the debt with government is just bad. Really bad. Company goal is to EARN and profit. Country goal should be to create stable enviroment for their citizens. Rarely countries are investing in education and infrastructure, most countries are using debt to give more benefits to big corporations which are lobbying politicians and giving them later extremly good paid positions as "consultants".

[@paulbo9033]

This.

[@rake483]

Dude, bridges in Germany are literally collapsing (Carolabrücke) because the government is so frugal, it doesn't even want to spend money on maintaining existing infrastructure. A crumbling infrastructure does NOT create a stable environment.

[@clockworkvanhellsing372]

​@@rake483 Bridges collapse because money is wasted on complete nonsense instead of doing needed investments. Each year we have a new record high in government budget, but somehow it's still not enough. At the same time we send i.e 500 million € developmental aid to imdia, a land that has landed satteöites on mars and has over 150 nukes. If they have developmental needs, it's their mossguided budgeting, and not germanys resonsibility, especially ehen we need that money to fix our bridges.

[@Clodi95]

debt brake is also present in Switzerland. No idea how strict it is tho

[@user-em8xs7lw8w]

The debt brake is even worse for cities and states in Germany. They are only allowed 0.15 % new debt. For this reason, the last time Germany invested more in it's infrastructure than it losing value, was 30 years ago. It only takes more and more ressources, the longer you wait to fix or improve something.

[@spambot_gpt7]

What you mention is a lack of prioritization of infrastructure. Which is correct. The incorrect part is the assumption that debt would fix this issue. The politicians would take new money and waster that too.

[@ronald3836]

It takes longer and costs more, and all the while the economy is bleeding from crippled infrastructure.

[@ravanpee1325]

The problem is that we spend so much for welfare programms which benefits foreigners and not the native German people. Problem is a lack of priorities

[@user-em8xs7lw8w]

@@ravanpee1325 that's not true at all. Compared to the other stuff in the budget, foreign aid is miniscule, about 0,8 % of it. And even this is beneficial to German businesses often, as it helps developing markets for the future. Often, the work is even done by German companies themselves.

[@ravanpee1325]

@user-em8xs7lw8w We don't talk about foreign aid but payments for unemployed people. Over 50% of unemployed people on social welfare are Ukrains, Syrians, Turks, Afghanistan or Iraqi

[@Phantom-mg5cg]

3:22 The federal court didn't judge if this is an emergency, but they ruled that the government can't use money that was lent for something different than what the parliament had allocated it for. The government could just have gone to the parliament and asked, if the debt brake can be paused for another reason or if they can get a credit for something. The reason this didn't happen was the stupid ideology of the Free Democratic Party. The CDU and especially the FDP are obsessed with the debt brake.

[@john.8805]

Actually, the court did rule that it couldn’t be considered an emergency any more 12 months after it occurred.

[@Marc42]

​@@john.8805Indeed, so the only stupid ideology here is the wealth incineration of modern-day German greens and social democracts - unfortunately it took the lib dems way too long to see this for the rigged game it was all along.

[@jpablo700]

Man, that suit and tie looks sharp.

[@golddigger8759]

Thank you for your work on your channel 🙏

[@gabrielzinho3230]

There is a flaw in the argument about the population owning its government and its debt: redistribution. Everyone is liable, but only rich people hold these assets that the government will pay back. The debt break is good, it's just needs a strict rule that allows for some infrastructure spending.

[@floerry]

No one is holding the German government back from investing in Infrastructure. It's just, that the Government chooses not to do it... Infastructure only ever gets brought up again, when the Politicians wasted all the tax money and ask for more.

[@miro123450]

Thanks, great summary of the topic

[@J.C.1966]

Living on the German border, I regularly see infrastructure which needs repair to support the economy. Not spending that money on that infra will form a break on the economy.

[@ivani3237]

France has much more debt and budget spending. How it is on French side? Much better with infrastructure???

[@d.s.8227]

They have the money to maintain their infrastructure, they just need to finally cut back on the out of control social spending. You can't have it all.

[@oLii96x]

There is no need for making more debt to maintain infrastructure. Just don´t waste the money

[@jonasb911]

@@d.s.8227Why you say „out of control social spending“? Looking at different metrics Germany is in upper field internationally but nothing outrageous.

[@J.C.1966]

@@ivani3237 I don't live in France. I don't know how infra looks in France. I live in the Netherlands, and cross the border for a change of spice as far as foodstuffs go.

[@test_human2647]

The main issue we as a younger generation have with the loosening of the debt brake, is that we see how our government uses money; there are tax cuts for companies that donate politicians or several types of gifts to retirees that are funded by taxes those receiving never paid. So yes heavily investing in infrastructure is needed, but we probably wouldn't get much of but buying voters. So maybe reform it a little, but we don't need more special retirement gifts or Mövenpick laws.

[@aenorist2431]

7:11 That is fake causation. What actually happened is that the same motivation (public pressure about debt) caused two things in parallel: 1) A completely useless debt brake, purely a gesture 2) A reduction in spending to comply with that pressure

[@paxundpeace9970]

Even worse it is an excuse to cut spending and urgently need social services. Like unemployment payments and help. To justify cutting spending on refugees which does cause unsafe housing environments.

[@Fiercesoulking]

"reduction in spending to comply" that is what they did until the bridges start collapsing now all the dept is in form of infrastructure which need renewal. Every time I try to explain what that is Google gets angry at me.

[@maexpp]

how did you get to this conclusion? Why should the first reduction in the ratio take place precisely in the year of its introduction? The same is true, by the way, for the deficit and the primary balance. If you are referring to the "black zero": that was politically proclaimed earlier. I do understand that endogeneity is a major issue, but what is the basis of your assessment? Is there evidence to support your statement?

[@jacksonmatysik8007]

I don't trust politicians with debt

[@spambot_gpt7]

This is the correct take. They can't even curb their overspending, slim down their bureaucracies or prioritize actual infrastructure. With more debt, they would waste even more money.

[@tomtom2806]

The Debt Brake successfully limits welfare politics, but needs an exception for necessary infrastructure repair/development.

[@lesand5484]

What's the benefit of limiting the welfare politics exactly in this case? Because of the debt brake, all Germans with public insurance, which is the majority, now need to pay more for the same health care services, because the Government's debt break did not allow it to give more money to the public insurers. In this case, the debt break just increases costs for private households more than necessary.

[@mx338]

Yea it's working so well at limiting welfare, that the far-right is gaining massive traction, thinking immigrants stole welfare from them.

[@SurmaSampo]

​@@lesand5484The alternative to your example is the public paying more in taxes to fund the interest on borrowings.

[@SurmaSampo]

Borrowing money to pay for regular operational costs like maintenance of capital is what led to the 1988 market crash. Doing this on a regular basis will lead to a debt spiral where eventually money is being borrowed to make the repayments on previous borrowings. Governments should only really borrow for 2 reasons: 1. Emergency funding to cover the cost of unplanned short term emergencies. 2. Creation of new infrastructure with a conservatively estimated return (normally in GDP growth, preferably GDP per capita) that equals or exceeds the total annualised costs. Nations have approximately a zero percent success rate in controlling spending and debt accumulation without hard fiscal controls like this.

[@IFRYRCE]

@@lesand5484 This may be news to you, but public healthcare is welfare politics.

[@bionicle37]

Governments role is not to invest therefore the debt break is absolutely needed

[@HermanWillems]

So u want toll roads all over Germany?

[@bionicle37]

@HermanWillems if that means privatizing highways and simultaneously lowering or completely abolishing taxes on cars/gasoline (thats how they pay for most roads now) than yes

[@ahgrr7411]

The most problematic thing about having such a strict debt brake is taht it doesnt add up in the long run. If Germany had invested properly int their infrastructure needs the last couple of years, they would have maybe a debt level that is a few Percentage points higher than now, but would generate much more growth due to havinf proper infrastructzre for business. Now Germany ahs to invest up to 1 Trillion euros to get their infrastructure back on track which is wa mkre than if they simply had invested properly the years before. The debt break is one of the most frustrating policies ever implemented in german economy, because it simply serves no rational purpose. If u say "The poeple dont know how to spend free money, it is too risky to take on more debt", then why even try it in the first place?? So insanely frsutrating as a young german

[@catslikewitches1332]

Ask the CDU/CSU and FDP? Most of this started under the Kohl-administration, it's a large reason why the "Neue Bundesländer" have/had a hard time to get things done and why the Afd gets such a large following (together with Russian propaganda ala "you were better off in the USSR"). Personally I'm fine with a real parliamentary debate as soon as the nbr from the debt break is reached, simply as it gets out into the open where (all) the money is intended to be spent for. Is it something good for all the citizens (yes, a bridge in Hamburg is on the same page as an upstart for recycling cement in Lübeck*) the parliament votes on it and the debt is project bound (as basically requested by the Bundesgesetzhof). Simply taking up debt for rhetorical reasons is a no-go for me. I know it sounds easier then done. Regretably, those first mentioned parties also privatized big chunks of the infrastructure (Railroads, Telekomunikation**, Healthcare e.g. hospitals, Housing) back then (partly still now), because they claimed it wasn't "profitable" (like a company - an administartion can NEVER really be compared to a company). I screamed against all those selling off to everybody who wanted to listen ... With all those privatizing came regulations (aka bureaucracy), what before was more or less regulated under the constitution's law of taking care of the citizens. (I hope I explained it correct and understandable). Another big chunk about bad infrastructure decisions, is lobbying from and bailouts of big/large companies ... Everytime other parties as the mentioned above get the stearing wheel, it seems as the lobbying in the press and the blackmailing towards large layoffs sweeps the citizens into fearfull returning towards those 2 (now 3) parties ... *Those things/places are just examples not reality as far as I know ** I'm not sure, if it would have been faster/cheaper to get the internet railroad done, but it would have been more equally spread - imo It is a long answer towards your question and more historical facts then solutions, but voting (looking at Februar 2025) has a lot to do with it.

[@ahgrr7411]

@ i. mean i appreciate the effort you took but basically everything you wrote was already in my knowledge, so i can’t do much with that other than be frustrated aswell haha. Especially the privatization of healthcare and DB is so dumb .

[@justanotherdude2165]

@@catslikewitches1332 we can be very sure that the roll-out of fibreoptics would have been cheaper. Currently every single company has their own cable-network, that is biult in a completely disorganized fashion. Putting cables 5x in the same location -subterranean of course, so each company has to both dig and close the hole - leads to incredible inefficiency. One big administration that only places cables 1x per location, with this kind of economies of scale? Most definitely cheaper.

[@bionicle37]

6:56 concluding that because politicians were fiscally responsible in the past they will continue to be in the future is such a foolish statement to make. Especially when new generations come to power this can change very quickly

[@guill90]

Nice suite 😎

[@sternof]

So glad you agree with MMT at minute 08:30, and even used the word "lens" at minute 09:28. Please continue spreading the MMT lens to your soon to be half a million subscribers!

[@askeladd60]

MMT is even more absurd than Keynesianism.

[@qjsharing2408]

Weird though, because Germany has an externally controlled currency. So, the rules for sovereign currency also don't apply.

[@lucaskohl1037]

At 6:20 and 6:30 i think you mislabelled one of your graphs. If both depict the same thing for the same period from the same source, how does germany suddenly have a different trajectory in the second graph than in the first?

[@thomask.9850]

They are both mislabeled as % of GDP while they are really showing trends from a base index of 100. Also on top of that both curves for germany are not matching up at all.

[@MoneyMacro]

Its the same line but the Y-axis scale is different. It's a bit confusing that I didn't use the same color for Germany in both graphs. Sorry about that.

[@lucaskohl1037]

​@@MoneyMacro i get that, but Germany Levels Out at an Index of about 140 in the First Graph and in the Second it's just 120 in 2020.

[@thomask.9850]

@@MoneyMacro As has been said both graphs max out at different values. Also in brackets it says (1998=100) while above it reads Gov debt as % of GDP, one is an index the other would indicate the actual percentages. I also read that Germanys gov debt never really got to above 100%. I think it maxed out at around 80 something % so graphs can't be showing gov debt in % of GDP but what is said in the bracket instead.

[@13231wmw]

Brazil recently had to reform its version of the debt brake. The old rule limited all debt to the inflation-corrected value from 2017. The new version limits the public spending to 70% of the last year's revenue, and the fiscal expenditures to 2.5% above the inflation rate.

[@oliverd.shields2708]

If you're going after Germany, at least go after Switzerland too! The canton Bern has had this dept break and I'm curious about your thoughts!

[@puma7171]

I'm Swiss and the debt brake has worked great here. This is, on the federal level at least (to my knowledge, Bern does not apply a debt brake). In Switzerland, unlike Germany, public investment did not decrease after the introduction of the debt brake! Covid related spendig was accordingly easy, as the country is ready(!) to face challenges such as demographics, climate transition etc. Its sad that almost all advanced economies are completely failing on this.

[@AM-md6sv]

@@puma7171 Public investment in Germany actually increased after the debt break, due to the good fiscals. Public investment has been low in Germany for 30 years now, After re-unification essentially. Investment was cut to finance the growing social sector

[@spambot_gpt7]

@@AM-md6sv This. Spending discipline is required. Debt cannot solve that problem.

[@GerbenWulff]

The question is not if Germany should be allow itself to borrow to invest in infrastructure, but whether it should allow itself to borrow MORE. Germany's financial conservatism helped Germany borrow at some of the lowest rates in the world. Since WWII Germany has been more financially conservative than other countries and it has served them well.

[@ronald3836]

But now the economy is shrinking in large part due to broken infrastructure. Over the last 15 years I have seen everything in Germany getting uglier and uglier and everything in the Netherlands getting nicer and nicer. In Munich, renovating a single S-Bahn entrance now takes THREE years. The S-Bahn system breaks down for a few hours multiple times per week because of totally outdated and worn out signalling control, which is taking 15 years to replace (the new system is supposed to start operating somewhere in 2025, but let's see). This is absolutely not normal for a modern Western country. Road closures also last years. There is absolutely no sense of urgency, while the German economy is bleeding. Instead, politicians are doing their best to make house construction even more expensive than it already is.

[@GerbenWulff]

@@ronald3836 Housing in Germany is still cheaper than in the Netherlands. Some Dutch people move across the border to buy a house in Germany because of that. The infrastructure in the Netherlands was behind on maintenance for a long time, because of budget constraints. Now the finances are in order, and since the periods of negative intrest rates the government has increased spending on infrastructure and maintenance. Now we need the government to plan more housing construction. A lot more. This could really boost our economy for a few decades.

[@antonywerner1893]

Hello you misunderstude the ruling of the Constitutional court. In germany we have Budget laws in the constituion who say how to spend money and the Traficlight-Collition dosend followed them. The thing woes: 1. Everything in the Budget has a purpose and you can not change the purpose of the money the goverment did that. 2. The the Budget needs to be made a year before its used or in the year its used the goverment wanted do use it from the year before. That two things where unconstitutionel.

[@bilgyno1]

Very in-depth discussion about governments being in debt. We are indebted to you for informing us! Joking aside: not accepting the Climate transition as an emergency shows the shortsightedness of that German court...

[@slobodanmatic4918]

Limiting their debt simply means they are pessimistic about their own economy and they are concerned it wont be possible to service the debt in the future.

[@MegaCooliam]

@slobodanmatic4918 looking at western birth rates, I can't particularly disagree with them.

[@berkaygungormus4208]

lol not really but ok

[@9s-l-s9]

No? It means they don't trust (future) politicians to use debt to actually invest and not just consume.

[@rdg7250]

No growth means they wont be able to service the debt

[@Sion-No1]

Look at Japan

[@thilokm522]

3:25 the court's issue with the climate and transformation fund was that the government took 60 billion euros that were assigned to fighting covid consequences but not spent. If they would have declared the climate crisis or their emissions reduction path being unaligned with the paris goals a debt brake emergency with their majority in paliament, most likely there would have been no issue spending the same 60 billion. So this ruling was regarding fairly bureaucratic reasons and being not able to spend the 60 billion was more of an operative mistake by the government than an issue of the debt brake. But in general, I would agree that the debt brake limits the german government's actions in a way that I think a democratically elected government shouldn't be limited

[@zhoudan4387]

Love the suit❤

[@kerimgueney]

People who think the German government would actually use that money meaningfully and not give retirees more money make me laugh. Almost 30% of the federal budget is wasted on retirees. Denmark has a debt brake and a lower GDP-to-debt ratio and they're doing better than Germany in virtually every metric.

[@steemlenn8797]

Are you a troll or can you simply not read tables?

[@kerimgueney]

@@steemlenn8797 Are you illiterate? Look up Rentenzuschüsse des Bundes on their OWN website. The biggest portion of the federal budget goes to "Bundesministerium für Arbeit und Soziales" and 74+% of that goes into "Rentenversicherung und Grundsicherung im Alter und bei Erwerbsminderung". If you don't know the structure of the federal budget, something you can look up, just shut up.

[@paxundpeace9970]

You can't really compare them that well. Denmark has an ecnomy focused on services and some key Industries like production of wind turbines (vestas and Siemens) as well as energy Technology (danfoss) and pharmacy (novo nordisk) Which have high margins compared to high competion the Chemical and automotive Industrie.

[@paxundpeace9970]

Denmark barely gives an state help to seniors beyond average income level. Most people have help them self with private retirement plans. Only low income gets reasonsable support.

[@kerimgueney]

@@paxundpeace9970 That's the perfect model. The government should provide the minimum necessary to survive and everything else should be saved with private retirement plans. In Germany, you pay more into the collective retirement fund than in Denmark and still get less in the end. If we had the Danish model or the tax-exempt private retirement account model like the 401K in the US, the vast majority of Germans would be better off.

[@glike2]

Private companies do not better manage infrastructure! Just look at the railroads like Norfolk Southern under investment in maintenance and train conductors to the point where they've had so many derailments with toxic chemicals that they burned and poisoned the people in the area. I have seen this problem for the past 35 years. Meanwhile, I have never heard of any such serious problems with publicly operated trains during that same time. The problem with the profit motive is external costs are not accounted for with corrupt government not sufficiently penalizing bad corporations.

[@sirjmo]

Private companies refuse to improve. E.g. american rails still not being electrified because it would cost a bit on the short term even though it would have massive savings and be greener in the long term.

[@kisarunihofmannndosi5327]

I'm obviously not an economist but I find it wild, that a country is being criticized for trying not to spend more then it earns and the US is the prime example on why one shouldn't do that. It is said in the video that other advanced economies have managed to decrease their dept: Yes, they just sat it out until the debt became negligible through inflation. They haven't solved anything. This (and of course corporate greed) is why a Yoghurt costs nowadays as much as an entire meal. I'm sorry but if nobody wants the current economic model to collapse politicians around the world should make some hard decisions sooner than just taking up more and more dept.

[@AdamJones381]

Germany is being criticised for not investing in infrastructure, not so much for borrowing for day to day spending. It is like an individual who doesn't take out, a mortgage or a loan to fix the roof because s/he has a rule about taking on debt.

[@robertmusil1107]

You don't need to be an economist to logically determine that this dude is full of shit and pushing a political agenda. There is no consesus in research that debt is "good". He is presenting his stuff like it is an universal truth.

[@gdskopje]

Thank you. Exactly what I wanted to say. Come on. Germany is the 4th economy in the world. The problem is that the government is oversized, corrupt and ineffecient that can't manage its money better. Allowing it to borrow more won't fix the problen for sure.

[@john.8805]

⁠@@AdamJones381this is a common fallacy, not quite explained here. Germany can spend on infrastructure (and does) just not without demonstrating how this will create an income. Technically, Germany can borrow endless money, if it can also generate endless revenue. In your example, it would mean it can take out a loan, but not in excess of the houses’ value/ projected costs.

[@2and20]

@@john.8805precisely this! This video (in my view) shows the folly of economic theory. The examples cited are also wildly misleading. Post-WW2 the US increased taxes 3-4X to offset debt (it didn’t decline on its own because returns from investing). Denmark had lower debt rates because the collect 3x more in taxes as a percentage of GDP than Denmark. And this idea of spending on stuff is stupid without taking into account ROIC on these projects which is declining the world over.

[@phantomderp834]

Debt brake is a great idea. USA pays almost a trillion in interest payments, would be nice if we had a debt brake. If debt is useful to allow growth, then private companies can borrow money themselves.

[@ThomasVWorm]

You do have a trade deficit, which requires a growing public debt. The private sector would collapse, when it is required to have growing debt for net imports.

[@georgehoffmann4148]

Interesting opinion. Though, why does everyone always assumes the government needs even more money? The government has a huge budget, they should be able to invest within that budget. Consuming all this income and than go and say: Oh but now I need even more money (taxes or debt) to invest, is a concept I find hard to agree to.

[@DerAstrophysikerr]

"huge budget" is relative. What's important to focus on is whether or not the government can fulfill its tasks. In Germany's case, the infrastructure is crumbling, and most of its spending is already set and inelastic, so clearly, there is not enough room for investment. "they should be able to invest within that budget" why? the availability of an artificial means like money should not be what determines investment, but the needs of the economy. "Consuming all this income" it's not 'consumed' as in 'lost', though. If the government spends money, it goes into the economy, i.e. this money is somebody's income.

[@AdamJones381]

It is about choices, which spending would you cut for investment?

[@kayleekayt3306]

Germany's budget has been way bigger per capita in the past thou. Unification in the 1990s, 1970s-late 1980s arms spending.

[@santostv.]

Germans is a export economy, Romania has better internet than Germany, German rail operator is clown on by Germans,Germany only in 2025 will stop using faxes, German bureaucracy according to some is even worse than southern European bureaucracy thats how bad they are Austerity doesn’t work it destroyed countries like mine,Germany been a export economy and exports been reducing they need to put to use the extra cash flow they have from their reduced budget or they will continue falling behind despite being the biggest economy in the eu they have serious problems that if continue unaddressed they will become the japan of Europe.

[@theWebWizrd]

​@@AdamJones381 I don't know the German budget, but I am sure a lot of people would point to immigration, climate change-related expenses and aid to foreign countries as the first places to reeuce spending to invest in infrastructure. That is exactly what many people ask for in my country, anyways, and it makes some sense too since we spend many, many billions on those things. In other words, of course it is a political issue of priorities.

[@TheLeftPath]

Germanys debt went down because they were "exporting" it. If someone saves, someone else spends, but in Germany, everybody saved (yes, even companies). So who has the debt? The other european countries! Germany utilized the euro to destroy its competitors in the eu, which meant that many countries had to take up debt to import stuff and to not let the unemployed starve (so they even exported that as well). Easy saldo calculation, no big theories needed. And additionally to that, they even preseured those countries to restrict their debt, resulting in austerity policies all over europe.

[@ThomasVWorm]

Good summary.

[@SurmaSampo]

Almost everything you wrote here appears to be the opposite of truth. How does the German saving force other nations to borrow money? How did Germany use the euro to destroy competition in an open market? How did starvation of the unemployed become and export? Wtf is a saldo calculation

[@TheLeftPath]

@@SurmaSampo ah yes the Classic "you are saying the opposite of thruth" without providing any actual counter argument. If you dont understand the basic fact that competition means that there is a winner and a loser and that Germany has outcompeted other countries industries, destroying them in the process because the euro has put countries Industries like greece's or spain's into direct competition with germany's, then there is not much more to tell to you. Because what happens when a country cant produce its own stuff because its Industry gets obliterated? It has to IMPORT it from the country it has been OUTCOMPETED by because thats where all the Industry ended up. And if it doesnt produce much itself, it has little income, so it has to BORROW. Get it? And you dont know what a saldo is? The simplest economic Relation, for everyone who saves there is someone who spends.

[@TheLeftPath]

@@SurmaSampo ah yes the Classic "you are saying the opposite of thruth" without providing any actual counter argument. If you dont understand the basic fact that competition means that there is a winner and a loser and that Germany has outcompeted other countries industries, destroying them in the process because the euro has put countries Industries like greece's or spain's into direct competition with germany's, then there is not much more to tell to you. Because what happens when a country cant produce its own stuff because its Industry gets obliterated? It has to IMPORT it from the country it has been OUTCOMPETED by because thats where all the Industry ended up. And if it doesnt produce much itself, it has little income, so it has to BORROW. Get it? And you dont know what a saldo is? The simplest economic Relation, for everyone who saves there is someone who spends.

[@ThomasVWorm]

@SurmaSampo how we Germans force others to borrow money? Money is created by debt, which requires the debtor to get the money back in the given term of his contract. To be able to repay the debt, it need the same amount of the demand as being created by the debtors. If it is lower, the debtors go bust, because the money flow back to them is not big enough to pay back all the debt. Germany has huge export surpluses each year. It means it is a net importer of foreign money. Since the Germans hoard this money rather than spending it where it comes from. This results into a lack of demand in those countries. Those countries now have 3 options to react to this: 1. they let their businesses and economy collapse, though it is not the fault of those companies, who borrowed money to invest where should be a demand 2. they can send their armies to Germany and force the Germans to go shopping with the money 3. the foreign governments tax less then they should to allow for more demand in their countries. But as a consequence, this increases their public debt as much as Germany is a net exporter. Option 3 is the most reasonable option.

[@rungus24]

Adding to all that, when a government tries to avoid spending to fix a problem, the problem tends to become more expensive. We have the saying that 'a stitch in time saves nine', which describes how things get more expensive to mend if you try to avoid mending them. One example of this in govenment spending is healthcare, where if you treat a medical condition quickly, it is cheaper to treat than if you leave it for too long. Various types of infrastructure spending also have the same principle, where the prevention is cheaper than the cure. In the UK we saw all of these problems over the last fifteen years, and also another way that everything became more expensive when governments tried not to spend is that many professions, like teaching and medicine, were so underfunded, and workers were so overworked, that people began to leave the profession, creating a very expensive 'brain drain', so now we have to pay more money to get supply teachers and locum doctors to fill the gaps that permanent workers used to fill. We pay more for less, all so the government of a decade ago could see short term savings at a time when borrowing rates were low. It's sad to see Germany making similar mistakes, and worryig to see that the US is about to dive really far into the same.

[@paxundpeace9970]

Sums it up very well. The lack of primary doctors or specialists is leading to more patients seeking help in emergency departments of hospitals. While you have to keep in mind. That primary specialist care doctors see over a Billion visits each year in germany and emergency departments less then 20 Million. Of which a third could usually be seen in primary care too.

[@rungus24]

@@paxundpeace9970 It's become pretty difficult to see doctors now here in the UK, and then the waiting list to get any treatment is terrible, due to years of deliberate underfunding. And this all hurts the economy, because so many people are unable to work now due to ill health. Another example is that, in about 2007, the Labour Party tried to become more electable by moving to the right (which never works) and so they tried to make unemployment benefits punitive, saying they were getting 'tough on scroungers', but it was really just disabled people who they hurt. And it didn't make them electable, so when the Conservatives got in in 2010, they got even tougher on 'scroungers', so there were loads of deaths of disabled people, and all the evidence since has shown that it cost the tax payer more because it made people less able to work because (not including those who died to despair or hunger) it drove us mad, making us more ill and more dependant on the state.

[@gepal7914]

The question is not just of making investments, but of how the investments are decided. If the investment is wasteful and destructive, as in Germany’s energy sector, this should be controlled. The EURO agreement stated that debt/GDP should not exceed 60% and deficits should not exceed 3% of GDP. Few Governments have stayed, voluntarily, within those limits. That is why the Debt brake is necessary.

[@PatrickHutton]

The State has three ways to cover its costs. 1) Tax the Country 2) Borrow and pay later 3) Or the worst monetary inflation. No amount of clever and/or soothing words change that. No clever accounting diagrams and playing with formulas alter that fact.

[@qjsharing2408]

Hmmmn, you don't need inflation to cover costs, technically. But that would depend on the scale of the costs. If there are untapped resources (usually labour) then they can be tapped into production without causing inflation (since they're bringing new supply online). There's always the counterfactual. Like, a tax may be used to pay for something. But the absence of that 'something' leads to higher costs elsewhere. It would be a greater cost to the citizenry, despite not showing up as a 'tax'.

[@maciejs5763]

They can get their central bank buy all the debt at the rates below zero (so basically debt will be shrinking). But it is possible only for countries with negative GDP growth and deflation like Japan. Othwerwise it would go into option 3) mentioned by you. Also there is option 4) Go bankrupt and set debt counter on zero.

[@rmidifferent8906]

Technically there can be also profit from government owned companies

[@SianaGearz]

@@rmidifferent8906 this is strictly equivalent to tax isn't it. That is say a company wasn't state owned but formed an industry which was taxed higher.

[@edata5898]

The economy can also grow, which enables the government to earn more tax without raising its tax rates and shrinks the debt to gdp ratio by increasing gdp.

[@matthewmelange]

6:18 I don't think the US Gov debt % of GDP is 250% in 2020 I think it was a lot closer to U.S. debt to gdp ratio for 2020 was 124.73% Edit: Why does the same statistic change numbers 10 seconds later? 6:28

[@andresmartinezramos7513]

The colors may be the same, but the countries aren't

[@apollosbby]

You did so well presenting this!

[@pouyaz8472]

This assumes governments generally borrow to invest in R&D and infrastructure. However, in the case of the United States, trillions have been borrowed to fund unnecessary wars and to address government mismanagement and inefficiencies instead

[@paxundpeace9970]

So you now limited RD and infrastructure and social services.

[@archangel2633]

No other economy... someone forgot about the uS debt ceiling? Bit surprised to see such arguments against the debt brake given overall goverment expenditure is now at historical (non world war) levels as well as debt. Germany's enery sector isn't suffering from underinvestment, it collapsed because of religious convictions (on nucleair) and political mismanagement (with Russian gas). In a world where countries are realizing politicians are ALWAYS going to spend more in good as well as bad times there needs to be a cap on the borrowing forcing them to make choices rather than just please everyone.

[@paxundpeace9970]

Not the same. The debt break limits the amount of new debt per year to a share of 0.35% of GDP. About 14.5 Billion Euro in the moment. Which isn't that much. Hardly 180€ per person. In the long run this will result in German government debt to be limited to 14% of GDP which would be way to low. US debt ceiling can be agreed or raised by congress primarly the house.

[@santostv.]

Usa is always increasing their debt ceiling as far im aware unlike Germany, Germany has underlying problems decades in the making because of their love for austerity and frugality, for a country that is the biggest economy in Europe in some areas they are in the behind even compared to other European countries,Sweden is 95% cashless,Romania has the fastest internet speeds,Estónia has a e-government ect despite this they have a varied economy and the cash to face adversity they just need a plan for the future. German auto industry lobbied the Eu to use synthetic fuels,Germany reduced ev subsidies. Germans dislike tech more than most even for eu standards but the money now is in tech ect.

[@Jonas-Seiler]

Nuclea energy has always been stupid and it was never even close to making up enough of the energy mix to induce any kind of collapse

[@HermanWillems]

​​@@santostv.This is so true. I bought and sold car to German people for example. The bureaucracy needed for this process of transferring ownership is that i needed to go to an office... Do lots paperwork. While in Netherlands. We do EVERYTHING online. I just transfer ownership of my car to another person in just mere seconds. 24/7 not needing to wait for a stupid office to be open and drive to it. Germany is extremely oldfasioned and under developed in terms of countries surrounding it. Its like they dont know how to use a computer and stuff hahaha.

[@ArminKohne-ih6pi]

Thank you so much for making a video about this, I think in Germany we really need others explaining that to us because in Germany debt is something scary for most people. Maby also because it is less usual to have personal dept

[@guydreamr]

Seems that certain countries just can't shake the austerity bug, despite its obvious failures - Brexit was largely driven by the lack of investment in infrastructure, education, and healthcare which made the British public feel left out and led to their blaming immigrants and Brussels instead of the real culprit, which was austerity. As John Maynard Keynes once said, "the trouble is not in the embracing of new ideas but in the escaping of old ones."

[@maexpp]

Notice, however, that most empirical studies do not show a significant influence of fiscal rules on public investment. From a theoretical (political economy) perspective, any additional means are more likely to be spent on consumption rather than investment. This is especially true in Germany with a huge demographic problem. Literally nothing indicates that higher debt will be used for investment. Furthermore, the debt break allows to take up debt as high as 0.35% of GDP. In economic bad times, this is expanded to a much higher percentage. In 2024, this allowed debt as high as 54 billion euros, or 11% of federal income.

[@TakeMeToTheTruth]

A lot of simplifications in this presentation. For example, debt is a burden on the future (true) while also being an asset to that future (in the form of bonds), which assumes that the debt is held as widely as the tax burden. This isn’t accurate in most countries, since the folks who hold most of the debt are the rich. Thus, government debt is a massive transfer of wealth from the working class to the wealthy

[@MoneyMacro]

It is true that the inequality aspect is really important when talking about this in more depth. However, it also makes the point much harder to grasp. I decided to keep it simple. I don't think it is an oversimplification because all I said here was that debt is not only a burden for future generations it is also an asset.

[@insaneshepherd8678]

Most of the bonds are being held by public institutions or banks. It's not like some rich guys soak up all the government bonds.

[@Alexander-z6x]

​@@MoneyMacroid much rather see countries repay debt than just willy nilly take on debt. Db is a private institution wasting tax and money for nothing. Its ineficcient. Repay debt and stop taking debt ever again.

[@xiphoid2011]

If you know the interest rate or rate of return on US government bonds, then you wouldn't say that. Because US treasury bonds are so safe, it always pays lower interest rate than other investment vehicles. In fact, it experience high inflation risk (meaning, because interest rates are so low, inflation can easily exceed it so the investor would be actually losing money). Most US treasures are used as a form of safety, not investment. They make up parts of any diversified retirement funds. So almost every American's pensions and 401k retirement target funds usually owns a small piece of US treasury bonds.

[@paxundpeace9970]

​@@MoneyMacroNot only that but you were hardly getting to the heart of the discussion and spend to much time on outside almost of topic examples.

[@TeeHaa0032]

Their bridges are actually collapsing like the Carolabridge in Dresden, but hey... they have the debtbrake.

[@r.7442]

The fundamental question is whether the societal return on investment of the government "Investments" is sufficiently high. They should need to prioritize and manage resources carefully.

[@surfacepro3328]

That is such an overused and plain wrong argument. The whole 16 years of Angela Merkels government have consisted of them trying to cut costs wherever they can, infrastructure, schools, military, housing you name it. No all of these things are of extremely low quality and now our bridges are literally collapsing. There is nothing that can be 'prioritized' anymore everything is running on the bare minimum we just need to make kore debt

[@paquitotm4878]

No debt brake is too strict. No state should have debt as you're increasing the tax burden to people that couldn't vote at the time or that they weren't even born yet.

[@PeloquinDavid]

Canadian here (a retired federal public service economist). What I most object to in relation to German attitudes towards debt is the hypocrisy of being much more tolerant of "breaking the rules" DOMESTICALLY but insisting on stringent compliance on compliance of OTHER countries (think Greece) with equivalent EU rules. I have LONG maintained that the Euro - in the absence of enhanced (budgetary/fiscal) automatic stabilisers - was a grievous error guaranteed to end badly for any EU countries facing adverse asymmetric economic shocks any time in the future. In that context, arbitrary debt rules are a ticking time bomb for the European project.

[@witthyhumpleton3514]

Agreed, I find it even more egregious now that we have seen Covid play out. The Greek government was able to easily sell it's bonds as the ECB backed the program. Even though the country's debt is higher than during the initial debt crisis, it was able to get minimal interest rate loans without issue. It goes to show that Greece's financial problems, while there were real problems, were not it's government debt, it was simply other EU actors, like Germany, who decided to drop Greece with the ECB needing to follow the influence of the stronger economic parties in the EU, if the ECB were fully behind Greece at the time, it would not have had any issues, meaning it was a willfull and politically motivated decision to stop Greece's economy from growing and developing, not a necessary fiscal one.

[@mreese8764]

Germany's export surplus is too big, violating the rules of the Euro which destroyed the competitiveness of other Euro countries, forcing them to have more debt. But Germany isn't fined and the other countries are being blamed. It's idiotic. And it was predicted. The Germans would be much less competitive if the German Mark would still exist because it would be much stronger than the Euro.

[@dakufokkusu2702]

I see no problem with that. You can do with your own money what you want, but if you rely on other peoples money they rightfully should hold you accountable. Afterall its their money you spend.

[@simonmarshall3869]

It feels like bad communication between housemates when one cuts the other off for owing more to the house utility bill.

[@crosstraffic187]

Absolutely! The Euro crisis was a real eye opener.

[@fnorgen]

The real question is: What is the ideal government debt load? Presumably if 0% of the budget goes to servicing debt then that is a terribly wasted opportunity, and if 50% is needed to service debt then that is way too high. So it seems reasonable that the debt /gdp ratio has to be stabilized eventually. It can't be allowed to grow forever. I do find it interesting how the US previously only saw big increases in government debt during big national crises, but from the 80's onwards it has largely crept up even in relatively good years. Oh sure, it has fueled economic growth, but are they really getting a good return on investment anymore? The Danes seem to have kept their debt well under control without really doing anything fancy. Are they missing out? Also, not every source of inefficiency can be solved by an injection of capital. In some cases that will only hide the problem.

[@ombagi1386]

German writing. The problem is that many people in the public discourse in Germany have a false understanding about what is an investment and what is "consumption spending". For example, the Kindergrundsicherung (Basic Child Support) was a law agreed to by the coalition, but then scrapped due to unwillingness of the finance minister to provide the necessary funding. The narrative here was that increasing child support pay for vulnerable families was consumption spending, and most people agree that government should be austere on consumption spending. In fact, growing up poor is a major risk factor for low income in adulthood, low productivity in society, and poor health. So I see the Kindergrundsicherung as an investment into our country's economy. Conversely, spending billions on new airports, motorways, or even Stuttgart 21 station pays towards infrastructure, a bit, but is in fact consumption spending, or "show off" spending, with only little value for the economy. We need to invest in train stations, no doubt, but we shouldn't spend billions on projects where it is not necessary, while money is short elsewhere.

[@SurmaSampo]

While child support payments do have long run fiscal benefits and increase can very well be consumption spending if the predicted economic and fiscal returns are unknown or less than the costs including any inflationary pressure created. Hard infrastructure can be status spending or pork barreling but those projects are easier to predict the economic benefits of and have a strong track record of contributing to economic growth. Front load costs with relatively low operational costs fit more readily into investment than the opposite. Investment does not require endlessly borrowing money every year just to maintain the investment costs. That is consumptive spending.

[@peteregan3862]

The world need to study Australia's economic performance from 1788 onwards. When Europeans arrived, there was no settlement infrastructure - the aboriginals were so skilled at living in the environment, they had no need of it. When railways arrived, they were built by government as the period for return on railways was too long for the private sector. Also, government, in the form of parliamentary committees, decided where railways went based on economic prospects. The committees were where MPs learned about public infrastructure (eg, transport services and supporting infrastructure strategies) to support privacy land use - residential, commercial, etc. The states performed better when geographically elected politicians made and committed to infrastructure decisions, not bureaucrats. Australia also now has vertical fiscal imbalance as income tax was handed to the Commonwealth in 1946, but not responsibility for infrastructure (eg, main roads and railways) that are built by debt backed by tax receipts. We also have political divisions with one party dedicated to seeing that rural and regional voters have poor access services to keep city folk out and for better services to be a campaign point to stay elected, but never delivered as that would be the end of the party.

[@thiagomassa9807]

Politicians love to spend, and public spending is sooooo inefficient. Every economist knows it. Germany is doing great as it is, and if there is any problem here isn't because of the lack of money, but rather the bureaucracy and regulations. Removing the debt break won't fix this issue. US grew based on much they overspent since the financial crisis and the QEs and heterodox economic policies. Germany could decide as well to dig up holes and fill it up to show "economic activity" like the US has been doing since 2007, but it wouldn't make any difference, except that it would be more indebted. Just look at US life expectancy rate, we should give exactly zero fucks about how much GDP they can put out if they are working themselves to death in a country plagued with inequality, crime etc.

[@thepedrothethethe6151]

I hope your next train isn't late due to lack of maintenence

[@noidea5597]

​@@thepedrothethethe6151 It is true that there was way too little investment in the rail system, but at least they're renovating it now. Your country (which I assume to be the US) isn't much better.

[@thoree.1048]

@@noidea5597 The Infrastructure in Germany lacks far behind most EU neighbours. Not only trains but roads, bridges, education, defense etc. The debt brake is one of the main reasons for this, not just bureaucracy. Public spending needs to be done so the economy works.

[@alexturlais8558]

The US has better quality of life than Europe. Instead of digging holes, the US spent on growing their economy. Germany is getting poorer because they prefer rules to being richer.

[@santostv.]

Delusional German no wonder your companies ceos are also delusional by delaying progress. About bureaucracy again you need investment in digitalization of the public sector Germany should have invested when interests rates were low but their stubbornness took the better of them and now will borrow with although decreasing higher interest rates. Germany has money and is the powerhouse of Europe if Germany fails most countries fail so Germany can’t become the Japan of Europe.

[@TheLovescream]

One thing I would add is that the debt brake is inherently anti-democratic, intentionally limiting the possibility for future electorates to control their own spending without having a 2/3 majority. Germany truly had awful leadership the last 20 years.

[@neovi6424]

Germany has a lot of dumb ideas.

[@arafat464]

Congrats on the Economist sponsorship. I can't think of a better pairing.

[@BobAbc0815]

Germany had the "Golden Rule" before the Debt Break, the Problem was what will or wont be counted as Investment (Roads allways, Education never).

[@guru47pi]

There's a happy medium. The US's 20% deficit is totally unsustainable, and has enabled huge tax cuts for the rich with no corresponding reforms to SS, Medicare, and the military, which consume 85% of the budget. That said, Germany's debt break needs caveats for capital investment and war time

[@sakshambhadoria9998]

Lack of political consensus and government infighting, social churn, economic downslide and tough external environment are prominent the headaches for policymakers in Germany and even whole of europe.

[@Iskelderon]

The government ultimately crumbled because of one man's hubris, who is still convinced he knows better than subject experts, when his previous experience before politics was only that he ran a company into the ground (hence why the libertarians pushed him for finance minister).

[@Marc42]

It crumbled because of ridiculous ideology-driven reddish-green decisions pretty much ruining Germany's energy autarky, the financial sustainability of its social systems and its future defence posture in one fell swoop... the lib dems stopped this madness way too late, unfortunately.

[@SurmaSampo]

Who are the subject matter experts in this example? Other politicians?

[@Iskelderon]

@@SurmaSampo Economists from universities all the way up to the WTO. In addition to those, also industry spokespeople.

[@SurmaSampo]

@@Iskelderon As far as I can tell the bill that triggered the issue was designed to take on more debt to fund welfare payments, climate emergency measures and support for Ukraine (at least according to the Guardian). This doesn't come close to meeting the emergency requirement and would have certainly been challenged and defeated in court. Maybe economists and lobbyists are not the people to ask questions of law.

[@Iskelderon]

@@SurmaSampo What toppled it was a list of demands from the finance minister and representant of the libertarian party with crap so outlandish that the other two coalition partners could have never let it fly. And this was after the new budget package had already been completed. About a week ago, two newspapers released news that this had been engindered to force that exact crisis and in their hubris the FDP even named the project "D-Day", with plans dating back months.

[@Maas_Grande]

German economy functioned when it could export absurd amounts. As the euro expanded and first order competition increased their exports shrunk, but government requirements continued to grow. Instead of economically enslaving their friends and empowering their ideological enemies they should have been trying to assist the European neighborhood to develop interdependence. But Germany will only allow itself to be dependent on its ideological rivals. The EU is a mirage.

[@HermanWillems]

It was like that. In the past. In Netherlands the second language was German. Germany was a very big trading partner. But now second language is English and Germany has become a smaller trading partner. So yeah.

[@thiscommentsdeleted]

Deutsche Bahn has had worsening services for decades now. We're at a point where I can't remember taking a German train and not arriving late (seriously). I'm not sure whether (semi) privatizing passenger traffic was a great idea in many EU countries. It neither got cheaper for passengers nor more convenient. In fact, a bunch of lines and amenities have been cut or downsized. The only compliment I could give to DB/politics is the regional train ticket for 50€/month. There is nothing else to praise...

[@nikolavideomaker]

The 50 euro ticket is part of the problem. How can DB have enough money to renovate their system, when they barely make money.

[@theprofessionalfence-sitter]

One problem with DB (and railway companies in a number of other countries) is that they are required to provide connections to some rural backwaters, instead of being allowed to focus on providing better service on the main lines.

[@gaymer8849]

@@theprofessionalfence-sitter that is just not true, connections to rural backwaters are ordered by the states and can be serviced by the DB or any other railway company

[@theprofessionalfence-sitter]

@@gaymer8849 It is still money that the states are not putting into better service on the main lines, instead.

[@Alexander-z6x]

​@@nikolavideomaker and if db doesnt have it, it runs empty trains. People using more trains that run anyways is better than not. Pit db back into publick hands

[@RJKYEG]

In Canada, interest on our national debt is becoming a substantial expense, and it's been getting worse for like 8 years in a row.

[@HermanWillems]

But Canada has huge huge hugeeeee resources. U just have to sell it and pay off the debt. Easy.

[@donaldmcronald2331]

As a German, I can assure you that the debt brake is a political tool, not an economic one.

[@yeetyeet7070]

this

[@Rad-Poe]

In Gesetzestext gegossene Besitzstandswahrung.

[@robertschumacher9640]

In my opinion, one problem that you do not address directly is that each party, due to its respective ideological orientation, prefers different things that, in its opinion, justify taking on debt (Ideologically motivated expenditure) for this purpose without this additional expenditure promoting sustainable growth (Productive debt). This will be an important point in a reform of the debt brake, also in view of the fact that there are more and more coalitions in Germany that differ greatly in their ideological orientation.

[@dondonnysson4973]

Imagine living in a fiat monetary system and not abusing debt

[@johannesu8006]

While there is a lot of valid criticism that there is good and bad debt and investment is necessary, the ability to not prioritize within the existing budget shows a lack of seriousness from our politicians. If the government is allowed to yolo out more debt, it will do so (see France...) and the track record of actually spending the money on things that provide a ROI is highly questionable. In terms of logic alone, it would be a good move. But the prerequisite would be responsible useage, and I doubt that part of the equation...

[@dimlylitcorners]

09:00 also there would be no money if the government didn't spend it first…

[@maciejs5763]

Nope. Currently money is created by private banks loans. In the history of USA there was also issuence of private money. Government was not needed for it. Additionaly in old days everyone who has gold or silver could create their own money and every bank could create "paper" money as deposit notes even without cover.

[@mostlyguesses8385]

Guy jumped fast to no debt brake needed.

[@swedichboy1000]

Why money is an artificial limitation.

[@theprofessionalfence-sitter]

It is really not. Money represents real resources and they all need to come from somewhere.

[@maciejs5763]

@@theprofessionalfence-sitteryou are partially correct about limitation of real resources. But money is just abstract unit of measurement of wealth. Same as you can't say that Fahrenheit or Celsius is representing heat. Of course money is more "flexible" so it can change in time. But it is nowhere near being real. Real are things which can be exchanged for money, but not money itself.

[@bigpapa1954]

The only world, in which a debt brake can make sense, is when you are sure, that the government will worsen the situation, and all you can do is to limit the damage. However, if that were the case, you shouldn't limit government but change it.

[@TwentyZZ24]

I still think it is more of a sound strategy in the long term rather than artificially pumping the markets like certain others

[@huntardhc2286]

Well yes. But it also artificially prevents necessary investments. Infrastructure, science & education funding is strugglling for decades now. And its what the country is running on. We still depend on the infrastructure that was built in the 60s and 70s but its starting to crumble. AND theres nothing comparable being done for future generations. The debt brake just means managed stagnation and inability to react quickly to crisises.

[@XMysticHerox]

Avoiding debt is a sounder strategy. A hard limit is however not much better than bubble creation. Of course the only reasonable course is a sufficient tax level and good city planning. But voters hate that so here we are.

[@termitreter6545]

Tbh there is spending too much, and theres spending too little. Neither is good.

[@jgcondron]

​@@termitreter6545The likes of the short term thinking "geniuses" at Volkswagen only seem keen on burning money on a hostile state.

[@calexico66]

The dumbest idea is not recognizing that bailing out the private banks was just pushing all the money these have created through credit in the system into the public accounts. If governments wouldn't have done that the economy would have collapsed by lack of liquidity, they should have also nationalized the banks and punished the directors and stockholders which they didn't. This debt that occurred after 2008 was about closing the big economic hole that the financial system created, but... It seems people aren't very bright, politicians are often clowns of some sort or another, and decided that the narrative should be the State is borrowing too much. And 16 years later... We have this... And people keep barking at the wrong door... It is clear that people prefer to obfuscate the reasons that they get themselves into messes.

[@tudvalstone]

Here's an idea. Mandate an election any time a government tables a budget that increases spending more than inflation.

[@pagclaud]

Switzerland also has a debt break. Without the issue of infrastructure under investment.

[@debbe7182]

Its imporant to mention, that debt break does not mean "no additional debt" but "only LIMITED ADDITONAL debt". Therefore the debt break is a control mechanism for the governments: handle the money (like everyone else has to do) people are earning and giving you through tax. If you are not able to -> find a way to do so and cut unnecessary spendings It also has a signal function: if the wealthiest country in the EU is not able to manage with their money, why should poorer do so? -> If Germany increases their debt in excess, the Greeks and Spains will do so and we end in a crisis. Again. In general its a very good mechanism. Obviously there should be exceptions for exogenous shocks.

[@m.rogers5846]

Your view suggests that current government budgets only include necessary expenditures and that leaves new debt as the only solution for investment. This is untrue. So much of government budgets are filled with non-essential but popular spending that could be cut if necessary for future investments. Otherwise, politicians will always say "we can't cut a thing" and the only alternative is new debt. Meanwhile, the baseline budget goes up each year even without new programs. Politicians need rules for the budget just as families do.

[@ManuelBTC21]

The idea that the debt brake is too strict is strictly ridiculous. As if every cent in the budget were holy and the only way to finance whatever project is regarded as a new top priority can only be financed through debt. It's important to recognize, whenever the government spends money, be it financed through taxes or debt, it makes claim to resources of the economy, crowding out private actors. In other words, whenever the government spends money (which is mostly consumption spending, rather than investment), private actors are restricted in their access to land, labour and capital. Debt does not magically spawn resources for the government to use as investment. Rather, the claim that debt is needed, is equivalent to the claim that the government (while putting a new burden on people who aren't even born yet) is in a better position to determine how scarce resources of the economy should be used, compared with private actors who are spending their own money. Add further to this, that Germany is already one of the highest tax jurisdictions in the OECD, with a budget on the order of 50% of GDP. In other words, it's reasonable to say that Germany is more socialist than capitalist. Germany is projected up to 2026 to have its fifth consecutive year of zero growth and has had practically no increase in labour force productivity for over a decade. Germany is dying of socialism and yet M&M says "it's a no-brainer" for Germany to engage in even more socialism. If e.g infrastructure investments are the most important thing right now, then cut something else. Face the hard decision of prioritising things in the budget, rather than taking the easy-out of spending at the expense of the private sector and younger generations.

[@ronald3836]

But Germany's economy is now suffering from a lack of government investment in Germany's infrastructure. It makes no sense to try to "save" money by letting infrastructure rot.

[@iliketoast-q9b]

When the government invests in infrastructure it hires private companies to pave new roads, build new trusses for power lines and so. When the government pays for social security, that money ends up the local markets through consumption, driving demand. When the government invests in education by hiring more teachers it technically spends money on consumption, however more or better paid teachers lead to better education, leading to higher GDP with positive ROI. If conversly the government wanted to reduce national debt it would have to raise taxes, therefore taking money out of the economy, restricting access to wealth. Unlike private debt the government doesn't owe anyone its debt unless it's in foreign currency. The money we earn and pay taxes with is past debt, so without debt there would be no wealth in the first place. Additionally national debt is not the same as private debt and no, the younger generations do not have to pay it back, but they do have to live with our crumbling infrastructure and outdated education system. Paying everything out of the budget is a ludicrous idea and stems from a lack of understanding in macroeconomics and how money and currencies actually work. Also the patents that paved the way and culminated in the first computer being built were, with only one exception...wait for it...publically funded.

[@trobbonius]

well, @iliketoast-q9b already made a nice counter-argument on the economic side. But although I know I'm on an economics channel here, I'd like to put out a reminder here that in the end, economy is just _a system to allocate resources_. It may work quite nicely in some circumstances and worse in others, but in the end I think there is so much more that makes up our lives than merely labor and consumption, so much that happens outside of economy, that I'm sometimes quite happy to have a parallel system on the political side of things. I mean, essentially, democracy is also some kind of market allocation of supply and demand. And this way it's even possible to keep some adverse effects of monopolization and extreme divergence in wealth in check.

[@lambo8063]

The idea of the debt break is in my opinion quite smart. creates reform pressure and Ideally forces conversations about structural problems instead of just dumping money on it. Plus not every investment is a good and can become just an other Subsidy. It's obviously not idea but the idea behind it is not baseless

[@MrGolibroda]

6:22 - What if the Netherlands and Denmark results are similar because they are intermingled with the German economy due to its proximity and smaller economies are more affected by it's Germany size?

[@MoneyMacro]

If the theory was true that politicians always want to borrow more to hand out goodies, we would likely still have seen more government debt despite this integration.

[@MrGolibroda]

@@MoneyMacroThat's why the break was invented, to stop handing out miscalculated, corrupt or unfounded investments. The private business will correct the mistakes by handling work at market price to it's neighboring subcontractors. Additional taxes would incentivize their politicians to make similar decisions because they share industries and legacy. It's possible that Debt Break created mirroring effect in non-debt break countries.

[@YokeRoel]

Just enforces efficiency. There’s always something that it seems worth taking debt for. It’s been a wise decision to implement it.

[@Almirante1741]

Only a keynesian economist, also known as an ignorant, would thing that debt brakes are bad. The more government expends, people become poorer

[@fatdogonsand6816]

Really nice topic very sad it doesn’t get the views it deserves