Common Wisdom: Germany & Communism

Reading time: 900 words, 2 to 4 minutes

The trouble with common wisdom is it’s neither common nor very wise. In fact, most of the time it’s either completely wrong or, at best, only half right.

Case in point: the collapse of the USSR in 1991. Common wisdom said that, after three generations under Communism spanning 70 years, Russians would need several generations to re-learn how to work, grow their economy and regain their freedom. Most of us have heard this in one form or another. Unfortunately, it’s wrong.

Re-unified Germany proved otherwise. The Berlin wall fell in 1989 and Communist East Germany was re-united with West Germany. Granted, East Germany was Communist for only two generations: 44 years from 1945 to 1989. However much they suffered under Communist rule, they also suffered greatly after re-unification.

Four million Germans lost their jobs and about 14,000 companies in East Germany either shut down or were privatized. According to Macleans’ February 22 article,
“Can Germany rescue its ailing neighbours?” “It wasn’t until 2003 that the tide began to turn…” making Germany into the economic powerhouse that it is today.

The tide began to turn for Germany 14 years ago. Russia has had 21 years and their tide is still receding; their population is falling so rapidly they’re importing Chinese loggers in eastern Russia, their life spans are falling and Russian males are drinking themselves to death in record numbers. Unless something happens very soon to turn Russia around, the Chinese will conquer the eastern half of Russia without firing a shot. The Chinese are much more capable of developing and exploiting Russia’s vast natural resources than the Russians ever have been or probably ever will be.

Americans do not understand this. They don’t see the danger of the Russian vacuum being filled by the Chinese. American’s myopic world view is stunted by their inability to see beyond their own borders. They barely register that Africa, with its vast natural resources is being developed with the aid of and to the benefit of the Chinese who are financing railroads, roads and ports in Africa. This logistics infrastructure has one aim: to facilitate resource extraction and shipment to China. Meanwhile, the U.S. is bankrupting itself, already fighting half a dozen endless wars and now rattling their sabres at Syria and Iran: two more unwinnable wars.

Back to Europe: keep your eyes on Germany. There is much in the lame scream media about the crisis in Greece. Ignore Greece. It’s nothing but ass media sensationalism and a distraction from real home-grown problems.

Watch Germany. That’s where the real news will arise. There is a disconnect between the average German citizen and their politicians. The politicians continue pressing for more Greek bailouts whereas the average German never much liked the Greeks. They see them as lazy, tax-cheats. Although they once enjoyed vacationing in Greece, it has become too dangerous to do so now and hard-working Germans resent having to bailout the profligate Greeks and to engage in another round of throwing hard-earned German money into the bottomless hole of Greece.

On the other hand, German politicians, bankers and manufacturers understand they have a lot to lose if Greece defaults and leaves the Eurozone. Macleans says, “Germany’s banks are heavily exposed to troubled Eurozone members.” As well, Germany’s high quality exports, its recipe for success until now is at risk if Europe goes into the tank.

Unfortunately, German politicians have done a poor job explaining this to the German people. The President of Germany recently resigned demonstrating that German Chancellor Angela Merkel is losing control. Merkel also has a tough balancing act, not only within Germany but she must avoid being too heavy-handed with the Greeks and the other PIIGS (Portugal, Ireland, Italy, Greece & Spain) on the periphery of Europe. It’s a very delicate balancing act. On the one hand, the peripheral European nations need to shape up or ship out while on the other hand their loss would be catastrophic to Europe’s entire economy.

The Germans are being called on to take a leadership role to save Europe without appearing to taking on a leadership role. And, at the same time, Germany must endure the humiliation of endless attacks from the Greek media who portray Merkel as Hitler. Macleans quotes Radek Sikorsky, “I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.” The Poles understand this; the Greeks do not.

Nothing ever stays the same for long. Germany’s economic miracle cannot keep chugging along forever. A large part of Germany’s exports go to China and China is slowing down. German exports suffered a 4.3% decline in December and unemployment is inching up. Then too, the German people will put up with the “damned if they do, damned if they don’t” humiliation of being both thankless leaders and lenders only for so long.

Then what? So, forget Greece and keep your eye on Germany. That’s where the real news will start and when it does; fasten your seat belt!

February 26, 2012

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About gerold

I have a bit of financial experience having invested in stocks in the 1960s & 70s, commodities in the 80s & commercial real estate in the 90s (I sold in 2005.) I'm back in stocks. I am appalled at our rapidly deteriorating global condition so I've written articles for family, friends & colleagues since 2007; warning them and doing my best to explain what's happening, what we can expect in the future and what you can do to prepare and mitigate the worst of the economic, social, political and nuclear fallout. As a public service in 2010 I decided to create a blog accessible to a larger number of people because I believe that knowledge not shared is wasted.
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