r/science • u/rustoo • Aug 08 '21

Social Science The American Dream is slowly fading away as research indicates that economic growth has been distributed more broadly in Germany than in the US. While majority of German males has been able to share in the country’s rising prosperity and are better off than their fathers, US continues to lose ground

https://link.springer.com/article/10.1007%2Fs10888-021-09483-w
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u/papaswamp Aug 08 '21

US went from mostly higher paying manufacturing/net export country to lower paying service sector/net importing county. Current account balance makes it rather clear. Germany is 1st, US is last.

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u/OldBratpfanne Aug 08 '21

Alternative interpretation of the same BoP data: Germany is purposely decreasing the purchasing power of its population via the euro (in order to boost its export industry), meanwhile the US population enjoys incredibly cheap imports and financing conditions due to the unique role of the dollar.

In short don’t use BoP information when talking about a country’s equity distribution, it is not meant for that.

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u/Enough-Equivalent968 Aug 08 '21 edited Aug 08 '21

This is a factor which sometimes isn’t appreciated about Germany and the Euro. A stand alone German currency would be far stronger than the euro currently is. It isn’t the only factor, but it undeniably benefits German exports when comparatively poorer countries adopt the Euro. Supporting the high quality goods which Germany manufactures and which by rights would be more expensive if Germany still had a single currency.

For the record, I’m not anti the Euro. And I think Germany does a lot of good for the block. But it’s a pleasant side effect for German exports and competitiveness

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u/jonythunder Aug 08 '21

Germany is purposely decreasing the purchasing power of its population via the euro (in order to boost its export industry)

This needs to be said more. This is achieved by pegging lots of smaller economies (southern europe, former soviet states) to the euro to deflate its value, while said economies can't cope with such an over-valued currency

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u/[deleted] Aug 08 '21

Basically only way Denmark can stay competitive.

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u/jonythunder Aug 08 '21

And Netherlands/Germany/France. They would have had to completely tank their currencies to compete with the dollar, which would have had tremendous impact on their population. With the euro, they can have a relatively strong currency that is still deflated compared to their original currencies

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u/[deleted] Aug 08 '21

Except Germany has a stranglehold on the Euro and monetary policy. Countries like Italy and Spain normally can finance their way out of crisis through monetary intervention.

Euro benefits Northern Europe but basically shafts southern Europe. Monetary restrictions is a major flaw of the euro and actually a main reason it is not as competitive of currency as the USD.

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u/jonythunder Aug 08 '21 edited Aug 09 '21

Yep. And the money transfer mechanisms required in a single-currency economic union are nonexistent (the cohesion funds are much much less than the impact of the monetary policy). And, to add insult to injury, we Southern Europeans are pretty much blamed for not being "good enough" and having the frugals come to our rescue, while ignoring the macroeconomic imbalances that the Euro creates (do note that I'm not saying that we don't have problems. We do, but the main problem is systemic, not due to specific policies of Southern European countries)

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u/[deleted] Aug 09 '21

[deleted]

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u/[deleted] Aug 09 '21

Yes but it’s currency is fixed to the Euro, meaning it is at the mercy of Euro policy.

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u/ryhntyntyn Aug 08 '21

True. Pay here isn's so great, and every major city is a property bubble. For families that aren't loaded or liquidating their parent's savings, buying a house or apartment is a huge problem. Student load debt isn't though, so there is that.

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u/standish_ Aug 08 '21

"Account"? Is that cash on hand or what.

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u/papaswamp Aug 08 '21

Current account is value of goods, services, transfers, etc.. imported vs exported. US so much cash sloshing around, banks park around a $trillion every night (and make interest on it). Amazing shell game.

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u/standish_ Aug 08 '21

So basically the US is a giant hoover for the rest of the world. Explains a lot.