I know you wrote about the "Nuclear shutdown" beforehand, but it bears repeating that this one was also a mal-advised misadventure by Merkel - a supposed "physicist" who was initially in her terms as "Minister of Environment" under Helmut Kohl a stark supporter, even a builder of Nuclear under Kohl.
Yes, that was a long time ago, in the 1990s and into the early 2000s. She then took Schröder down on the peak of his arrogance and usurped and twisted what was once a conservative-led party into a green-ish nightmare that you are seeing today with no discernible talents to be seen anywhere nor any firm and solid positions you could discern from most of the other partys - current Germany feels like it's run a uniparty circus and no one can find the exit of the tent.
Kohl himself even weighed in on Merkels solitary (!) decision to reverse positions on nuclear energy and plants, here, in 2011:
I am so mad about this, I might actually turn this into a longer piece, as it bears chronicling this stupidity of a whole nation granting one individual the right to tear it down from "Energy secure" to "energy poor and insecure" in the matter of a decade.
And of course when later on, you get your North Stream 2 blown up by some drunk "yacht renters" who surely didn't have any help from anyone, they just misplaced some explosives in the deep sea after a bender, it's a one-two punch.
Thanks for pointing that out! The nuclear debate in Germany was certainly shaped by non-stop antinuclear propaganda over decades. And I agree that politically, the Merkel years will be seen in a very different, and negative light. Looking forward to your thoughts if you turn it into a longer piece.
Putin? No, it was the US who said allowed 'Fuck the EU'. They were very open that the US would destroy NS2 themselves if access to affordable Russian gas via the pipeline was ever operational.
I remember articles in the Economist after 2006 (a time when I still read this publication, unfortunately today another victim of the WEF agenda) in which Merkel was always called a scientist (physicist), while her career in the East German university was more centered around propaganda then science.
But we Germans should never forget that not only Merkel after 2006 started financing (buying) the media which suffered from the developing Internet boom, but that during all the years from the 80s on two generations of teachers told the German youth about the dangers of nuclear and the evils of a capitalist society. The feminist and woke agenda of the last 15 years did the rest.
So today, even if you try to present *arguments* people just do not listen to you, because in their view you're an old fool.
This is an excellent write up of what’s happening in eurrope. I personally am aware of my friends not being able to build factories in Germany, or otherwise shutting them down in pretty vital industries. Hugely depressing and seemingly a downstream effect of adopting ultra progressive attitudes towards future development without considering consequences.
When I read the hydrogen part I just thought damn. Lmao good luck Germany, enjoy your indoor snowpants
Great article, and I completely agree. The solution would be simple: reconnect with cheap Russian gas to regain competitiveness. But that won’t happen anytime soon.
The problem, I believe, is psychological. Having lived in Germany for a while, I think what’s hurting Germany is that it has been rich for so long that it can’t imagine that it could change. That crates a certain apathy with the average German voter. But, to be fair to the average German voter, how often have they heard scary stories that didn’t materialize? But this time it is different, I am a afraid.
As an investor, though, there are some interesting opportunities emerging. The Biden administration passed the Inflation Reduction Act (IRA) in 2022, which offers substantial incentives for foreign companies to move operations to the U.S. It seems that a number of German companies are already doing just that. I'm currently researching this trend. This could help isolate them from the poor policy decisions in Germany. While it’s unfortunate for German workers—though that’s a separate discussion—if these German companies were to re-list on the NYSE, it would become even more attractive since P/E valuations are generally higher in the U.S. than in Germany. I am researching.
You may be familiar with a well known German Economist HW Sinn. His talk about Germany’s Energy Transition was called “Energie Transition to nothing” (Energiewende ins Nichts). This was almost one decade ago but nobody listened.
Germany was last in a similar situation around the turn of the century, when it was famously dubbed "sick man of Europe". It overcame that period thanks to the Hartz reforms and emerged stronger than ever. But now the missteps of the last 10 years or so - each of which reversible in isolation- have combined in a potent self-reinforcing spiral. botched green transition reinforceb by Russian cheap energy being offline due to war in Ukraine. Export-led Wandel durch Handel strategy vis-a-vis China backfiring spectacularly against their coveted auto industry, among other things. Lack of investments into infrastructure and digitalization making them slowly lose competitiveness. And so on. Then again - they have been through worse. They are in a bad spot right now and will be for a few years yet, but their overall track record indicates they beat similar or worse odds before historically.
Agree there are several forces which turned against Germany, largely however policy errors and bad economic decisions. Question remains, will the country turn around with reforms, or double down on current dogmas?
I sometimes wonder if the impact of the Hartz reforms was overstated and Germany’s recovery in the 2000s was mainly because the world (and especially China) really wanted to buy what Germany was selling. Cars, machine tools, chemicals - all sectors that Germany had been building expertise in over most of the 20th century, if not longer.
Now China has moved up the value chain to become a competitor instead of a buyer of German goods, lead to structurally lower demand for German products. Add in energy prices and you have a pickle that further downward pressure on wages will struggle to fix.
Great post. I’m unfamiliar with German politics but it seems like too many people there have bought into the Green vision for the country to be able to avert disaster. Maybe they need to hit rock bottom
Blowing up the pipeline was bad, but so were the green policies that shut down Germany's energy independence. Germany should never have gone all wind and solar and no nuke. That was slow-motion green suicide. The destruction of NS2 nudged Germany over the edge. She shouldn't have been standing so close to the cliff in the first place.
I remember watching that hideous troll Verhofstadt slobbering on about how the Imperial EU was the future of everything, and how the dinosaur supporters of the nation state couldn't bring themselves to understand the managerial superiority of the technocrats running the shop in Brussels. Ha. Talk about a comeuppance. First Brexit and now this. If Germany enters a prolonged economic malaise, as now seems likely, the EU is finished as any sort of important central authority. The constituent states will race for the exits when the cash starts drying up.
What’s happening in Germany encapsulates everything that is wrong with politicians and the political class (from Merkel to current). Leaders are so self focused and cocooned, that either due to ego or ineptitude, they create a path that discourages real progress and delivers an environment that is unsustainable. The longer this path is followed, the harder it is to deviate, until the only option is to turn back entirely… you may be able to burn your furniture at home to keep warm, but you can’t run a factory that way…
I’ll never forget the legendary utterance from Germany’s minister for economics (now candidate for chancellor): “I can imagine that certain industries will just stop producing for a while, without going bankrupt.”
Perhaps even worse: this guy doesn’t seem to be aware that it’s a criminal offense to delay filing for insolvency. Even if you hope your company won’t go belly up.
This is a very helpful article, thank you. What Germany is doing seems so blinkered and heavy-handed, it resembles some odd combo of academic thinking, bureaucratic certainty, and Soviet depravity.
Oh, it gets worse than that. Go look at what BASF is doing. Chemical and plastic production requires competitive sources of hydrocarbons, which Germany no longer has. Their hope is to produce elsewhere and send product back to Germany for assembly. Hope your work area has a skylight!
Seems that the “green” climate doomsday religion has destroyed another country. The climate doomsday religion is against carbon-based energy and nuclear energy, and there are no currently existing technologies that can RELIABLY and ECONOMICALLY substitute for carbon and nuclear.
By deliberate mismanagement, procrastination and propaganda, industry and Blackrock fool you. You've fallen hook line and sink for their narrative that any regulation or protection for the environment or animals, let alone any real structural change that would limit their profits, is anti-humanity.
Pathetic is adults who cling to the adolescent idea that profits and environmental care are antithetical to each other, when in truth the worst environmental disasters, by far, have occurred in countries where private ownership of property, and profits derived from that ownership, is expressly forbidden.
Absolute rubbish. Are you referring to China? Per captita there emissions are tiny compared to the States and they’re investing far more heavily in transiting from fossil fuels. In the West private ownership means that the 1% continue to profit and pollute at the expense of everyone and everything else.
Environmentals disasters affect the Global South most, because of geography, and the emissions (and neocolonialism keeping them poor) of the Global north.
China has changed from a country where profit was outlawed to a country where profit is embraced, so their current environmental situation is almost beside the point, but if you think China is embracing green (as it builds a new coal fired power plant each week, and has the laxest environmental regulatory environment by far in the G20) keep smoking that fantastic weed you’re on. I was more specifically referring to the Soviet Union and the Eastern Bloc, which were, when the iron curtain was finally rolled back, absolute environmental hellscapes. Or have you forgotten about that?
Yes, it's the green policies themselves that are behind all problems with the German economy- I know this because that's what we've been told. Green policies are morons and are out to destroy the world. Run and hide if you see a green policy, they're very dangerous.
However, multinational US companies are not scary nor dangerous. They have our, and the German economy's, best interests at heart. Never mind that they seem to be the ones benefiting from Germany's demise and get to profit and pollute the environment with impunity- so glad i did some research with an open mind, or I might start to doubt myself!
“Managed decline doesn’t exist. You move forward, or you crash hard.”
Brilliant line.
True.
Germany; You have from now until January 20th 1159 EDT / 1659 GMT to break alliances with us 🇺🇸 and go your own way. At 1200 EDT Trump is President. He can’t let you quit, it’s like Reagan and the Air Traffic Controllers. Reagan an old union man gave them the best offer they ever had, but they were determined to strike to prove a point and forced him to crackdown just as he was taking office. Europe and especially Germany should avoid making the mistake with Trump.
Interesting commentary. I believe you are right about Germany being in a bad state because German companies don't invest there. (Here you also have Pettis & Klein on your side.) But I think you are wrong about central planning. I won't argue that central planning is always highly effective because that is obviously belied by the facts. But so too is the statement that central planning never works. Both Nazi Germany and the Soviet Union were centrally planned during WWII, as well of large swaths of Europe and even some parts of the US economy in the aftermath the war and for many decades.
The balance between planning and market competition is determined by transaction costs relative to information costs. With both at all time lows its not clear where the right balance might lie, and a little experimentation is well warranted for those who can afford it (such as a rich country like Germany)
I know you wrote about the "Nuclear shutdown" beforehand, but it bears repeating that this one was also a mal-advised misadventure by Merkel - a supposed "physicist" who was initially in her terms as "Minister of Environment" under Helmut Kohl a stark supporter, even a builder of Nuclear under Kohl.
Yes, that was a long time ago, in the 1990s and into the early 2000s. She then took Schröder down on the peak of his arrogance and usurped and twisted what was once a conservative-led party into a green-ish nightmare that you are seeing today with no discernible talents to be seen anywhere nor any firm and solid positions you could discern from most of the other partys - current Germany feels like it's run a uniparty circus and no one can find the exit of the tent.
Kohl himself even weighed in on Merkels solitary (!) decision to reverse positions on nuclear energy and plants, here, in 2011:
https://www.spiegel.de/international/germany/nuclear-moratorium-overly-hasty-helmut-kohl-weighs-in-on-reactor-debate-a-753125.html
I am so mad about this, I might actually turn this into a longer piece, as it bears chronicling this stupidity of a whole nation granting one individual the right to tear it down from "Energy secure" to "energy poor and insecure" in the matter of a decade.
And of course when later on, you get your North Stream 2 blown up by some drunk "yacht renters" who surely didn't have any help from anyone, they just misplaced some explosives in the deep sea after a bender, it's a one-two punch.
"Most idiotic energy politics" globally, indeed.
Thanks for pointing that out! The nuclear debate in Germany was certainly shaped by non-stop antinuclear propaganda over decades. And I agree that politically, the Merkel years will be seen in a very different, and negative light. Looking forward to your thoughts if you turn it into a longer piece.
She has to be the most overrated politician of the early 21st century. MSM during that time would have you believe she was the Genius of Germany.
I have wondered aloud if she was not a Russian plant all along, and if Putin had this planned decades ago.
Looking at her economic policies, absolutely makes you think so.
Putin? No, it was the US who said allowed 'Fuck the EU'. They were very open that the US would destroy NS2 themselves if access to affordable Russian gas via the pipeline was ever operational.
I remember articles in the Economist after 2006 (a time when I still read this publication, unfortunately today another victim of the WEF agenda) in which Merkel was always called a scientist (physicist), while her career in the East German university was more centered around propaganda then science.
But we Germans should never forget that not only Merkel after 2006 started financing (buying) the media which suffered from the developing Internet boom, but that during all the years from the 80s on two generations of teachers told the German youth about the dangers of nuclear and the evils of a capitalist society. The feminist and woke agenda of the last 15 years did the rest.
So today, even if you try to present *arguments* people just do not listen to you, because in their view you're an old fool.
You’re adding an interesting perspective about Merkel. If she never really was a scientist, that explains her attitude towards nuclear power.
And I agree very much to your comments about the Economist.
https://www.philoinvestor.com/p/realpolitik-justpolitik?utm_source=publication-search
This is an excellent write up of what’s happening in eurrope. I personally am aware of my friends not being able to build factories in Germany, or otherwise shutting them down in pretty vital industries. Hugely depressing and seemingly a downstream effect of adopting ultra progressive attitudes towards future development without considering consequences.
When I read the hydrogen part I just thought damn. Lmao good luck Germany, enjoy your indoor snowpants
Depressing, indeed.
Not ultra progressive attitudes. The US sabotage.
Great article, and I completely agree. The solution would be simple: reconnect with cheap Russian gas to regain competitiveness. But that won’t happen anytime soon.
The problem, I believe, is psychological. Having lived in Germany for a while, I think what’s hurting Germany is that it has been rich for so long that it can’t imagine that it could change. That crates a certain apathy with the average German voter. But, to be fair to the average German voter, how often have they heard scary stories that didn’t materialize? But this time it is different, I am a afraid.
As an investor, though, there are some interesting opportunities emerging. The Biden administration passed the Inflation Reduction Act (IRA) in 2022, which offers substantial incentives for foreign companies to move operations to the U.S. It seems that a number of German companies are already doing just that. I'm currently researching this trend. This could help isolate them from the poor policy decisions in Germany. While it’s unfortunate for German workers—though that’s a separate discussion—if these German companies were to re-list on the NYSE, it would become even more attractive since P/E valuations are generally higher in the U.S. than in Germany. I am researching.
You may be familiar with a well known German Economist HW Sinn. His talk about Germany’s Energy Transition was called “Energie Transition to nothing” (Energiewende ins Nichts). This was almost one decade ago but nobody listened.
thanks for mentioning. Sinn is one of the lone voices.
Germany was last in a similar situation around the turn of the century, when it was famously dubbed "sick man of Europe". It overcame that period thanks to the Hartz reforms and emerged stronger than ever. But now the missteps of the last 10 years or so - each of which reversible in isolation- have combined in a potent self-reinforcing spiral. botched green transition reinforceb by Russian cheap energy being offline due to war in Ukraine. Export-led Wandel durch Handel strategy vis-a-vis China backfiring spectacularly against their coveted auto industry, among other things. Lack of investments into infrastructure and digitalization making them slowly lose competitiveness. And so on. Then again - they have been through worse. They are in a bad spot right now and will be for a few years yet, but their overall track record indicates they beat similar or worse odds before historically.
Agree there are several forces which turned against Germany, largely however policy errors and bad economic decisions. Question remains, will the country turn around with reforms, or double down on current dogmas?
I sometimes wonder if the impact of the Hartz reforms was overstated and Germany’s recovery in the 2000s was mainly because the world (and especially China) really wanted to buy what Germany was selling. Cars, machine tools, chemicals - all sectors that Germany had been building expertise in over most of the 20th century, if not longer.
Now China has moved up the value chain to become a competitor instead of a buyer of German goods, lead to structurally lower demand for German products. Add in energy prices and you have a pickle that further downward pressure on wages will struggle to fix.
Great post. I’m unfamiliar with German politics but it seems like too many people there have bought into the Green vision for the country to be able to avert disaster. Maybe they need to hit rock bottom
many thanks!
I'm afraid that when people see things going wrong, they will conclude they need even more green policies to bail them out.
Again, nothing to do with Green policies. Coal is not green neither is buying LNG from the US transported across the ocean.
This is sabotage - reconnecting with the NS2 would be difficult after it was blown up!
Blowing up the pipeline was bad, but so were the green policies that shut down Germany's energy independence. Germany should never have gone all wind and solar and no nuke. That was slow-motion green suicide. The destruction of NS2 nudged Germany over the edge. She shouldn't have been standing so close to the cliff in the first place.
Regulation + too much focus on the green energy without realizing that nuclear is the solution makes Europe unattractive to invest.
During the last 20 years Europe has failed to prop up any industry as its champion thus they are now falling behind.
So we have expensive energy, massive amount of regulations and lack of regional / national champions to support - a truly horrifying mix
I remember watching that hideous troll Verhofstadt slobbering on about how the Imperial EU was the future of everything, and how the dinosaur supporters of the nation state couldn't bring themselves to understand the managerial superiority of the technocrats running the shop in Brussels. Ha. Talk about a comeuppance. First Brexit and now this. If Germany enters a prolonged economic malaise, as now seems likely, the EU is finished as any sort of important central authority. The constituent states will race for the exits when the cash starts drying up.
What’s happening in Germany encapsulates everything that is wrong with politicians and the political class (from Merkel to current). Leaders are so self focused and cocooned, that either due to ego or ineptitude, they create a path that discourages real progress and delivers an environment that is unsustainable. The longer this path is followed, the harder it is to deviate, until the only option is to turn back entirely… you may be able to burn your furniture at home to keep warm, but you can’t run a factory that way…
I’ll never forget the legendary utterance from Germany’s minister for economics (now candidate for chancellor): “I can imagine that certain industries will just stop producing for a while, without going bankrupt.”
Truly legendary
Perhaps even worse: this guy doesn’t seem to be aware that it’s a criminal offense to delay filing for insolvency. Even if you hope your company won’t go belly up.
I’m writing an article titled, “if Germany didn’t exist, urban progressives would invent it” and this is so perfect, thank you sir!
Welcome, and many thanks! Looking forward to your article!
This is a very helpful article, thank you. What Germany is doing seems so blinkered and heavy-handed, it resembles some odd combo of academic thinking, bureaucratic certainty, and Soviet depravity.
That's an excellent representation!
This was great. Thanks for sharing!
Thanks for your kind comment!
Oh, it gets worse than that. Go look at what BASF is doing. Chemical and plastic production requires competitive sources of hydrocarbons, which Germany no longer has. Their hope is to produce elsewhere and send product back to Germany for assembly. Hope your work area has a skylight!
Seems that the “green” climate doomsday religion has destroyed another country. The climate doomsday religion is against carbon-based energy and nuclear energy, and there are no currently existing technologies that can RELIABLY and ECONOMICALLY substitute for carbon and nuclear.
This is the narrative that fossil fuels, and the US, want you to have.
It was not a green transition- it is sabotage that is destroying Germany.
“Green” is anti-humanity
By deliberate mismanagement, procrastination and propaganda, industry and Blackrock fool you. You've fallen hook line and sink for their narrative that any regulation or protection for the environment or animals, let alone any real structural change that would limit their profits, is anti-humanity.
It's pathetic.
Pathetic is adults who cling to the adolescent idea that profits and environmental care are antithetical to each other, when in truth the worst environmental disasters, by far, have occurred in countries where private ownership of property, and profits derived from that ownership, is expressly forbidden.
Absolute rubbish. Are you referring to China? Per captita there emissions are tiny compared to the States and they’re investing far more heavily in transiting from fossil fuels. In the West private ownership means that the 1% continue to profit and pollute at the expense of everyone and everything else.
Environmentals disasters affect the Global South most, because of geography, and the emissions (and neocolonialism keeping them poor) of the Global north.
China has changed from a country where profit was outlawed to a country where profit is embraced, so their current environmental situation is almost beside the point, but if you think China is embracing green (as it builds a new coal fired power plant each week, and has the laxest environmental regulatory environment by far in the G20) keep smoking that fantastic weed you’re on. I was more specifically referring to the Soviet Union and the Eastern Bloc, which were, when the iron curtain was finally rolled back, absolute environmental hellscapes. Or have you forgotten about that?
That’s not what i said
No, it’s the moronic green policies. Do some research with an open mind
Yes, it's the green policies themselves that are behind all problems with the German economy- I know this because that's what we've been told. Green policies are morons and are out to destroy the world. Run and hide if you see a green policy, they're very dangerous.
However, multinational US companies are not scary nor dangerous. They have our, and the German economy's, best interests at heart. Never mind that they seem to be the ones benefiting from Germany's demise and get to profit and pollute the environment with impunity- so glad i did some research with an open mind, or I might start to doubt myself!
https://jowaller.substack.com/p/update-on-farmers-protests-it-was
“Managed decline doesn’t exist. You move forward, or you crash hard.”
Brilliant line.
True.
Germany; You have from now until January 20th 1159 EDT / 1659 GMT to break alliances with us 🇺🇸 and go your own way. At 1200 EDT Trump is President. He can’t let you quit, it’s like Reagan and the Air Traffic Controllers. Reagan an old union man gave them the best offer they ever had, but they were determined to strike to prove a point and forced him to crackdown just as he was taking office. Europe and especially Germany should avoid making the mistake with Trump.
It’s the worst thing you could do.
And predictably this is exactly what you will do.
Interesting commentary. I believe you are right about Germany being in a bad state because German companies don't invest there. (Here you also have Pettis & Klein on your side.) But I think you are wrong about central planning. I won't argue that central planning is always highly effective because that is obviously belied by the facts. But so too is the statement that central planning never works. Both Nazi Germany and the Soviet Union were centrally planned during WWII, as well of large swaths of Europe and even some parts of the US economy in the aftermath the war and for many decades.
The balance between planning and market competition is determined by transaction costs relative to information costs. With both at all time lows its not clear where the right balance might lie, and a little experimentation is well warranted for those who can afford it (such as a rich country like Germany)