Marcel Fratzscher is visibly unhappy, completely annoyed, as Handelsblatt comments on the publication of the new book by the prominent German economist and head of the German think tank, DIW in Berlin. “Our German relationship with money is characterized by fear, shame and guilt,” the economist lamented. And he adds: Saving is heroized in this country, it is celebrated as a virtuous act. Debt, on the other hand, was stylized as something disrespectful. However, both are above all a sober balance between the present and the future. Much more: both belong together, without credit there is no savings.
In the course of his book, it becomes clear that Fratzscher does not see the blind attitude of the Germans towards saving as a small cute quirk, but as a tangible problem that stands in the way of an economically viable future.
“Geld oder Leben” (Money or Life) is the title of the new, fourth book by the economist at the German Institute for Economic Research (DIW) in Berlin. This is a pleasantly provocative statement, nervous and clear. You can agree with Fratzscher or work through his posts – whatever it is, readers will have fun. It is very likely that one will turn to one’s camp after reading it.
Fratzscher criticizes the fact that savings have become increasingly politicized in Germany in recent centuries. The distorted image of the Swabian housewife – whom she also denounces as sexist – has been unfairly chosen as a model.
Never allow yourself anything, always strive for security – and only buy something when you have the money to do so? Not with Fratzscher! If saving is celebrated so much as a value in itself, the essential is lost: that is, if one saves reasonably, that is, with a good combination of risk and return. But that’s what seldom concerns the Germans, says Fratzscher. Hardly any other people let so much money go to waste in their bank accounts.
The whole issue is also turning into a political problem, Fratzscher believes – in Germany, after all, the aversion of individuals to debt is transferred one by one to the state. The German debt brake shows how short-sighted this view is: It is only interested in the amount of debt, but not in where the state invests its money. It is like an analyst looking at only the liabilities side of a company’s balance sheet, but not the assets side.
No, Fratzscher does not consider public debt to be in itself problematic. On the contrary, it has been heavily critical of German fiscal policy in recent years. Despite rising debt, the state’s net worth has shrunk by half a trillion euros this millennium, he argues, citing troubled infrastructure as a major problem.
This also makes it clear which variable he wants to focus on – that is, the difference between government assets and liabilities. It also wants to take into account the obligations the state owes to its citizens – for example, in the form of pension promises. It calls for public investment in areas that promise high returns – because they make the country fit for the future: climate protection, digitization, education.
Fratzscher’s book could be read as a confrontation with the conservative current of economists. Fratzscher, on the other hand, would probably be dominant in many other countries. Just not in Germany, where the reason is always a bit special. In this respect, Fratzscher’s book brings international character to the debate.
No right to positive interest rates
What also bothers Fratzscher is the Germans’ constant grumbling against low interest rates and central bank policy. For him, it is clear that it was not the central banks that lowered interest rates, but that they could not have done otherwise – given the overall macroeconomic picture.
Because people had accumulated a real surplus of savings, but at the same time invested so little, the price of money had now fallen. “Interest rates are ultimately the result of a mechanism of market, demand and supply,” writes Fratzscher. There is no right to positive interest rates in a market economy.
For Fratzscher, the inequality of wealth and income is also partly responsible for low interest rates: the rich save a lot. And if the rich in a country are particularly rich, the savings in that country are also particularly high. For Fratzscher, the road to a prosperous future therefore goes through fiscal and social reform – with stronger asset and inheritance taxation and a more balanced pension system.
Source: Capital
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