The Duran Podcast - German economy; Spending, Debt and Deindustrialization

Episode Date: August 11, 2025

German economy; Spending, Debt and Deindustrialization

All right, Alexander, let's talk about the German economy, which seems to be going the same way, the same direction as the British economy. Yeah. And the EU economy, they all seem to be going in a downward trajectory really fast. But in this video, we'll talk a bit more. We'll focus a bit more on the German economy. So what's the situation in Germany at the moment? You're absolutely correct. I mean, the whole thing to understand is that Germany had an economic model that was different from that or Britain, France, some other countries. I mean, it was the British model was based on very high consumption, very high demand. That was basically centred to a great extent on how, you know, the state of the property market, people,

in Britain, many people in Britain own their own houses, they have pensions and all that kind of things so that they borrow against property that then attracts demand, that brings in goods, that creates a big service economy, that gets recycled in the economy, that pushes up the GDP figures. It was not basically a manufacturing-centered economy. Germany was very different. Germany's economy was historically based on a much more diversified financial system with regional and local banks, funding German industry in conditions of very low inflation. And what you tended to get is that German businesses would have quite significant debt because, they would be funded by, as I said, the regional banks and some of the bigger banks as well, obviously. But the debts would be covered by large savings that the population would have because

the German central bank always made certain that housing costs in Germany were relatively low and didn't encourage speculation at the housing markets or pushing up prices. in prices in that kind of way, house prices. So people would keep their money in banks, the banks would lend to the industries, the industry would then invest the money that they borrow from the banks and the German economy would grow. And of course, this system also depended on low inflation rates because you need low inflation to build up savings.

And that was always the priority of the central. bank and in order to keep inflation low and to keep the entire financial system stable, you also wanted the German government to maintain it careful, careful budgeting. That was the German model. It's all coming apart. I mean, it's now becoming rapidly the British model. So, this is evolved over time, but with Merz, what was starting very visibly to happen under Angela Merkel has now evolved much, much faster. So all attempts at fiscal restraint have gone out of the window. The constitutional debt break has gone out of the window. The government is spending money at an extraordinary rate in Germany now. It's borrowing to do that. So the budget

deficit is rising fast. The government has taken steps. that we all know about through its various sanctions on Russia, which have resulted in energy costs in Germany rising rapidly. That has triggered de-industrialisation processes in Germany. All of this extra money that the government is spending is inevitably going to increase aggregate demand, faster than industry which is in decline, can keep up with. This is going to start to suck in imports, which, of course, was the opposite of what Germany used to do. Germany always used to export. Now it's going to become an import.

So we are in a self-reinforcing cycle of spending, debt, de-industrialization, probably a growth in services. The Germany that we used to know is disappearing fast. And with a disappearing Germany is a disappearing European Union, because Germany was the engine of the European Union. Everything in the European Union was centered around Germany. It was built. It was built around Germany. And many countries, many member states in Europe, in the EU, hollowed out their own economies at the expense of centering everything around Germany. I mean, they willingly gave up their industry because Germany was going to power the whole thing.

So what's going on here? Exactly. That is exactly what's happening. So the industrial model that Germany was built up, which is also an export model, is now starting to break down. Germany wasn't just the center. It was the anchor of the whole system because one of the reasons that we could have high levels of debt in various European economies, France, Italy, whatever, was there was the belief that ultimately the Eurozone was stable because Germany, its central core, was fiscally stable as well. Now, that's going out of the window, and that's going to create major problems going forward for the whole German, not just German, but EU model.

Now, we're starting to see the signs. Insolvences in Germany are running extremely fast. these are hitting very badly, the Mitelstand, the huge array of small to medium-sized family businesses, many of them unusually in Germany involved in manufacturing. Mila, you know, the famous kitchen manufacturer, that is a high-end METELStand company. I'm not suggesting, by the way, that they're in trouble, just to make that clear. probably they're one of the Mitelstan companies

which because they have such a strong customer base are probably still stable but all of the others, many of the others small companies that made all kinds of things from you know materials that are used components that are used in the car industry

for example. The car industry is going down very fast and much of the Mitelstan was centered around it making, you know, various component parts that were brought into the factories that made the cars. Anyway, they're going down. Other small companies making things like, you know, glass, optics, all of that kind of thing. They're going down rapidly as well. And that's going to change, not just the German economy, it's going to change the whole texture of life in Germany.

And one of the things about Germany is that because of the way in which industry functioned, and it functioned right across Germany, there was no dominant central place like London is in Britain, which dominates the whole economy. Well, with all of these small businesses closing down very, very rapidly, what you're probably going to see is regional centralisation as well, probably in a few big regional centres, Frankfurt, Berlin, perhaps. We'll see. But anyway, the process is happening, Munich, the process is happening very, very fast. We'll see how it turns out. But in a few years' time, and I really mean a few years' time, before Mouth's term ends, We're going to see Germany having a debt-to-GDP ratio around the same size as that of the other big European countries, France, Spain, Italy, wherever, Britain, even though Britain's outside the EU. We are probably going to see Germany move much quicker than people expect from being a net exporter to being a net exporter to being a net. importer, and I'm going to make a prediction that most of the extra spending that we're seeing

come from the German government. Instead of it going into arms production and infrastructure spending and all of those things, it's going to be absorbed in ever spiraling welfare costs. The German welfare stage is extremely generous, has a very long history going back to Bismar. It's perhaps in some ways the oldest of all the welfare states. Cutting it down is going to be massively politically controversial. The METS government is a coalition of the CDU and CSU with the SPD. The SPD will want to protect the welfare state. And in fact, they are already pushing for higher welfare spending because it's a left of center

party, and that's what left of centre parties do. And that will make it Germany even more like Britain. Because the thing about welfare states is that they were created in the period from about 1870 to 1960 on the basis that you had strong industrial economies and people who sought welfare would do so only on a temporary basis until they found work again. But if people are permanently out of work, that creates an entire different situation entirely. So how is Germany going to fight Russia in 2007, given this news? By raising a white flag, if it ever comes to that. I mean, I mean, I'm going.

I mean, this idea of a great German military buildup is an illusion, in my opinion. I mean, it's a mirage. It simply isn't going to happen. All of the extra funding that we're hearing about is not going to go into military rearmament. I mean, there's lots of talk about buying weapons. A lot of the weapons will be bought from the United States, obviously, but they're not going to be able to sustain a long-term arms buildup. because the financial structures to do it are not there.

And by the way, German industry isn't really organized for this sort of thing. Again, this is something which people don't understand, perhaps, but it's not the German industry. German industry today is very strong and very powerful, but it is not like it was in the 1930s or 40s. Even at that time, the Germans were never able to achieve the kind of economies of scale that the Russians and the Americans did then, because he's a huge continental economies. That was why the Germans made far fewer tanks and aircraft than the Americans or even the

Russians were able to do. The evolution of Germany's industrial economy since then has made that problem even greater. And the Germany, that's... That's going to exist in four, five years time. Absolutely will not be able to do that either. German industry is contracting. Heinmetall, the core industrial group that is supposed to be at the center of German rearmament. It's seeing its output decline. Latest figures have confirmed it. All right, we will end the video there. The deraad.locos.com. We are on Rumble.

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