No doubt, the German economy is something to admire. Its economic model is so efficient that some experts believed United States and Germany’s European neighbours should follow the same pattern.
The German economy has already tallied consecutive advancement in the first two quarters this year, expanding 0.6% and 0.7% respectively, the fastest growth pace in the continent.
Figuratively and statistically, it looks the economy remain unscathed and unblemished. But behind that, there is one dirty, ugly stain – a threat to the economy of the rest of the world.
A Conspicuous Filth
The German economy is enjoying solid growth this year. Records will do the talking for its glorious run. The 4.8 million jobs in the continental bloc, European Union, are produced by Germany, with its contribution in imports amounting to 555 billion euros.
No doubt, the country’s economy is on track for further expansion. But all roses have thorns. Despite these impressive economic records, there is one major concern about the German economy – its ballooning surplus trade.
Currently, the country’s total account surplus has reached more than $290 billion, the largest amount tallied in the world.
The harsh-talking US President Donald Trump has already criticized and tagged Germany’s mammoth account surplus as “very bad for trade.” And for a rare occasion, he may be right. So what does holding such enormous record mean to German economy?
This mammoth surplus trade means that Germany has a long-term excess of national saving over domestic investment. Since the country uses a free trade policy, foreigners complain about this result.
As a rule, if a country has chronic excess of domestic saving, exporting it abroad is an automatic response, creating an artificial demand for German exports. Through this, Germany is able to collect massive foreign currency each year, leaving global trade dangerously unbalanced.