EC If Dollar History Is A Guide, More Than A Growth Scare

Forgotten now, overridden by the arrival of the coronavirus, Germany’s economy was already well into recession before COVID. Quite a long time before. It wasn’t an earth-shattering collapse reaching downward to an incredible depth, that became the later effect of overreacting to the pandemic. We will simply never know what that prior contraction would have looked like, and how bad it would’ve gone, had SARS never escaped China.

Oddly enough, it was the Chinese economy which had much to do with that shallow yet prolonged pre-2020 recession. Heavily exposed to it by trade, like Japan the German system goes as the rest of the global economy might. The global economy gets moved by China and how it fares under often self-reinforcing eurodollar conditions.

Working backward, then, tight dollar, bad for China, not good for the global economy which we can practically see from how the German economy is behaving. In the latter case, it had been ZEW sentiment, of all things, which proved very useful in picking apart the inflation/boom narrative unquestioned in any media located on whichever continent.

Even after 2018 was shown to have been a total bust, though not yet recession, the latter would come about anyway and it had been, for Germany, the ZEW on the spot. I wrote the following in August 2019, which proved to have been exactly the case:

Unlike, say, Argentina, you can’t so easily dismiss German struggles as an exclusive product of German factors. One of the most orderly and efficient systems in Europe and all the world, when Germany begins to struggle it raises immediate questions about everywhere else.

This was the scenario increasingly considered over the second half of 2018 and the first few months of 2019; whether or not recession. Over the past few months, however, the question has changed again.

Central bankers and Economists were hoping it would all get resolved favorably, and the public would go back to asking about rate hikes and normalization. A growth scare and nothing more, the inflationary boom temporarily delayed.

Now, contrary to official reassurances, it looks like Germany’s economy may already be in recession.

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Sorin 2 days ago Member's comment

And the conclusion is?