Why Nobody Can Fix German Economy

Añadido: 2026-05-12

[00:00:00]The German economy is broken and no one can possibly fix it. Factories across Germany are closing one by one.

[00:00:07]Companies such as Volkswagen, BMW, and Mercedes are suffering. Almost 200,000 companies have actually collapsed in 2024. And that number since then is rising. The German economic model that made Germany so insanely rich is no longer working because almost every single year Germany is facing a recession. If you look at the Germany's economic growth, you will see that up until 2018, Germany was growing to a certain extent. Since then, there was a recession in 2018, almost a recession in 2019, and of course in 2020, there was a serious recession. This was the pandemic recession. The only economic growth that was in Germany is the post-pandemic recovery. However, if you look at the German economy since 2022, you will realize that almost every single year there is a recession. And what's a recession? A recession is two negative consecutive GDP growth. So if GDP growth goes negative for two quarters, that means that it's a recession. And you can see that here is a recession. Here is another recession. Here is almost a recession. And recently, the economy began growing, but that's just 0.3%, which is nothing. And probably by the end of this year, because there is a war in the Middle East, it is going to be another recession. And that recession is not going to stop anytime soon. However, if you zoom out and you look at the overall picture, you will see that in the last few years, the German economy is actually growing. Look at 2020. Since then, the GDP has actually grown from less than $4 trillion to almost $4.7 trillion.

[00:01:49]What exactly are you talking about? What if I told you that this economic growth is absolutely fake? Because if you look at the inflation data, what you will see is that that GDP growth is simply because prices are rising in Germany faster than ever. There has been massive inflation since 2022. Inflation almost hit 10% as it did in the rest of the world. Germany isn't a country that is known for having high inflation. German people save a lot of their money. They don't take much debt, and yet prices in Germany has been growing catastrophically fast. If you look at all nations in the world, you will realize that Germany is one of the few countries that has financial discipline.

[00:02:35]The German government isn't borrowing money like there is no tomorrow, such as the French government or the British government or the US government. But, if you look at the inflation data, you will see that even now inflation is about 3%.

[00:02:50]So, this economic growth that you see has been happening recently isn't because the German economy for some reason has been growing, but rather as long as prices across the entire economy keep growing, then the GDP is going to grow. Why? What is a GDP at the end of the day? The more money people are spending, the higher the prices are, the more money circulates in the economy, the faster the GDP growth. Now, if you zoom into the German's GDP and you look at it since 2008, you will realize that the German economy hasn't actually grown since 2008. And that's how big the problem is in Germany. The total GDP in Germany back in 2008 was about 3.8 trillion dollars. Of course, the 2008 financial crisis crushed the German economy as well. And since then, the economy was barely growing. By 2020, the German economy recovered to about 3.9 trillion dollars. So, by 2020, the total GDP was as much as it was back in 2008.

[00:03:53]Finally, maybe the German economy is going to grow. But then, that real growth or that economic growth that happened since 2020 was primarily because there was so much inflation. In other words, the quality of life of the average German hasn't actually grown since 2008. Now, if you take this and you compare that to the United States, the US economy since 2008 has doubled while the German economy hasn't grown at all. The only growth that happened was the growth on paper because now there is simply too much money is circulating in the economy. Do you see how big of a problem the German economy is? And Germany has to do something serious.

[00:04:35]Germany has to completely reshape and restructure the economy for the economy to start growing again. Otherwise, if the economy keeps falling, in 5 to 10 years from now, God knows what is going to happen German economy. Now, this is the reason why the German economy has grown so fast since World War II. And if you go back to 1945, you will see a couple of countries that have been completely devastated. One was Japan and the other one is Germany. These two countries have been completely crushed.

[00:05:09]But, right after World War II, the German economy started growing faster than ever and today Germany is literally the most powerful economy in the entire European Union. Even the British economy is not even close to the German economy.

[00:05:25]But, this model is no longer working because this economic model was actually built on a few main factors. First of all, cheap Russian energy.

[00:05:35]Russia is this vast country that isn't that far away from Germany. And Russia has a lot of resources, very cheap energy, and very cheap oil. So, as long as that cheap resources would be flowing to Germany, Germany would be using these resources to build some of the world's best cars. They would be using these resources to build some of the world's best electronics, and that allowed them to be competitive on the global stage.

[00:06:02]Plus, the Chinese demand for German machinery. China, by far, has one of the largest markets in the world. And up until recently, China wasn't actually building really great technologies.

[00:06:15]China wasn't actually building really great cars. So, German cars were these really great cars in Germany. So, the entire elite market of China was actually purchasing BMWs, Mercedes, Volkswagen. In fact, every single German car manufacturer had factories all across China, because the demand for German products was insanely high. Plus, the premium pricing for made in Germany quality. As long as it's made in Germany, everybody knows that it is a great quality. If you would ask anybody in the US, and you would tell them, "What are you going to choose? A BMW or a Chevy?" Most people will certainly tell you a BMW, because the quality of BMW is far more superior than the quality of a Chevy. That's why people associate German brands with really great quality and are ready to overpay for them. The same thing was happening all across the globe, especially in China, when at that time, China didn't actually had much of their own cars, which is why they primarily purchased the German cars. But, what if I told you that this economic model that made Germany the wealthiest country in the entire Europe is no longer working for a few reasons. First of all, China is now overpaying for energy two to three times. If your factories don't have a source of cheap energy, then your factories will have to increase their prices. They will have to increase their cost, which means that they're no longer going to make as much money as they did in the past, which means that they will have to raise their prices. Since 2022, Germany is no longer buying the cheap Russian energy, but rather they're buying expensive energy from the United States. They're buying expensive LNG and expensive oil from the United States.

[00:08:09]That instantly increased the cost of producing for these factories. Secondly, Germany has lost the Chinese market.

[00:08:16]Back in the days, yes, you could actually sell anything in China and the Chinese elite, where were literally huge number of people, were buying massively German products. But now, China is the global factory in the world. 15 years ago, yes, China was actually producing inferior products. But if you take today a Chinese cars and a German car, I can tell you for a fact that Chinese cars are really great. Their quality might not yet be as great as the German quality, but they're very close. At the same time, their prices are significantly lower than the German cars. And finally, China is beating Germany at every single aspect. China basically replaced the entire German economy because China is producing anything that Germany is producing, but at a much cheaper price. Why? Because China has two competitive advantage.

[00:09:12]First of all, economies of scale.

[00:09:15]Because China is a much larger country and has a much bigger population. The population of China is 1.5 billion, while the German population is about 80 to 90 billion. So, China can actually use economies of scale. The more they're selling to their domestic market, the lower are going to be their prices and the more they can export at a lower price to the rest of the world. Germany doesn't actually have those economies of scale because Germany is not as big as China. So, China will always beat Germany in prices. Secondly, China has cheap energy. Since Russia stopped selling their energy to the European countries, primarily to Germany, guess who is buying all of that cheap energy?

[00:10:00]Yes, exactly, it is China. So, essentially in this free market that we have today, Germany literally have no chance whatsoever to stand against Chinese products. Yes, Germany will still sell some of their goods, but nowhere close to China. So, what made Germany such a great economy since 1945 is no longer making them because China essentially overtaken the entire German economy. Germany should have moved from quality manufacturing to software. Yes, Germany has some software companies such as SAP, but just a few companies. If you compare them to the largest companies in the US, they stand no chance. The largest software company in Germany has a market cap of 250 billion dollars. The largest company in the US has a market cap of 5 trillion dollars. Even Chinese companies have far bigger market caps than any German company. And Germany hasn't been actually investing heavily in software businesses. They're not the Silicon Valley of the European countries. They also don't have a huge tech sector. How many tech companies do you know from Germany? Not many. There are some really great companies from Germany, but they don't have young people who come to Germany and build some of the largest tech companies in the world. They're not also leading the world in AI. So, essentially the United States kept growing its economy because the US changed its model from manufacturing to moving into software, into AI, into tech companies. But, Germany stayed at manufacturing. But, when it comes to manufacturing, there is nobody that can actually compete with China. So, the German economic model is simply no longer working, and Germany has to do something. Germany has to completely restructure their economy, because every single year the German economy is going to get a lot worse.

[00:12:00]But, if you think this is the only problem, then you're making a grave mistake, because Germany is on the brink of catastrophe, since their pension is about to collapse.

[00:12:09]Germany is a socialistic country. They have really high taxes, but at the same time they pay really good pensions. And that means that young people are paying a lot of taxes for elderly to be able to retire. But, that's only possible when you have enough young people who are paying enough taxes so that you can actually pay for the elderly to retire.

[00:12:31]But, if you look at the statistics, you will realize that the number of young people has been shrinking in Germany for the last few decades. Back in 1990s, for every elderly person, there was almost three young people. So, three young people are paying taxes to take care of one elderly person. But, that number has been shrinking lately, and right now it's about 1.8 or 1.9. The less young people are there in Germany working to take care of the elderly, the more taxes they will have to pay. But, if you look at these numbers, you will realize that by 2035, which is not that long ago, that number is going to fall to as low as 1.3. At this level, the pension system is going to be entirely unsustainable, which is why the German government doesn't actually have much options. Either they have to raise the retirement age to 70, maybe 72 or 73, or they will have to completely abolish the pension system because this system is not going to work. Imagine if you're an average young person in Germany, and now you will have to pay literally 70 or 80% of your entire income to taxes just to be able to take care of the elderly. And no one knows if you are actually going to live long enough to also be receiving these pensions. If you're in your 50s or 60s, you might be able to accept that.

[00:13:54]But if you're in your 20s or 30s, chances that you are going to go to Germany and start a business in Germany are extremely low because you will be paying the most amount of your income to taxes for the German pension system not to collapse. And I'm not even talking about the problem that might happen 50 years from now. I'm literally talking a problem that's about to happen within the next 5 to 10 years. And this problem is not unique to Germany. Almost every single European country actually has a pension problem. Everybody that is watching this video who is in his 20s and 30s, maybe even 40s, most likely are not going to receive their pensions because the entire system is on the brink of catastrophe. That's why the only way that you can protect yourself is to start building an investing portfolio that is going to replace your income. So if you build an investing portfolio that's worth about a million dollars, and on average the S&P 500 grows by about 10%, you're essentially earning a hundred thousand dollars from your investments. And at first glance, building a million-dollar portfolio seems like an impossible job, especially if you're on a paycheck. But trust me, the moment you start, it's a lot easier than you think. The first hundred thousand dollars is extremely difficult, but the moment you hit that milestone, going from a hundred thousand dollars to a million dollars is much easier than most people expect. So if you want a personalized investing strategy and find out what are the best investments you should be making right now, then you can schedule a one-on-one call with my team that will help you to build a personalized investing strategy. And the first 100 people who will use the link in the description of this video will get the investing session completely for free. The link is in the description of this video.