By Jeffrey P. Snider,

In 2015 the combination of the “weaker” euro against the dollar as well as the fact that monetary “stimulus” in Europe accomplished even less than that here meant that for the first time since 1961 France was not Germany’s largest trading partner. Exports to the United States finally surpassed those to its close European neighbor. When the statistics showing the switch were first published in February, at the time it was agreed this was a good thing for Germany; France was stuck economically speaking and the US was about to shake off whatever number of “transitory” factors temporarily delaying the growth spurt economists expected.

Just a few months after that, however, German industry began to moderate, or as much as that word might apply in this economic world. Growth had been sluggish for years but because it was less so in Germany it allowed the mainstream to continue to call the central European country the “powerhouse” or “engine” of Europe. Thus, if the “engine” already at near idle sputters, what would that mean for the rest of the Continent? At the very least it doesn’t reflect well on QE (again).

German factory orders fell by 0.5% year-over-year in April, which by itself wasn’t significant since in this new no-growth paradigm (depression) contractions are now almost a regular part of monthly variation. But April started what is now four consecutive months of contraction, a renewal of sustained weakness not found in Germany since the darker days of early 2013 and the European re-recession (announcing the depression).

The news of late has been even more grim. Industrial production fell an alarming 7.6% Y/Y in July, the worst contraction also since early 2013. The 6-month average is again just barely 1% meaning that 2016 is so far not all unlike the worrisome trend of 2015. There is just no growth in large part because there is no consistency at any point; including a still-uncertain future as reflected by subdued and contracting new orders.


A good part of the reason for the slowdown in Germany’s industrial sector is global trade. Despite the euro remaining relatively weak, German exports fell also by an alarming 10% Y/Y in July. Economists have been quick to blame Brexit for the disturbance, but the industrial figures and factory orders show that this weakness predated the vote (and really can’t be blamed on Brexit jitters since it was expected that “remain” would win). Even the export problem began months earlier, unsurprisingly in tandem with the four straight months of declines in factory orders.

German exports fell sharply in July, shrinking the overall trade surplus for the fourth consecutive month — something not seen since 1992 — and putting the continent’s benchmark stock index on course for its first weekly fall in three.

Germany’s problem is the same as everyone else’s – “sluggish” demand, only it isn’t due to far flung small economies suffering as far flung small economies might always seem to. Economists and the media should have been prepared for the export numbers given that the US Census Bureau reported not all that long ago that US imports from Europe dropped by a concerning 8% in July, which was also the fourth straight month of contraction in American “demand” for European products.

Sales to countries outside the European Union such as China and the United States suffered the most, indicating that the export-driven German economy was beginning to suffer from sluggish global demand. A steep fall in demand from non-eurozone EU countries, including Britain, was also reported.

That means Germany’s current concerns are as much concerns about the American economy as anyone else’s. Add China into the mix and there are clear problems in the world’s two largest economies at the start of the second half of 2016 where there weren’t supposed to be any. That can only mean that the depression marches on with its usual ebbs and flows mostly tied to monetary conditions.

The synchronization of especially global manufacturing and industry is more good confirmation of the eurodollar’s primary role in all of this. If we compare German industrial production with Brazil’s, for example, we find the same inflection points as well as an expected difference in each’s reaction to them.


You see very clearly the artificial “miracle” growth from 2003 to 2007 in both, just more amplified in Brazil, all of which forced Alan Greenspan and Ben Bernanke to adopt the absurd “global savings glut” idea so as to avoid admitting the Fed had no idea about how global money worked. In the summer of 2011, by contrast, these “miracles” were put into reverse, as what recovery there was from the Great Recession (that is clearly not a recession by virtue of what we see in these charts) came to an abrupt halt. Germany, as Europe, experienced another shallow recession that Brazil did not, but since that point German growth has been, again, unusually weak while Brazilian growth turned into a nightmare especially through the “rising dollar” portion.

The difference is simply that Germany’s industrial base is more mature and concurrent with other more mature economies, meaning moreinternal stability; Brazil on the other hand was and is far more susceptible to external monetary influence especially in contraction. Thus, the eurodollar’s decline means sluggish growth for Germany while at the same time a historically significant collapse in Brazil.

German weakness to such a high degree in July is surprising only to those who continue to see central banks as offering “stimulus.” The only stimulus indicated in global manufacturing and economy is what was once provided by an out-of-control wholesale money system that now in reverse acts as anti-stimulus. The degree to which that contraction affects each individual connection to it is different, but the process is all the same. It is a global problem hitting trade most of all because trade, by its very nature, has always been tightly connected to money.