Germany and Global Instability

Germany is well known for its highly labor efficient industrial capabilities. Germany's GDP normalized for purchasing power parity per capita per hour in 2013 was seventh in the world. Their nearest competitors were mostly germanic bloc satellite countries and the US. But as a ranking it only tells a piece of the story because their ability to manufacture and export accounts for about 50% of their GDP. Whereas the US' GDP is composed of only 15% exports. This means that the labor in Germany is being used heavily in manufacturing and export or to phrase it another way, they have an outsized productivity level in exports per person as opposed to consumption and services. As a result they have become quite vulnerable to the swings of the global economy. They are far overproducing what they could possibly consume and thus are dependent on other countries importing from them. With Europe at a dead halt, Asia slowing down, and South America in free fall, only the US, UK, Canada, and Australia are left among the advanced economies with likely growth prospects. Yet even these countries are rapidly cutting trade deficits with much of the cuts coming on the import side of the equation. The economic model of relying on net export activity is flawed because it is heavily reliant on the importer's economic policies and fortunes.

Nothing occurs in a vacuum and the Germans are no exception. It concerns me that as the problems in Europe began to return to the forefront, the conflict in the Ukraine exploded. In 2007 (http://icps.com.ua/pub/files/46/21/FTA_Impact_E.pdf) a report on the implications of free trade between the Ukraine and the EU was published. Many times throughout the report correlations were outlined that made it clear the proposed "deep free trade" agreements between the EU and Ukraine were ultimately about discounted access to Russian markets and Russian energy supplies. Can you imagine a country such as Russia being happy about loss of tariffs and the weakening of their highly protectionist policies? Then is it any wonder that Russia would proceed to instigate a proxy war in the Ukraine? Even more concerning is that because the EU has placed all its socialist eggs in the well disciplined basket of the Germans they have become highly susceptible to economic ruin if the Germans and the germanic satellite countries don't find an outlet for their exports and lead the Euro into chronic deflation due to deficient demand.