In April, an ECB survey caused a furore by suggesting that whereas median net household wealth was just over €50,000 in Germany, in Greece the figure was just over €100,000, in Spain €180,000, and in Cyprus over €260,000. You can imagine how that went down on the Cologne Omnibus.
In fact, this evidence is highly mis-leading because all sorts of assets were not included which figure particularly strongly in Germany, notably state and occupational pension wealth.
We’re therefore excluding from our calculation of German household wealth the largest asset that almost all of those households will have. The current value of their future pensions. Agreed, we are also excluding this from the Spanish and Cypriot etc numbers, but pensions benefits in those countries will be very much lower than they are in Germany.
Does anyone with a brain really believe that Germany will pay me the pension it’s promising me when I go and ask for it? Any call on the pockets of the future taxpayer needs to be heavily discounted.
And not at all smug about it Tim!
A question: UK household wealth is tied up in property; German obviously much less so. However much this is an inappropriate form of investment for UK householdsn it is still tradeable – just – and liquifiable (if that is even a word). A German’s pension, by contrast, is worthless if he dies early. I would have thought therefore that the Germans would have multiple equity investments etc as a substitute for our homes. Am I wrong?
Also, doesn’t this mean that in Germany the state is generously and selflessly looking after our wealth for us because it will definitely do a much better job than we would, while in Greece et al wealth is allowed to fructify in the owners pockets?
There’s an argument to be made about the German conscience here – as the state takes more and more off you most people ease up because there’s no point working harder to give 60% (conservative estimate of my marginal state theft rate) to the government. Germany is different – the more you tax Germans the harder they work to maintain the same income.
In any case, I don’t believe the numbers quoted for Germany. The amount of cash savings in Germany is horrific – I need to find the number but I am sure Herr Durchscnitt has over €100k in the bank. Cash. Not counting other assets. Germans save for armageddon. Earn a good salary, eat from Lidl, and on retirement go around emptying the bins looking for deposit bottles.
Well I guess that answers my question. So the figures were bollocks partly for the very good reasons Tim highlighted and partly because they’re bollocks.
These days, when you hear people discussing wealth, particularly your wealth, be afraid. Be very afraid. They’re only talking about it in terms of taking it away & using it for their own purposes.
The _mean_ holdings of cash assets (including shares and such) is €60,000. That’s per citizen, not per household.
Where did you get those figures? I’m not challenging them, I’m seeking knowledge.
Aren’t Germany’s pension funds heavily invested in Greek and Spanish government bonds?
That’s a thought! What is the NPV now?
They were published by Allianz in January 2011. These figures come out quite regularly, including from the Statistisches Bundesamt, I think their estimate is considerably higher.
Correct, yes and no. Living in Germany these past 20 years, I am continually shocked by how many people expect to live on the government retirement scheme. Remember the scheme is not funded but is a simple “pay as you go” system. With almost the lowest birthrate in the world, the Khaldun-Laffer curve will crush this retirement system inthe next 20 years leaving minimal payments in its wake.
IN the end, the Germans know the Greeks have been stuffing cash into their pockets with both fists instead of paying taxes since they joined the EU and , when push comes to shove, the Germans WILL NOT bail them out.
Yes well, as everyone else seems to have said already, an “asset” which you don’t control and which can be taken away at any moment by the State simply changing the rules, doesn’t really count.
I’d rather have my house than anybody else’s promise to pay me a pension miles in the future, out of funds that don’t exist.
Your house is an asset because the state maintains a register saying you own it (one of the reasons people in sub-Saharan Africa are so screwed is that land tenure doesn’t provide land ownership rights, and so they can’t sell or borrow against their land), and because the state’s agents will remove people who say that you don’t own it from the premises and throw them in the jail.
It’s bizarre to conceptualise that any differently from any other right which is maintained solely as a matter of government policy.
John b, I think we’re a bit nearer to having the rule of law than you imply.
It’s true that the State could suddenly decide one day to abolish private property, or pass a bill of attainder against me, or (slightly more likely) just not enforce my rights against some favoured minority (gypsies, muslims) who might decide to take over my house.
But to put that on a par with the near-certainty that the State will at some point renege on its promises about the Old Age pension, is stretching things a bit far.
It’s a technical truism but a practical nonsense.