Wrath of Draghi Hits Germans who Refuse to Blow their Savings

Just shocking that Germans dislike stocks, with the DAX down 21%

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Since promising to save the euro at any price, ECB president Mario Draghi has thrown just about everything he can at Europe’s crisis-ridden economy. That includes the mother of all financial anomalies, negative interest rates. Yet despite all the trillions of euros of his alphabet-soup creations — QE, LTRO, TRTRO I, TRTRO II…  — the European economy is still frail, growth is lackluster, public debt is out of control, and unemployment remains worryingly buoyant.

As for the region’s banks, the less said, the better.

Not to worry. As Draghi said in a speech to Asian government officials and business leaders on Monday, there’s still a great deal more that can be done to punish Europe’s hordes of savers, the central banker’s scapegoat du jour for all that ails Europe’s debt-laden economy.

The low or negative interest rates plaguing Europe are a symptom of a much bigger problem, he said: the compression of investment returns due to a massive global savings glut. To our great amazement, it’s this purported glut — and not his monetary policies — that lies behind the historic decline in interest rates.

Inevitably, whenever Draghi talks about “savings,” he has a particular kind of savings in mind: German savings. If Germans spent money on imported products rather than saving their money, they wouldn’t have an account surplus — which has been “above 5% of GDP for almost a decade,” he complained — and would thus save the world.

While Draghi bemoans Europe’s savings glut, reality is that household savings have been on a sharp downward trajectory ever since the creation of the single currency. Even in Germany, the personal savings ratio has slipped from 12% at the beginning of the crisis to 10% today. A similar trend has occurred in Japan, the U.S and just about every other so-called developed economy since the beginning of this century.

By contrast, household debt has been on a steep, upward path for decades. In the EU average household debt ranges from 54% of net disposable income in Hungary to 305% in Denmark. As a matter of fact, the four OECD economies with the most indebted households are all European — Denmark, the Netherlands (274%), non-EU member Norway (224%), and Ireland (207%). In Germany, average household debt is a rather modest 94%, just slightly higher than Italy’s 90%, but lower than France’s 105%, Belgium’s 112%, Spain’s 127%, and the UK’s 156%.

Naturally, Draghi would much prefer Germany’s debt levels to be higher and its savings rate to be considerably lower. He wants Germans to spend money they don’t have.

And he would like Germany’s savers to take a leaf out of middle-class Americana’s book and diversify their investments — i.e. plow a much larger share of their hard-earned savings into the stock market. “U.S. households allocate about a third of their financial assets to equities, whereas the equivalent figure for French and Italian households is about one-fifth, and for German households only one-tenth,” he said.

It’s just shocking how Germans refuse to trust stocks. The DAX is down 21% since April 2015, and Germans stick to their savings? Just shocking.

One way of pushing Germans into stocks would be to make it prohibitively expensive to save. All that’s needed is for German banks to begin passing the burden of negative interest rates on to their retail customers. But that’s unlikely to happen anytime soon because people would simply hoard their savings as physical currency.

This might help explain the ECB’s impromptu decision to stop printing the €500 note as of 2018. Supposedly the bill of choice of money launderers, drug traffickers, terrorists, and corrupt politicians alike, the €500 is so allusive that in Spain it allegedly came to be known as the “Bin Laden.” According to Bloomberg, a growing consensus is forming in European policy circles that large-denomination notes, including smaller ones, are “used only by those up to no good.”

But it’s not just criminals. High-denomination bills are also popular among law-abiding cash-lovers all over, especially with the ECB tripling down on financial repression. And in Germany cash-lovers abound. An estimated 79% of all transactions in Germany are conducted in cash. As Deutsche Welle reports, the ECB’s decision to eliminate the largest of the euro currency’s seven bills is widely seen as “an affront against cash payments and an underhanded ploy to loosen monetary policy even further.”

Even the Bundesbank recently stepped into the fray, warning against killing off higher denomination banknotes due to the debilitating effect it would have on public trust in cash [read: “Freedom Always Dies Bit by Bit”: Bundesbank Takes Sides in War on Cash].

The ECB went ahead anyway and pulled the €500 note, ostensibly as a crime-fighting measure. But few people in Germany are likely to believe the central bank’s official justifications, especially given Draghi’s latest verbal attack on German savers.

Indeed, rather than rewiring German saving habits, all his words and actions appear to have achieved is to add fuel to a public backlash against EBC policy. Already only one in three Germans say they have trust in the ECB. Unless Draghi begins choosing his words more carefully, by the time Germany’s general elections come around next autumn, that number is likely to be a lot lower. By Don Quijones, Raging Bull-Shit

Negative interest rates and helicopter money have already triggered the Clash of the Titans. Read…  “We Cannot Afford another Draghi”: Germany Attacks ECB

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  49 comments for “Wrath of Draghi Hits Germans who Refuse to Blow their Savings

  1. As another poster observed, should we continue to call this capitalism when it is based on credit/debt and not capital?

    • Wolf Richter says:

      George, there are two kinds of capital:

      – equity capital (different versions of stock, like common shares, preferred shares, etc.)

      – debt capital (like bonds, loans etc.)

      (And there are hybrids between the two, and those that convert from one to the other, etc.)

      There are capital markets for both types: equity markets and the credit markets.

      Both types are a crucial part of “capital”-ism. They’re both essential in funding enterprise, and in rewarding those that fund enterprise.

      • walter map says:

        You’re welcome to blame me for Mr. McDuffee’s consternation.

        But is it really capitalism if the goal is to profit from a gimmick that destroys capital? Debt peonage, borrowing for stocks buybacks to goose prices, and building ghost cities in the wilds of Mongolia somehow seem unrelated to the conventions of ‘capitalism’. Either the conventional definitions could use some qualifiers or we need to resort to other terminology.

        That said, one of my pet peeves is that the use of savings and profits for capital formation seems to be seriously in decline, replaced by bank debt, bail-outs, bail-ins, negative interest rates, and the like, which must ultimately prove to be unsustainable and financially and socially destructive besides, however profitable they may be to the perpetrators of such distortions.

        I’m too lazy to establish theories of pseudo-capitalism and anti-capitalism, but if I weren’t these would include concepts like equity and debt which also appear in capitalism, and they would not be pretty.


    • Intosh says:

      “the compression of investment returns due to a massive global savings glut”

      I was watching a documentary about the Greek/euro crisis — “AGORA – From Democracy to the Market” — the other day. In it, Naomi Klein explained that that crisis was part of a bigger project by the elites and bankers to “liberate capital” so that profit can be maximized. “Liberate capital” means going after savers and after the welfare states. It means creating a condition in which a given government is pressured to re-write the social contract and make concessions in favor of private enterprises at the expense of the rights of the people. It means privatization as well. Klein says if the Germans believe they are immune to this, then they are sadly mistaken. Once “they” are done with southern Europe, Germany and France will be next. That was in 2014. Looks like she was right.

  2. Keith says:

    You must remember these silly people see paying off debt as saving.

    With all the debt in the world there are a lot of repayments, saving that isn’t saving.

    • Agnes says:

      Again I apologize to not have the citation, but Greenspan once said he could not raise interest rates until individual Americans increased their credit card debt. I have not understood this well enough to explain it, but I have observed its truth.

      • d says:

        Alan could not print money and direct it where he wanted it, so he wanted the card company’s to do it for him, in the NEEDED place, retail main street.

        So stimulating the economy from the bottom, so he could raise rates in a rising economy, to control the level of its rise.

        • Agnes says:

          Thanks d I will think about your answer…I guess it is possible that Greenspan had a shred of integrity left when he said that…or maybe he was only trying to game the sovereign consumer.

        • d says:

          He talked about helicopter money too. Credit card use has a similar economic impact.

          If you gave everybody with a credit card, a free payment, that would be helicopter money, but only credit card users would get any.

          Alan knew helicopter money must go to the most needy, the homeless and rural long term unemployed first, they dont have credit cards.

          But if you can get it to them, they will immediately spend, the helicopter money.

        • Sound of the Suburbs says:

          Alan Greenspan’s last connection to the real world was in 1996 when he talked of irrational exuberance.

          Shortly after that he went completely insane.

  3. Dave Mac says:

    If you think the world of finance is in a mess right now…

    Things will only get crazier after Hillary is elected.

    • hidflect says:

      The Wicked Witch of Wall Street will make sure Goldman Sachs can sleep safely at night. It’s Main Street that will cover the bill.

  4. Ptb says:

    Trusting a currency like the euro may be something the “hoarders” would rather avoid. A currency that’s been honored for over 100 years may be a wiser choice. Or perhaps other more globally accepted assets. The EU is looking like a shakey bet as time goes by. Going NIRP at the retail level or even talking about it may result in something the clowns in Brussels won’t be expecting.

    • frederick says:

      Ptb İ fail to see how the dollar is any better My preference is for gold and silver and not some ridiculous digital currency that nobody even understands

  5. User13610 says:

    An alternative view:
    Given the accounting identity S=I (saving MUST equal investment), if investment falls short this will appear as too much saving. The resolution is simple: either surplus saving is exported (Germany) or income (GDP) shrinks until saving, which adjusts to income, drops to match investment (as in southern Europe). Apart from the national idiosyncrasies which you mention, this explains the situation adequately.

  6. nick kelly says:

    I believe the move against large bills began in Holland with the 100 guider note being withdrawn. The $1000 Canadian is long gone. I only ever had two- a herring fisherman had just returned from the insane 1982 (?) herring roe fishery when the Japanese bid the price up to 3000 a ton. Cash boats were buying right on scene with 1000 bills. More than one boat (seiners) pulled in a million dollars in one set.
    My guy was just a crew guy but had done well and bought a boat of me for 2 of them. At first I actually balked, then as the guy started to get PO’d I said lets go to bank and all was well.
    The Dutch reason apart from crime was tax evasion which the average
    wooden shoe and the average Brit do not consider a moral crime as much as a duty

    • Paulo says:

      My Father-in-law used his herring money to retire at 46. He lived on his investment returns spending 6 months wherever he felt like and 6 months on his waterfront property on Vancouver Island. He is the man who taught me the power of saving and being debt free. It works.

    • nhz says:

      you are wrong about the Dutch 100 gulder note. We even had 250 and 1000 guilder notes until the euro replaced all guilder notes as legal cash (several Dutch banknotes were among the nicest notes in the world, graphically).

      Sad really, as the guilder has a solid history of many centuries (and the guilder notes of nearly 2 centuries), while the euro will be lucky to last another decade.

      In the eighties and early nineties the large denomination bills were relatively common in certain sectors of the economy like car sales and the computer industry. I don’t think tax evasion was a real factor; later in the nineties most of the ‘black economy’ and tax evasion was already electronic (cashless), cash transactions were for the small fish.


    I worked for a very large Germany company a few years ago. I was on a job site in Canada with three German engineers. All three had company credit cards. But, all three paid for every lunch, dinner and anything else that we needed for the job with CASH. All three were under 30 years of age. One, has a Mark from the 1920’s that was devalued hourly by placing stamps on it in a framed picture frame in his home. Culture is kind of funny that way!

  8. Al Tinfoil says:

    Draghi used to be good for some laughs, but now he is just tedious.

  9. Bigfoot says:

    Just got done munching some swamp cabbage & read this. I have a problem with some of the numbers. Perhaps someone can help me out.

    “US households allocate about a third of their financial assets to equities, whereas the equivalent figure for French & Italian families is about one fifth, and for German families about one tenth,” he said.

    Are we talking 1/3 of disposable income or 1/3 of net? Where/what/how are these numbers derived or calculated? Is this referring to middle class families & what constitutes middle class in the US now & in Europe as well? A 1/3 allocation seems quite high to me. Are we really including all US households & the same question for the European countries mentioned? The gist of the article is good, just wondering about a small detail.

    • walter map says:

      RE: “US households allocate about a third of their financial assets to equities . . . ”

      “The gist of the article is good, just wondering about a small detail.”

      It’s not a small detail. Definitions are crucial, and Draghi isn’t offering any.

      The reference here is to financial assets, not to income. What Draghi supposes the percentage of income allocated to financial assets could be is anybody’s guess. For the majority of U.S. households living paycheck-to-paycheck you could suppose that percentage is zero, unless you believe they may be ‘investing’ in a crooked payroll-deduction 401k plan, or that SS payroll contributions somehow constitute some sort of ‘investment’.

      You have to parse these utterings carefully or you can easily misunderstand. These are professional double-talkers after all, minions of the global bankster cartel, and they are not your friends.

    • Wolf Richter says:

      Bigfoot, these numbers were used by Draghi himself, as quoted. The link to the speech is in the text.

      My understanding is this: a “third of their financial assets to equities” means those people who have “financial assets” (cash, CDs, savings, stocks, bonds, money market funds, etc.) – so not everyone but all those how own these kinds of assets have 1/3 in equities

      He said “assets.” So not “income,” disposable or otherwise. You can have lots of assets and zero income, and the other way around.

      “Financial assets” is a reasonably well defined category and is being tracked.

      • Bigfoot says:

        Ok, clear on assets versus income (my mistake) & yes I understand it was Draghi speak. The rest, not so much. It would be interesting to know how exactly these figures I mentioned are derived. If it really is 1/3rd of assets I would guess this does not or could not include most Americans. Hmmm. Not a big deal, just curious.

  10. Markar says:

    Between the Merkel/Soros/Erdogan refugee invasion and Draghi’s insane monetary policy, the German people had better grow a pair soon and demand out of the EU–before they lose it all.

    • Robert says:

      They certainly have evolved in three generations from being the Master Race and issuing awards to multiparous mothers to providing welfare for foreigners so as to provide sufficient factory workers in an aging society. What an astounding turn of events.

  11. Keith says:

    According to a recent article in Zerohedge, this also has to potential to remove a significant portion of physical currency from the market and force more in electronic means, allowing for a true financial repression authority to be established.

  12. Patrick says:

    As soon as US stocks are on sale for 1/2 off I’ll be glad to plow my hard earned savings into several of the more deserving one’s. Until then I’ll keep saving, and no amount of neg interest will convince me to pay for grossly overpriced equities.

  13. Paulo says:


    Do the very high household debt rates in northern Europe include mortgage debt? The article does not specify. If it includes mortgage debt then the amounts are very reasonable.

    After all, rent owed is a lifetime debt, a mortgage can one day be retired plus the owner has serious equity.

    • nhz says:

      The Netherlands has the highest household debt of all EU countries (and total of public and household debt is only slightly behind Greece). Almost ALL of this household debt is mortgage debt, the Netherlands has an epic housing bubble that has been expanding since about 1990.

      However… the Dutch also have some of the highest savings in the form of savings accounts and pensions worldwide. A major reason for this is that mortgage debt is fully deductible from the high Dutch income tax. Fiscally it wasn’t wise to really pay for a home even if you could pay cash. The Netherlands is a tax paradise for high income earners, on the condition that you buy a Dutch home with a maximum mortgage ;-)

      Lately the Dutch have started to slightly pay down their mortgages because the old constructions are not longer profitable with current extremely low rates. Mr. Draghi is shooting himself in the foot here with his NIRP policy, I guess he would prefer if the Dutch get even further into debt (why not again 120% mortgages like we had around 2000, instead of the 100-110% mortgages we have now in Netherlands?)

      Keep in mind that the situation is very different depending on country, e.g. the financial side of housing is completely different in neighbor countries Belgium and Germany (which in itself has been a source of trouble, as the Dutch have historically pushed up home prices just across the border, due to all the leverage in the system).

      High mortgage debt doesn’t mean serious equity at all!! Dutch homes prices have been pushed into the sky by this system, when the Dutch housing bubble collapses the homes will be worth a fraction of the mortgage value (e.g. just across the border in German, homes cost about half of an equivalent home in Netherlands while household incomes in Germany are a bit higher). The Dutch system encouraged ‘homeowners’ to never pay off the mortgage. Why would one pay off when the home prices are assumed to ‘always go up’ and the government provides a free home price put option?

      Some day the bill for all this madness will come due, I doubt many ‘homeowners’ (really renters from the bank) will have ‘serious’ equity – more likely they will have serious debt.

  14. walter map says:

    In a normal world, people save their money and deposit it in a bank, which pays them interest.

    The banks uses those deposits to make loans to companies, and companies pay the banks interest. Banks make money on the difference between what they are paid by companies and what they pay out to depositors.

    Companies use banks loans to pay for their operations so they can make money. They repay the loan, and earn a profit.

    The world is no longer normal.

    In our abnormal world, the Central Bank creates money out of thin air and pays banks to borrow from them. Depositors savings become useless to banks because depositors want interest and banks don’t need their savings to make loans. Banks would rather have people spend all their money and borrow more money from them, at interest, the more the better.

    This way, only banks make money from interest, and everybody else ends up in debt to the banks, and if they borrow too much they end up getting owned by the banks as debt peons.

    The Germans don’t want to go into debt and don’t want to become debt peons because they aren’t suckers, and Draghi has a problem with that, because his job is to make sure the banks make as much money as possible, even if it ruins the borrowers, which the banks are very happy to arrange, because it’s profitable.

    There’s a lot more to it than this, and it gets very nasty when the banks make loans the borrowers can’t repay. Whole countries end up going bankrupt, and then the banks can have their way with them. Banks do a lot of that. It’s called loansharking, and it used to be a crime.

    • Robert says:

      Great comments. It is taught in Econ 101 (the Samuelson edition) that “Savings are the engine of investment.” Not just that, but the natural corollary that a person has every right to expect some return for the act of deferred gratification embodied in saving. But things are even worse that you thought (“In our abnormal world, the Central Bank creates money out of thin air and pays banks to borrow from them.)
      The central banks are actually paying the very banks that own them, acting in the guise of doing soon behalf of their governments. And they don’t ceate the money out of thin air, either- it is only to the extent that, working hand in glove with corrupt legislators, they continually expand the respective national debts. The new money comes from their purchase of new debt securities. Andrew Jackson, who was just thrown under the bus (relegated to the back of the $20) vowed to leave the U.S. not one penny in debt and he kept his word. When he left office, crowds packed the railroad station to see him off. The Draghis of the world will only crawl back under their rocks when a new crop of Jacksons appears on the scene

      • ML says:

        The return for delayed gratification is having the money in future. Any expectnacy of interest presupposes the saving institution wants to borrow the money rather than simply looking after it for you.

        • Sound of the Suburbs says:

          When you save in a bank, you actually loan the money to the bank to do with as they please.

          This is why they should pay you some interests and can confiscate your money in a bail-in.

          The fact most people think their money is still their money in the bank is a grand deception.

      • Sound of the Suburbs says:

        Private banks do exactly the same thing and loans/mortgages create money out of thin air.

        The reserve requirements are so low that reserves needed are almost zero.

        After 2008, UK banks had a 80:1 credit: reserve ratio.

        It’s well hidden but some research on the internet will reveal all.

        A good starter is the “Hidden secrets of Money” web-site, a strong Libertarian slant but good on money.

        Historically, monetary systems are constantly collapsing and being replaced, nothing new.

    • Konstantin KS says:

      I aggree and I have to add that national sovereignity depends on central government stability and this is the key to the new money creation instead of private savings. By definition, this is centrally controlled economy. Some people like it, some other not.

  15. Chicken says:

    “Supposedly the bill of choice of money launderers, drug traffickers, terrorists, and corrupt politicians alike.”

    Yeah, they left out offshore criminal enterprise, ie: international banks, some of which have arranged for their shareholders to pay token fines levied on behalf of insider criminal activity.

    They wonder why nobody trusts the system, seriously?

    Expect the unexpected.

  16. d'Cynic says:

    So Mario wants the Germans to put their money into either the stock market, the bond market or the property market, all of which his fellow banksters have inflated into a bubble.
    He has a problem with his own creation: the banks need to make productive investments with depositors savings, and with NIRP are forced to lend to zombies, basically kicking the can down the road.
    I guess, he is building his own gallows as people are not going to be too generous next time around when all these bubbles burst at once.
    Enjoy the good times while they last.

  17. VegasBob says:

    The idea of a ‘savings glut’ was one of Alan Greedscam’s more cockamamie notions, now adopted by Draghi.

    The only ‘glut’ in the monetary sector is the trillions of counterfeit electronic currency units printed up by the world’s central banks over the past 20 years.

  18. ML says:

    UK. The other day my credit card was blocked as a precautionary measure following a high alert security issue. Without a card for almost a week, I withdrew more cash than usual to meet my spending requirements. To avoid bulking my wallet, I got £50 pounds notes

    On both occasions where I spent that sum, neither recipient was unduly concerned. Whether the notes were checked for fake I don’t know but having since read that high denomination notes put me in a different league of drug lords, etc., I might request them again in future in order to boost my self-esteem.

    The other advantage is that having the notes in my pocket made me much more aware of the value of money and whether such a good idea to buy what I did. Paying the same amount using a credit card is just numbers.

    • Chicken says:

      Keep something ominous looking hidden in your pocket and tell them your name is Guido! :)

  19. Christoph Weise says:

    Die ECB is a criminal organisation which finances countries such as Greece, Italy and Spain out of the pockets of the savers and by draining the pension schemes. We Germans understand that there is nothing to be gained on the stock market. The prospects of stock investments are uncertain because the policies of the central banks hurt global growth and render the markets dysfunctional. Whatever upside there may be is consumed by profits of the high frequency traders, by bank fees and taxes. We rather concentrate on a political effort, fight the German government and break the spine of the ECB.

    • nhz says:

      Mario’s mob is far more dangerous for ordinary citizens than the original Italian maffia or even the drugs cartels.

      The ECB is just another tentacle of Goldman Sachs that plunders the EU middle class for the benefit of some crony ‘capitalists’ (primarily in the US). They get away with this because the political class and a large part of the EU population benefits a little bit from this too, and doesn’t experience the downside of these policies (yet). By the time the majority in Europe really experiences the downside of these stupid ECB policies it will be too late to kill the monster in Frankfurt :-(

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