Germany is slipping into recession because world trade growth has slowed. In 2015-16, despite ECB's QE, German growth was lackluster. Only after China injected large domestic stimulus, which caused world trade to accelerate above 4% by mid-2017, German growth too off. 1/5 pic.twitter.com/v48ARRpF2P

— Ashoka Mody (@AshokaMody) January 9, 2019

The German stocks (DAX) have echoed these moves, rising in 2017 and falling since the start of 2018. World trade data is not yet available after October. But continued slide in DAX says that trade growth possibly fell further below 4% in Nov-Dec. 3/5

— Ashoka Mody (@AshokaMody) January 9, 2019

Lesson 2: Germany is not a global locomotive. its own domestic demand does not power growth elsewhere. But it does transmit buoyant global demand to the rest of Europe. Slowing world trade hits Europe twice: directly from slower global demand and from the German transmission. 5/5

— Ashoka Mody (@AshokaMody) January 9, 2019

Deeper lesson 3: Germany is descending into second-tier global competitor. This will make it harder for Germany not only to transmit global impulses to Europe, but will reinforce German reluctance to lay out German taxes to support Europe financially. https://t.co/Q0PDmpfJsY

— Ashoka Mody (@AshokaMody) January 9, 2019