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Anorak | Who really believes that Germany is poorer than Spain or Cyprus? The European Central Bank does

Who really believes that Germany is poorer than Spain or Cyprus? The European Central Bank does

by | 15th, April 2013

Cyprus Financial Crisis

WHO really believes that Germany is poorer than Spain or Cyprus? Well, apparently, the European Central Bank does. Which sounds insane but bear with me. They’ve just released some research showing that German households are in fact poorer than households in Spain or Cyprus. The report is here . In the FT we get the following :

Measured in terms of the median, German households occupy the last place among all eurozone countries, with net wealth of a mere €51,000, while the median Cypriot household has net wealth of €267,000. The explanation for this gap is the low property ownership rate in Germany – well under 50 per cent. This means that the median German does not own a house, while the median Cypriot or Spaniard does.

The median is the statistic to quote when you want to say that your typical German is poorer than your typical Spaniard. But that is a meaningless statement because it is based on distributions within countries. If you want to compare across countries, it is better to take the mean. The gap is not quite as dramatic but it is still very large.

If mean German net wealth is €200,000 per household and mean Spanish net wealth is €300,000.

This is, of course, entire nonsense. It is what the report says, but it’s still nonsense.

The reason is that the report doesn’t bother to include pensions as wealth. Which is crazed lunacy quite frankly. Because pensions are the major form of household wealth. Even just the UK old age pension has a “wealth value” of around £150,000.

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Posted: 15th, April 2013 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink