The critics of German policy are mounting a relentless media attack in trying to turn what some have called Germanic fiscal sadism. Many are blaming the culture of BUNDESBANK INFLATION PHOBIA as the neurosis that is beginning to suffocate the economies of EUROPE, including those who are part of the CORE. In today’s Telegraph, Ambrose Evans-Pritchard, jumps on board and blames the Germans and their efforts for fiscal fidelity as causing so much political uncertainty within so many EU nations.
In a Financial Times piece, Larry Summers turns up the heat on Germany in an article, “GROWTH NOT AUSTERITY IS BEST REMEDY FOR EUROPE.” Mr. Summers does major finger-pointing at the Bundesbankers for continuing to push for austerity before growth can have a chance to take root. Summer’s says:
“Germany’s enormous success in recent years has been achieved by becoming a large-scale net exporter–it would not have been possible without large-scale borrowing and importing by Europe’s periphery. The periphery cannot possibly succeed in reducing its borrowing substantially unless germany pursues policies that allow its surplus to contract.”
I think that Summers is in error in solely blaming the Germans for building surpluses for the Germans believe that they under went severe restructuring and deep reforms while the profligates partied on–now in the mindset of the TEA PARTY, the Germans want the profligate to pay the piper.
The BUNDESBANK PHILOSOPHY is bent on cleansing the system. This stance by the BUNDESBANKERS is currently resulting in a deleveraging of EUROPEAN DEBT, which is causing the present to and fro in the GOLD market. If the Germans capitulate, the GOLD will reassert its role as the HAVEN PAR EXCELLENCE. Further pressure on the Germans is emanating from the increasing strength of Francois Hollande in next week’s French election. Mr. Hollande is becoming the voice of the pro-growth, anti-austerity movement in Europe, which even is showing up in the Netherlands. The pressure is mounting on the Germans. GROWTH OR AUSTERITY: That is the question.
Tags: Bundesbank, Europe, Gold, Larry Summers
April 29, 2012 at 9:25 pm |
Laconic words Yra, up there with HH. You certainly don’t mince your words!
April 29, 2012 at 10:07 pm |
Judging from the comments to Summers’ FT piece, I don’t think the readers believe him any more than I do. Read; “All I know is, if mankind survives this century, it is a certainty that at some point thereafter it will look back and be absolutely mind blown that the society that can send little vehicles to Mars, is the same society that is so utterly stupid, LITERALLY INSANE, when it comes to achieving productive activity in general. People like Summers, Krugman, Wolf etc. will be regarded as the witch doctors and flat earthers of the day.
You are right on one thing though. Austerity is not the answer. Ordinary Greeks and Spanish should not be bailing out banks in any country. But neither should ordinary Germans or French. They were all going to suffer their fair share no matter what. There was only ever one economically optimal and morally acceptable answer, and that was default. But the vested interests that stood to lose power/money, like politicians, bankers, big business, Warren Buffet etc. had the propaganda machine ready and waiting to terrify the ordinary people into paying up. And the people stupidly put their trust in them. I wonder if given the opportunity again, the people wouldnt just say “we’ll take our chances and let the banks fail” Wow, talk about TEA PARTY!
Kevin
April 30, 2012 at 5:57 am |
Summers is wrong….growth is not a ‘choice’ it is an outcome. And imo growth won’t occur with additional inefficient govt spending. Look at the US…we run 7 to 10% govt deficits to achieve 2+ gdp growth.
April 30, 2012 at 6:34 am |
[…] is long over. While we must never forget it, European governments love to blame the Germans as much as Obama likes to blame […]
April 30, 2012 at 6:55 pm |
PSIN–Summers would probably say that DEPRESSSIONS are an outcome ,too.I am not a defender of Summers as I hold him very responsible for the effort and success of Glass-Steagall which laid the groundwork for the U.S. and probably global credit debacle.The repeal of Glass-Steagall removed the investment banks from acting as a fiduciary of systemic risk–and there in lies the beginning of the credit debacle.