Welcome, Guest. Please login or register.
Did you miss your activation email?
August 28, 2014, 12:09:27 am
HomePredMockPollEVCalcAFEWIKIHelpLogin Register
News: Atlas Hardware Upgrade complete October 13, 2013.

+  Atlas Forum
|-+  General Politics
| |-+  Economics (Moderator: ag)
| | |-+  Germany Should Take Wisdom From Keynes Instead of Weimar: View
« previous next »
Pages: [1] Print
Author Topic: Germany Should Take Wisdom From Keynes Instead of Weimar: View  (Read 477 times)
Beet
Moderators
YaBB God
*****
Posts: 15897


View Profile
« on: November 21, 2011, 08:27:08 am »
Ignore



The Weimar Republic may be the right historical parallel, but the Germans and their ECB brethren are extracting the wrong lesson. Today, Germany is the victor. Having implemented the difficult reforms needed to keep its labor costs down and its competitiveness up, it has emerged triumphant from the wreckage of the global recession.

The government’s 10-year bonds are yielding even less than U.S. Treasuries as investors flee Italy, Spain, France and even the Netherlands and Finland. Assuming the common currency survives, struggling euro-area nations will have little choice but to follow Germany’s example. They can’t go down the path to hyperinflation, because the ECB controls the printing presses.
A more relevant piece of wisdom might be drawn from a 1919 treatise called “The Economic Consequences of the Peace.” In it, British economist John Maynard Keynes warned the victorious Allies against impoverishing a defeated Germany with unduly harsh reparations after World War I. “The financial problems which were about to exercise Europe could not be solved by greed,” he wrote. “The possibility of their cure lay in magnanimity.” Unfortunately, the winning side didn’t heed his advice until after World War II, when the U.S. implemented the Marshall Plan.

Link
Logged

Wonkish1
YaBB God
*****
Posts: 2214


View Profile
« Reply #1 on: November 21, 2011, 10:07:15 am »
Ignore

I would be careful to call Germany some great bastion of economic greatness. In comparison to the rest of Europe that is mostly true, but that is like saying your kid is the healthiest at a fat camp...consider the company. The country is over 80% of GDP in debt and its banking system is 3 times more levered than the US. Deutsche Bank and Allianz(the European version of AIG--sovereign CDS) alone will probably cost the country at least $300 billion. I mean bank recap(of which the Germans will do) will put Germany right up to near 100% and all of sudden Germany isn't such an attractive sovereign credit risk(even though it will still be way better than the rest of Europe).


Also, if the implication is that Germany should now give up the only extra public balance sheet room left reserved for its banking sector to a bunch of profligate idiots I firmly disagree. Also, no country is forcing anything close to the post WWI reparations onto countries like Greece instead they did it themselves by spending to much on their own population and now its countries like Germany that have allowed Greece to actually default on some of its debt.

Bad story!
Logged
Beet
Moderators
YaBB God
*****
Posts: 15897


View Profile
« Reply #2 on: November 21, 2011, 10:56:05 am »
Ignore

Wall o gibblygook as usual. Germany is in GREAT economic shape! Even a millionaire can become a pauper if he makes all the wrong moves. And Germany wouldn't even need to re-capitalize anything if they would follow the advice in this Editorial.
Logged

opebo
YaBB God
*****
Posts: 47618


View Profile
« Reply #3 on: November 21, 2011, 11:22:12 am »
Ignore

...countries like Greece instead they did it themselves by spending to much on their own population...

No, Wonk, under-taxation.
Logged

The essence of democracy at its purest is a lynch mob

Beet
Moderators
YaBB God
*****
Posts: 15897


View Profile
« Reply #4 on: November 21, 2011, 11:28:49 am »
Ignore

The UK has a primary budget deficit of 9% of GDP. Greece has a primary deficit of only 1% of GDP. Meanwhile, gilt yields are at 200-year lows.
Logged

Wonkish1
YaBB God
*****
Posts: 2214


View Profile
« Reply #5 on: November 21, 2011, 03:26:46 pm »
Ignore

Wall o gibblygook as usual. Germany is in GREAT economic shape! Even a millionaire can become a pauper if he makes all the wrong moves. And Germany wouldn't even need to re-capitalize anything if they would follow the advice in this Editorial.

First of all, your better than that!

If Germany bails out the profligate idiots those countries will still default and their financial system will still need to be recap'ed. Of which they would no longer be able to afford.

The US is currently in a better position that Germany is. Some investors don't realize that because they aren't taking into account structural stability of their banking system(Iceland has shown that matters). And Germany is benefiting from being the best of the EU so the rest of the EU is buying German Bunds so many of them can stay in Euro's.

And in the US our banking system is much, much more stable than the European's. First of all, our Tier 1 capital isn't dominated by sovereign debt of soon to be restructured sovereign debt. Second of all, our leverage is 1/3 of Europe's. Third, to be more specific our banking system is about equal to our GDP and Europe's is 3 times it GDP.

I mean Deutsche Bank has about $60 billion in capital against over $2 trillion in assets and its Tier One Capital is dominated by risky sovereigns. That is a bank that is going to be bailed out by Germany one way or another and its going to cost a decent amount to do so.
Logged
Wonkish1
YaBB God
*****
Posts: 2214


View Profile
« Reply #6 on: November 21, 2011, 03:30:25 pm »
Ignore

The UK has a primary budget deficit of 9% of GDP. Greece has a primary deficit of only 1% of GDP. Meanwhile, gilt yields are at 200-year lows.

Well Greece shouldn't have ran huge primary deficits(either on balance sheet or off) way back in yesteryear. Now a primary deficit of 1% and 150% of Debt to GDP isn't cutting it. They need a balanced budget(and that includes debt service).


Are you suggesting that bond market doesn't know what its doing? And that you are smarter than all of these participants because they should be yanking credit from the UK instead of Greece?
Logged
© tweed
Miamiu1027
YaBB God
*****
Posts: 35450
United States


Political Matrix
E: -8.52, S: -8.00

View Profile
« Reply #7 on: November 21, 2011, 07:47:21 pm »
Ignore

I love that image
Logged
Pages: [1] Print 
« previous next »
Jump to:  


Login with username, password and session length

Logout

Powered by SMF 1.1.19 | SMF © 2013, Simple Machines