Germany update
In case you missed it, they (again) finally seem to have sorted out a compromise cabinet, plus a few policy agreements which many are predicting are likely to lead to the coalition's (and perhaps the country's) imminet collapse - largely thanks to the guaranteed popularity-winners of a 3% VAT hike, raising the retirement age and cutting public spending all at the same time. Nice.
As such, Anatole Kaletsky of The Times (about whom I keep hearing good things, though will admit to rarely reading) is also predicting disaster (via) -
"Germany’s plan to cure its self-confessed economic failure by doing exactly the opposite to what modern economics would suggest is certainly a bold and novel idea. Jim O’Neill, the chief international economist of Goldman Sachs, remarked on television last week that German politicians are acting as if they had never seen an economics textbook, much less understood one...Hurrah!
"the Merkel tax hike will probably condemn Germany to depression for the rest of this decade and quite likely trigger an Asian-style financial crisis in much of Eastern Europe some time in the next year or two."
3 Comments:
I suspect the whole idea is to be able to point at it during the next election and call it the "merkel tax hike." If there is one thing I have learned from various sojourns there over recent months it is this: germany's fucking bonkers economically.
My personal favourite is the recycling, where you get deposits back from and only from the shops where you bought bottles. Shops have these frozen bank accounts that are filled with money that they only get their hands on if the bottles are brought back. I am told by a reliable source that this frozen money totals 30 million odd euros. Mad I tell you, mad.
What the Great Depression taught:-
1) Have a Central Bank prepared to act as lender of last resort, to stop banking panics, and ensure that your central bank doesn't let the money supply collapse.(Germany no longer has a Central Bank.)
2) Don't introduce tariffs etc (Germany has to apply EU tariffs).
3) Don't put up taxes. (!)
4) Don't use corporate-state methods to try to keep wages high and "protect" jobs. (!)
5) If you make the mistakes that Hoover and Rooseveldt did, you'll have to wait for Hitler to come along and rescue your economy.
Actually, the fact that Germany does so well in spite of all the madness says a great deal for the Germans. And of course I don't expect another Hitler.
Oops, forgot one. If you must, devalue the Deutchmark. Heh!
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