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Do Germans Find Jobs and Profits a Bitter Tonic?

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Wednesday, 03 October 2012 16:08

A Washington Post piece on Jens Weidmann, the head of the Bundesbank, told readers of his anger over the European Central Bank's bailout of debtor countries and his concerns about inflation. It then told readers:

"Many Germans fear that printing the money to buy the bonds will contribute to higher inflation in the long run — a violation of what they see as the ECB’s principal mandate and a bitter tonic for a country that gave up its cherished mark in exchange for assurances that the euro would be just as stable."

It would have been helpful to remind readers that Germany enjoys low unemployment and a relatively healthy economy precisely because it has tied the southern European countries to the euro. If they still had their own currencies, they would have devalued against the "cherished mark." This would make German goods less competitive, sharply reducing its trade surplus with the rest of Europe.

Apparently Weidmann and the Germans to whom the article refers are like little children who want everything their own way. Many Post readers may not understand the absurdity of their position so it would have been appropriate for the paper to point it out.

 

 

Comments (6)Add Comment
The Wall
written by David, October 03, 2012 6:27
Those pesky southern Europeans made a united Germany viable, and this is the thanks they receive?
...
written by Calgacus, October 04, 2012 6:06
Of course, the Germans are talking nonsense. Before the Euro, they had just entered into a currency union with East Germany, financed by printing money. Which of course is not particularly inflationary, contrary to crazy mythology and historical revisionism they've been brainwashed into. And of course they don't particularly need demand from other countries, a trade surplus, to have low unemployment and a healthy economy. They just have to decide to have low unemployment, because the German people demand it, as they did before the dark age of economics fell in the 1970s, as they did before memories of the Great Depression and grade school arithmetic faded.

But a larger blame is due France's President Mitterand. Not only did he snatch defeat out of the jaws of victory with his absurd tournant de la rigeur - turn to austerity in 1983, putting the last nail in the coffin of Europe's postwar prosperity, showing himself to be a fake socialist, but Mitterand imposed the condition of joining the misbegotten, suicide pact Euro in return for allowing Germany to reunify. The Germans were in a hard place, and the Euro sounded good, sounded stable like the Mark - when its loony tunes demonetization of government debt made it a suicide pact.
...
written by JSeydl, October 04, 2012 6:38
I was actually talking with a German friend the other day about this. His argument was that only roughly 10 percent of the German population understands the economics Dean is highlighting. The other 90 percent truly believes that its country's prosperity is a result of hard work and nothing more -- the trade ties with Southern Europe are not even considered. So the problem is economic ignorance. It's not that the Germans are very bad people, who want to see the GIIPS suffer; it's that the German people are simply uninformed. Of course, the German elite policymakers aren't, so they deserve a heap of ridicule for the current situation.
...
written by liberal, October 04, 2012 9:06
Jseydl wrote,
His argument was that only roughly 10 percent of the German population understands the economics Dean is highlighting.


Yeah, well, 90% of people anywhere don't understand economics. I'd say 95%+ of economists don't understand economics.
One handed economists
written by Double handed, October 04, 2012 3:46
This argument is very one handed, and you know it. If the southern Europeans could devalue their currencies, German consumers would enjoy cheaper olive oil, wine, and travel to the south. For the Germany economy overall (consumers and producers), this would balance out the loss of competitiveness from a stronger currency, so Germans would not gain nor lose.

However if there is unexpected inflation, this would be a transfer from creditors to debtors, and Germans would lose because they are net creditors. I take your BMW but won't pay for it, but this is good for you, because wouldn't you rather make me a car than idling on the beach.

German employment is doing well because Germany did not have a bubble, and therefore not much structural adjustment was necessary. This, and the fact that ECB interest rates are now too low for the German economy - Germans are investing in real estate to save their savings from the impending inflation down the road. Curing malinvestment in Southern Europe with malinvestment in Northern Europe.

Anybody really want to take a bet that the quoted Germans will be wrong and that there won't be inflation in the long run? How else would you get out of the accumulated public deficits?
Higher Germany Inflation would also increase purchasing power relative to southern europe
written by Dean, October 05, 2012 5:09
Double handed,

it's the exact same story as devaluation. Wages and prices are higher in Germany relative to Italy and Greece -- to Germans that means cheaper olive oil and vacations.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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