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The crazy thing is that Germany is killing their own banks. They refuse to run fiscal deficits while at the same time they criticize the ECB for lowering rates
by Despegar 7y ago
The crazy thing is that Germany is killing their own banks. They refuse to run fiscal deficits while at the same time they criticize the ECB for lowering rates and hurting the German Saver, when the German Saver is who would benefit if they decided tomorrow to run deficits for the next 10 years.
- cwperkins 7y agoBe careful what you wish for. I agree with Stieglitz that the Troika has historically not chosen the best path for crisis countries by implementing austerity. My fear with using Fiscal Policy and running deficits is that it is hard for a politician to win a campaign fighting for austerity if and when the debt binge becomes to great. From my own understanding, that is why monetary policy is strongly preferred because it’s easier to roll back but Europe is at their end of Monetary policy. I wish I understood MMT better, it’s something discussed in the circles of parliament and congress but I don’t think the average joe is aware.
- Gustomaximus 7y agoVery generally, my gripe with MMT is maybe it could work if well run. I'm not convinced but let's say it's possible. Next step, can we trust politicions to run the program effectively? I suspect they would always try to squeeze more out than practical that would lead to issues... And that's if it would work in the first place. I'd like to see some countries try it and prove/disprove, just not mine first.
- marriedWpt 7y agoHasn't Japan already gone through the course?
- Gustomaximus 7y agoWhat course? Would you say they are running MMT, or just closer to than other countries. They have embraced increased holdings for ~6 years. Def the petri-dish but still seems early days.
- Despegar 7y agoThis is absurd in the context of Germany. They have a fetish with "fiscal responsibility". It'd be the natural inclination of every politician to cut back on deficits (and I imagine within a few years there'd be pressure to). Germany is a country with a broken military and infrastructure. They should spend money on that. They should cut taxes for workers. There's plenty of shit for Germany to spend money on, and it would cause yields to finally rise. The ECB has no choice because rich countries refuse to spend money.
- cwperkins 7y agoI want to be clear that I think the Germans, Dutch and Swedes can afford to do more for the benefits of their own economies and of Europe’s. Germany needs to ween itself off of lignite coal and get better broadband infrastructure as well as contribute more to NATO. On the other hand in a place like Argentina, I’m not sure what the exit strategy.
- bilekas 7y agoI really hate this idea that everyone needs to just constantly be spending. It's useful but there is nothing wrong with having a slow stable fincal conscious ecconomy.
- Despegar 7y agoAnd I really hate the moralizing as if the national economy needs to be run like a household budget.
- hocuspocus 7y ago> Europe is at their end of Monetary policy I genuinely wonder why you believe that? Everything points to the status quo.
- hocuspocus 7y agoAnd on top of that, property prices (both in absolute terms and relative to rent) climbed to stratospheric levels in major cities.
- aazaa 7y ago> ... when the German Saver is who would benefit if they decided tomorrow to run deficits for the next 10 years. The German Saver knows better than most that inflation destroys savings. Inflation benefits debtors by allowing them to pay back their loans in depreciated currency. Germany isn't exactly a nation of debtors, although most of Europe is. This is a looming political issue that's only just beginning.
- Despegar 7y ago>The German Saver knows better than most that inflation destroys savings. Yeah this is not the outcome Germany or the EU needs to worry about. It's experiencing Japanese deflation for 20 years. >This is a looming political issue that's only just beginning. Yes there's been plenty of hard money cranks that have said this for 10 years since the Great Financial Crisis in the US. Zero Hedge, gold bugs, hedge fund managers, etc have all been sounding the alarm about "money printing" and the deficit. There's no inflation in sight.
- deleted 7y ago[deleted]
- yorwba 7y ago> It's experiencing Japanese deflation for 20 years. GDP per capita (PPP) in Japan has more than doubled over the past 30 years. https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=JP&view=chart https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat... Slow growth is only a problem if you rely on investing to generate your income. Otherwise, even no growth at all is fine.
- AWildC182 7y agoHave there been any major issues with declining QOL in Japan? It might be a cultural barrier but aside from the deflation stories making the rounds, I don't hear much about them suffering because of it.
- 7y ago
- denzil_correa 7y ago> They refuse to run fiscal deficits Germany has a debt brake law (Schuldenbremse) that limits structural net borrowing to 0.35% of the GDP.
- hackeraccount 7y agoGermany is obsesed with having a trade surplus in good & services. Every Euro that ends up in a bank is one less euro that might be used to buy foreign goods. So they repress spending and the money having no where else to go ends up sitting in a vault or paying for US securities.
- Fishysoup 7y agoGermany is obsessed with keeping the value of the Euro low to maximize their exports. That's one of the reasons they've been pushing austerity after the economic crisis, as keeping countries like Greece, Portugal etc. in a rut depreciates the currency (the other reason is a weird sense that countries in debt have committed some moral failing and should be punished). Their trade surplus has been a subject of intense criticism by economists and other EU states, but Germany calls the shots in the eurozone economy. https://www.economist.com/leaders/2017/07/08/why-germanys-current-account-surplus-is-bad-for-the-world-economy https://www.economist.com/leaders/2017/07/08/why-germanys-cu...
- pergadad 7y agoThat's nonsense. The reason for low interest rates is so that Italy won't collapse. It's widely hated in Germany as bank accounts have basically zero interest nowadays.
- Fishysoup 7y agoThey also blamed Greece for the bailout, which was a bailout of German banks. Yes the situation obviously isn't completely one-sided and there's more than one actor here, but don't pretend Germany is doing everything out of the goodness of its heart and to protect the EU. They're as selfish as any other country.
- kyuudou 7y agoI heard there was quite a fire sale on pretty Greek islands during that time.
- QuesnayJr 7y agoThe comment you are replying to said "the value of the euro", not low interest rates. Interest rates are so low not because of Italy, but because the German government stopped borrowing. If you cut the supply of something, the price goes up. If the price of bonds go up, then the interest rate goes down.
- 7y ago
- MrBuddyCasino 7y agoThis kind of talk is irresponsible. Debt isn't free, you pay interest on it, you children might have to pay interest on it. Debt introduces systemic fragility. If the only way to grow your economy is rising public debt, something is fishy.