Treating national accounts like a household budget is, to my way of thinking, as disconnected from reality as imagining that your local bank has a box with all your deposits in cash in a drawer in a a safe, or that an exclusively pay-as-you-go national pension system based solely of government debt issuance will remain solvent https://www.ft.com/content/21c2f283-be8c-45b1-ab2f-75aa4564bc8d . One way I've found to make people think about this is to ask whether it's better for the economy in the long run to let families borrow with little money down and move into a house big enough to raise growing kids, or make them wait around in a cramped apartment until they've squirrelled away a 40% down payment ... or 100%. "In God we trust, all others pay cash".
The guy who founded the company for which I used to work once said "Germans are fantastic savers, and fantastic speculators, but lousy investors". In a sense, an "debt brake" is an artificial constraint that appears virtuous, but is likely starving public investment that could drive future growth. Look where "austerity" left Britain, which now has stripped public services and sewage-filled rivers.
I suppose I've become an inadvertant MMT advocate https://us5.campaign-archive.com/?e=9539ad5b50&u=6557fc90400ccd10e100a13f4&id=e3ae49317a , but perhaps Germany is indeed a special case, as while it benefitted greatly from seamless trade and being able to export deflation via the euro, it has limited its ability to fully reap the benefits of its self-imposed low public debt/GDP ratio, but had it retained the D-Mark, it likely would'rve roofed it like the Swiss Franc and made its exporters uncompetitive. A delicate balance indeed.
"To take full advantage of the special powers that accrue to the currency issuer, countries need to do more than just grant themselves the exclusive right to issue the currency. It's also important that they don't promise to convert their currency into something they could run out of (e.g., gold or some other country's currency). And they need to refrain from borrowing (i.e., taking on debt) in a currency that isn't their own. When a country issues its own nonconvertible (fiat) currency and only borrows in its own currency, that country has attained monetary sovereignty. Countries with monetary sovereignty, then, don't have to manage their budgets as a household would. They can use their currency-issuing capacity to pursue policies aimed at maintaining a full employment economy."
Germany faces gigantic challenges. Demography is lousy, with not enough net contributers in comparison to benefit recipients. Currently less than three taxpayers finance one beneficiary of old-age pensions, and that is posed to deteriorate to an untenable ratio of 1:1 within the century.
The country's lunatic energy policy will cost billions to implement, with little effect on CO2 emissions.
Infrastructure is crumbly, after decades of under-investment.
The only way out -- the only way for Germany to get rich before getting too old -- is more growth. The neoliberal approach of de-regulation ain't gonna hunt, with Germany's Byzantine bureaucracy, entrenched tradition of corporatism, and love of the Big State.
That leaves only the equivalent of Bidenomics, aka sane MMT. That Germans refuse to even consider this means they like digging their own grave.
I agree. In my view, Germany faces another lost decade like in the 1990s. But I am optimistic that if they suffer long enough, they will find a way out of their misery. It just requires a period of pain and suffering. A bit like the YUK leaving the EU. They have to suffer for a decade or so and then we can come to our senses again.
Treating national accounts like a household budget is, to my way of thinking, as disconnected from reality as imagining that your local bank has a box with all your deposits in cash in a drawer in a a safe, or that an exclusively pay-as-you-go national pension system based solely of government debt issuance will remain solvent https://www.ft.com/content/21c2f283-be8c-45b1-ab2f-75aa4564bc8d . One way I've found to make people think about this is to ask whether it's better for the economy in the long run to let families borrow with little money down and move into a house big enough to raise growing kids, or make them wait around in a cramped apartment until they've squirrelled away a 40% down payment ... or 100%. "In God we trust, all others pay cash".
The guy who founded the company for which I used to work once said "Germans are fantastic savers, and fantastic speculators, but lousy investors". In a sense, an "debt brake" is an artificial constraint that appears virtuous, but is likely starving public investment that could drive future growth. Look where "austerity" left Britain, which now has stripped public services and sewage-filled rivers.
I suppose I've become an inadvertant MMT advocate https://us5.campaign-archive.com/?e=9539ad5b50&u=6557fc90400ccd10e100a13f4&id=e3ae49317a , but perhaps Germany is indeed a special case, as while it benefitted greatly from seamless trade and being able to export deflation via the euro, it has limited its ability to fully reap the benefits of its self-imposed low public debt/GDP ratio, but had it retained the D-Mark, it likely would'rve roofed it like the Swiss Franc and made its exporters uncompetitive. A delicate balance indeed.
"To take full advantage of the special powers that accrue to the currency issuer, countries need to do more than just grant themselves the exclusive right to issue the currency. It's also important that they don't promise to convert their currency into something they could run out of (e.g., gold or some other country's currency). And they need to refrain from borrowing (i.e., taking on debt) in a currency that isn't their own. When a country issues its own nonconvertible (fiat) currency and only borrows in its own currency, that country has attained monetary sovereignty. Countries with monetary sovereignty, then, don't have to manage their budgets as a household would. They can use their currency-issuing capacity to pursue policies aimed at maintaining a full employment economy."
Amen to that (except the endorsement of MMT) :-)
Germany faces gigantic challenges. Demography is lousy, with not enough net contributers in comparison to benefit recipients. Currently less than three taxpayers finance one beneficiary of old-age pensions, and that is posed to deteriorate to an untenable ratio of 1:1 within the century.
The country's lunatic energy policy will cost billions to implement, with little effect on CO2 emissions.
Infrastructure is crumbly, after decades of under-investment.
The only way out -- the only way for Germany to get rich before getting too old -- is more growth. The neoliberal approach of de-regulation ain't gonna hunt, with Germany's Byzantine bureaucracy, entrenched tradition of corporatism, and love of the Big State.
That leaves only the equivalent of Bidenomics, aka sane MMT. That Germans refuse to even consider this means they like digging their own grave.
I agree. In my view, Germany faces another lost decade like in the 1990s. But I am optimistic that if they suffer long enough, they will find a way out of their misery. It just requires a period of pain and suffering. A bit like the YUK leaving the EU. They have to suffer for a decade or so and then we can come to our senses again.
Love this! :-)
Count me in in the debt-averse.