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>The point is not that the German argument did not make sense in 2009.<

But that was the argument; a opposition in 2009 to fiscal stimulus, using the automatic stabilizer argument. So you admit that the argument was indeed right in 2009?

by IM on Sat Feb 18th, 2012 at 11:57:37 AM EST
[ Parent ]
I believe it was, yes.

But that's because I believe that the hysterical children didn't realise in 2009 that their automatic stabilisers would certainly breach their magical voodoo 3 % deficit limit.

The other possibility is that they had realised this elementary fact that anybody who took the time to add the numbers together would realise. In which case they were lying when they said that automatic stabilisers would suffice, because they clearly didn't intend to let them work.

I'm going with stupidity here, but it's almost equally easy to make a case for malice aforethought.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 12:04:01 PM EST
[ Parent ]
Unity!

Well, almost.

I remember the policy discussion in late 2008 early 2009 around quite good and as far as I was aware nobody thought that after the impact of the crisis and the stimulus where would be a german deficit inside the Masstricht rules.

by IM on Sat Feb 18th, 2012 at 12:17:20 PM EST
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Then what was the debt brake amendment and the deficit panic of late 2009 all about?

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 12:49:50 PM EST
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God if I knew I would already told.

 The debt brake is a imitation of the debt brake in Switzerland introduced in 2001, the concrete german rule a result of commission working from early 2007 to early 2009. So I think we are talking less about a reaction to the crisis and ore about a manifestation of a long term obsession of the german body politic with public debt.

by IM on Sat Feb 18th, 2012 at 01:05:51 PM EST
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So I think we are talking less about a reaction to the crisis and ore about a manifestation of a long term obsession of the german body politic with public debt.

And what we're arguing is that it's toxic for the rest of the Eurozone to have by far the largest and currently most solvent country in the Eurozone acting on that obsession.

One thing we have pointed out is that after the summer of 2011 even France had lost any of the political leverage it may have had (and, again, reportedly Sarkozy got to make credible threats in the Spring of 2010 - now Merkel thinks she needs to help him with his reelection). So now it's just a Germany with a decades-old unhealthy obsession with public debt alone in the driving seat. Or do the Netherlands, Finland and Luxembourg set EU Council policy independently of Germany?

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 01:42:50 PM EST
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See, I tried you answer your question and you just use is as a cudgel.

"Or do the Netherlands, Finland and Luxembourg set EU Council policy independently of Germany?"

A straw man. The three and others Austria e. g, share the "decades-old unhealthy obsession with public debt".

Why do deny this simple fact? The government of say the netherlands is not a bunch of fanatic keynesians forced on a difference course.

by IM on Sat Feb 18th, 2012 at 01:52:39 PM EST
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For all the apparent disagreement I think it's been pretty well established that the Eurozone cannot work as structured and with its current membership.

At  which point one wonders if the inevitable conclusion is not that the Eurozone will shed its members one by one until all that's left is, well, Germany, the Netherlands, Finland and Luxembourg.

The problem is that it's one thing to say that the countries South of the Alps should never have joined a currency union with Germany, and a very different thing to say the proper thing to do now is to throw them out. But that's what appears likely. And the rump Neurozone would probably not enjoy having their currency appreciate by maybe 50% with respect to the old broad Euro average.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 02:03:00 PM EST
[ Parent ]
Well, it'll be good for Sweden, as the majority of our exports go to the Neurozone... ;p

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Feb 18th, 2012 at 02:26:39 PM EST
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It may have been right in the first half of 2009, but a bigger stimulus wouldn't have hurt ('adequate' is not an exaggerated size). And the argument was symptomatic of a general opposition to fiscal stimulus, as we saw by the "crass Keynesianism" "argument" (ahem) of late 2008, the debt brake of mid-2009, and then the panic over EU-wide breaches of the deficit limit at the end of 2009, to be followed by liquidationism and "expansionary austerity" since.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 12:45:41 PM EST
[ Parent ]
but a bigger stimulus wouldn't have hurt ('adequate' is not an exaggerated size).

That is a much weaker claim and you could say the same with more justification about the american stimulus. As far as I remembered krugman admitted grudgingly that the (german) stimulus was big enough for Germany and then aargued oit was to small for the whole EU.

I thought is was to small back then too, but are not so sure now. That said, there was a bot of top on off the original stimulus

 >And the argument was symptomatic of a general opposition to fiscal stimulus, as we saw by the "crass Keynesianism" "argument" (ahem) of late 2008,>

The stimulus in Germany did indeed came months to late, but the resistance had crumbled around the time of the inauguration of Obama.

As far as I remember the stimulus in other european countries wasn't timely too.

by IM on Sat Feb 18th, 2012 at 01:11:47 PM EST
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The real problem is that the stimulus was withdrawn and then reversed in 2010.

Only now are they starting to make noises about the need to have "jobs-friendly growth and growth-friendly fiscal consolidation". The "growth-friendly fiscal consolidation" is akin to "circle-friendly squaring".

So we're still withholding the necessary stimulus because, you know, 0.1% growth still destroys jobs and physical capital. So the criteria for fiscal stimulus should not be that growth is negative but that jobs are being destroyed.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Sat Feb 18th, 2012 at 01:37:37 PM EST
[ Parent ]

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