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REcently I found this interview with Hans Werner Sinn where he claims


 The Japanese have not cleaned the balance sheets of their banks, they have always brought new credit to repay the old credit, they didn't allow for the bankruptcies to happen. So Schumpeterian types of cleaning solutions were not chosen, and they couldn't get the economy going again.

So Schumpeter again. After Schumpeter destroyed the Weimar republic his disciples will destroy the EU.

Schumpeters claim that in a crisis you need to crush as much companies as possible, such that afterwards only the fittest would remain has been proven to be total bullshit one more. If it would make any sense the Greek economy should now grow like crazy after contracting (nominally) by 40%.

by rz on Fri Oct 31st, 2014 at 11:02:01 AM EST
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It is not surprising Hans Werner Sinn would argue against solutions that would put his bank out of operation. It is not indebted but productive companies that should be put out of business, but the holders and creators of counterfeit debt. In Sinn's case these would likely be one and the same.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 31st, 2014 at 11:18:25 AM EST
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Sinn has a bank?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 31st, 2014 at 11:27:49 AM EST
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Maybe he meant the bank where Hans Werner keeps his money?

Anyway: It is in fact the case that Hans and his ilk want to let banks go bankrupt! Think about it. Right now things are bad, but how would the situation be if we had a couple of bank runs?

by rz on Fri Oct 31st, 2014 at 11:36:25 AM EST
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Creative destruction, yay!
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Oct 31st, 2014 at 11:38:41 AM EST
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Creative destruction is for the free market radicals what the revolution was for the communists. The mythical event where all that is wrong with the current world is wiped away and from the ashes a new better humankind rises.
by rz on Fri Oct 31st, 2014 at 11:43:28 AM EST
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Sounds like the end of WWII.

OR...

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Oct 31st, 2014 at 12:11:23 PM EST
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Doesn't Hans Werner keep his money in the form of gold ingots under his mattress?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 31st, 2014 at 11:49:13 AM EST
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Most probably.

I mean his fews on sound national investment policy is that all Germans should bring there cash to the Kanzleramt and stuff it into the mattress of Angela Merkel.

But more seriously: In read an interview with Hans Werner Sinn from 2009 where he pointed out that in fact there is no serious risk of inflation, but instead a serious risk on an Japan style deflationary trap. Yet, then he went on and advocated tirelessly for the last 5 years for policies that would push us ever deeper into exactly this trap!!

by rz on Fri Oct 31st, 2014 at 11:54:33 AM EST
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It is likely a gross abuse of Schumpeter to imply that he would advocate turning up the dial on 'creative destruction' during a banking crisis. His view would more likely be that necessary steps should be taken and that the resolution of bad banks should take place when the situation had stabilized. He was one of the major influences Perry Mehrling cited for his own development and Perry would certainly never take such a view. The problem comes when sociopathic neo-liberals seize on his work to justify more looting.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 31st, 2014 at 03:34:46 PM EST
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I only know Schumpeters Ideas from secondary sources. However, I recently found that he was cited in the German Wikipedia article on Deflationspolitik.

There it says

Joseph Schumpeter veröffentlichte im März 1929 in der Zeitschrift Der Deutsche Volkswirt einen Aufsatz, in dem er erklärte, dass sich Deutschland wegen einer angeblich zu hohen Lohnpolitik und der Sozialpolitik in einer Depression befindet, die durch eine Mischung aus Lohn- und Preissenkungen sowie Austeritätspolitik bekämpft werden sollte. Dies war exakt das Konzept der Deflationspolitik Brünings.[6] Friedrich August von Hayek empfahl damals (auch den Vereinigten Staaten) eine Deflationspolitik, um die Lohnrigidität zu brechen.

Short Translation; Joseph Schumpeter recommended a policy of slashing wages and austerity (sounds familiar?) to fight the great depression in Germany.

The article also states that the general philosophy (not necessary directly related to Schumpeter) was

Die aus der Deflation entstehende Depression sei heilsam, gerade weil ,,untüchtige" Betriebe beseitigt würden.

Translation: The Depression was a good thing, because it would crush 'unfit' companies.

Now this does not specify banks. But clearly, the concept of creative destruction was right there and it was considered to be of particular importance during a depressed economic state.

by rz on Sat Nov 1st, 2014 at 10:01:45 AM EST
[ Parent ]
>Translation: The Depression was a good thing, because it would crush 'unfit' companies.<

Creative destruction is the core of his thinking. And in in discussions in the UK about demand stimulus to fight the great depression he ahd the same position: Nothing could be done.

by IM on Sat Nov 1st, 2014 at 10:44:00 AM EST
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If anyone is left to write the history of this period, the way that individuals who were clearly delusional at best were able to define policy will fascinate future historians.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Nov 1st, 2014 at 01:38:27 PM EST
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You may well be right. I am certainly no expert on Schumpeter.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Nov 1st, 2014 at 11:06:43 AM EST
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Schumpeter was another fool who thought the prolonged depression after The Panic of 1873 had nothing to do with hard money policies.
by rifek on Sat Nov 8th, 2014 at 09:44:46 PM EST
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I misremembered and thought he was an official at a bank.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 31st, 2014 at 03:08:19 PM EST
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YOu must have mistaken Hans Werner (Un)Sinn for Axel Weber or Jürgen Stark (raving mad).

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Nov 1st, 2014 at 11:22:37 AM EST
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Which is no shame. Just a few weeks ago Jürgen Stark and Hans Werner came together for a press conference about Hans Werners new book: Gefangen im Euro (Trapped by the Euro).
by rz on Sat Nov 1st, 2014 at 11:38:03 AM EST
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Why don't they try getting Un-Gefangen and give us all a break?
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Nov 1st, 2014 at 01:17:49 PM EST
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Because they want to have their cake and eat it, too. IOW, they don't want Garmany's massive accumulated holdings of Euro-denominated foreign debt to devalue ralative to the new DM.

Remember Germany's current account surplus continues to accelerate:



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Nov 2nd, 2014 at 03:38:34 AM EST
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Yeah, I thought he was another bank official/economist.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Nov 1st, 2014 at 09:45:32 PM EST
[ Parent ]


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 31st, 2014 at 11:24:20 AM EST
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Why is there a question mark?

He should say:
Japan shows that you can monetize debt for years with no adverse consequences!

by rz on Fri Oct 31st, 2014 at 11:37:12 AM EST
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Ok, maybe my exclamation mark is a bit overdone.
by rz on Fri Oct 31st, 2014 at 11:38:20 AM EST
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He's expressing his monetarist disbelief.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 31st, 2014 at 11:48:20 AM EST
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Schumpeter is alive and well in the Elysée
Hollande drops Keynes in favour of Schumpeter

Nicolas Sarkozy's Socialst challenger Francois Hollande will today unveil his economic proposals. According to Le Monde there are several circles of economists who have elaborated Hollande's economic policy proposals. Among the dominating figures are Harvard economist Philippe Aghion, Bruegel director Jean Pisani-Ferry, industrial policy specialist Elie Cohen and social policy expert Gilbert Cette, the paper reports. ,,The Socialists are today engaged in the transformation the Social Democrats in Scandinavia have already gone through several years ago", Les Echos quotes Aghion. ,,The Keynesian model of of relaunching consumption would today aggravate our external deficit. Our thinking is now much closer to Schumpeter who emphasizes the role of innovation for growth in the medium to long term."

(26 January 2012)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Nov 1st, 2014 at 11:25:46 AM EST
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And don't forget Jean-Baptiste "Supply side" Say earlier this year:

Supply-Side Hollande - WSJ

"We need to produce more, and better," Mr. Hollande told his country last month, while announcing plans to cut payroll taxes and rein in public spending. He added: "Action is therefore needed on supply. Yes, supply! This is not contradictory with demand. Supply even creates demand." Who knew Jean-Baptiste Say was French?

The Assimilation of François Hollande is Complete | Benjamin Studebaker

If the French thought their 2012 election of socialist François Hollande over former president Nicolas Sarkozy meant that they would have their Keynes and avoid austerity, they have been proven fatally wrong. Hollande has just announced plans for a €50 billion austerity package, a cut of 4% of France's GDP. He has promised to cut taxes on businesses by €30 billion, but this will come in the form of the elimination of a requirement that French businesses fund a family welfare program.

[...]

What is Sarkozy Hollande's argument? He makes appeal to Say's Law:

The time has come to solve the main problem of France: production. Yes, I said production. We have to produce more. We have to produce better. So it is on supply that we must act. On supply! It is not contradictory with demand. Supply creates demand.

Emphasis Added.

by Bernard on Sat Nov 1st, 2014 at 12:54:52 PM EST
[ Parent ]
So, why did this happen?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Nov 2nd, 2014 at 03:32:57 AM EST
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The Socialists have always wanted to be recognized as Serious PeopleTM and this is the gospel Serious PeopleTM do profess.
by Bernard on Sun Nov 2nd, 2014 at 03:40:12 AM EST
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Then we truly are fucked because the Socialists did the same in the 1930s.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Nov 2nd, 2014 at 03:49:08 AM EST
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Hollande: France's answer to Tony Blair and Bill Clinton.
by rifek on Sat Nov 8th, 2014 at 09:31:14 PM EST
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Merkel is nothing but a useful idiot for Sinn and his ilk.  She will never learn she can't run the country like her kitchen, and the Ueberklass doesn't want her to learn.
by rifek on Sat Nov 8th, 2014 at 09:28:53 PM EST
[ Parent ]

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