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Germany has relatively low rents precisely because German economic policy has not allowed bubbles in German real estate. The problems that developed in Germany were the result of German banks making reckless loans in peripheral countries and then being able to stick those countries with 100% of the costs. The contemptible regulatory policies in Europe were due to the refusal of Germany to allow European wide regulation of banks while allowing European wide operation of these same banks.
I am sorry you have relatives who are generating wealth through residential rentals. I also deplore the process by which that has happened. In the USA it was because Greenspan and others turned a blind eye to the bubble that was developing and refused to use the vast powers of prudential regulation Congress gave the Federal Reserve after the Savings and Loan crisis.
Greenspan adhered to his easy money policies until 2005, but by then monetary policy was incapable of handling the situation that had developed. Not only did we have a world class bubble in real estate but also in stocks and commodities. Financialization of residential real estate had created financial instruments, MBSs, CDOs, etc. that had face values far above their actual value. When this became known the entire financial system started to freeze.
The result was a great destruction of bank money and a large hole in the money supply. This was highly deflationary and would have sent the world economy into a debt-deflation death spiral had not Bernake and Paulson created TARP to paper over the hole and then, under Obama employed QE to take the impaired finacial instruments off the market or to arrange for other institutions to take them, along with money from the Fed to make them whole.
So while the world was staring into the abyss of deflation and depression which was being staved off by massive central bank intervention, most people were obsessed with INFLATION. TARP and QE were going to trigger massive inflation they feared. This was because the general understanding of economics had been poisoned by rich man propaganda for half a century.
The rich knew well how to make money off a depression - buy up valuable assets on the cheap and consolidate your vertical integration. But they feared inflation because it made their existing wealth less valuable. A major result of their propaganda was to normalize the view that the only legitimate way to manage the economy was through monetary policy.
While monetary policy served excellently well for getting us into a deflationary crisis, it is useless for getting us out. All monetary policy can do is make money cheaper. But that is useless if business people are afraid to invest. It was fiscal policy, direct government spending on useful projects, that got us out of the depression of the '30s, to the extent that we did recover prior to WW II. And it was a careful combination of fiscal and monetary policy that enabled the USA to prosecute WW II to conclusion and emerge with a prosperous economy.
When Obama took office the economy was at its nadir. But the Mainstream Economists he relied upon, Larry Summers in particular, were frightened by the size of the hole that had been blown in the economy and were terrified to propose a $1Trillion dollar stimulus. So they asked for and got $600 Billion, some of which was in the form of tax credits, while what was needed was more like $1.5 Trillion. The result was an anemic recovery. The justification for the anemia was AUSTERITY. Because the rich so feared inflation, millions of people had to suffer privation and many died as the result.
That is where we are today. Tax cuts for the rich, austerity for all others. The solution is deficit spending. The bottom 80% of the population is starved for income yet the economy is driven by consumption. But the other consideration is how that deficit spending is to be deployed. Right now it is buying tax cuts for the rich. That does not help consumption as the rich only consume a tiny fraction of their income, squirreling away the majority in overseas accounts, financial instruments and real estate.
What is needed is investment in the real economy. Spending on infrastructure employs real people who are un or under employed and increases the money circulating in the economy that is used for consumption. This has positive knock on effects. And yes, deficit spending on productive assets can be considered an investment. Well done, this spending becomes self liquidating. Wind farms and associated transmission facilities pay back far more than they cost over their useful life.
But Mainstream Economics, Neo-Classical Economics and its recent permutations, requires that investment be made from savings. This was basically true under the gold standard. But it is no longer true since the USA went off the gold standard in the summer of 71. An understanding of the range of options available to a nation with its own fiat currency shows that there is often policy space, options to use resources that are un or under utilized. The limit on such use is inflation.
For starters it is clear that, if we can afford to give the rich a $1 Trillion+/year tax break, we could use that same money instead to fund a Green New Deal. And, by moving to Medicare for All we could have better health care for all of the population for what we are currently spending or less. MCA would likely actually be deflationary, which would require even more deficit spending. Government assumption of student debt would have a similar effect. The newly found purchasing power of GenX and younger college grads would generate economic growth, increased GDP, that would more than pay for the cost of retiring the loans.
"It is not necessary to have hope in order to persevere."
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