Minggu, 03 November 2013

The US Treasury should be ashamed of itself

There is nothing more irritating than somebody who pontificates. Even more irritating is if the guy has absolutely no credentials to pontificate on the subject in question. Imagine the Pontiff (if you'll pardon the pun)  lecturing on the merits of Viagra. Or Sarah Palin extolling the merits of Shakespeare. Or even this blogger blogging about Kollywood !!

That is how I can best describe the American Treasury's criticism of Germany's economic policy. The criticism is that Germany's current account surplus as a danger to the eurozone and the world economy. Germany runs a current account surplus - that is, it exports far more than it imports. This is , according to the American Treasury, a big danger to the world economy. This blog is not meant to be a technical paper - so I will desist from explaining this , which will make it too technical. Suffice to say some "leading economists" also share this view.

First let us play the man rather than the ball - after all this blog is refreshingly free of any responsibility and therefore can attack any which way ! Of all the people, America should not be lecturing on fiscal responsibility. If there is a prize for the most fiscally irresponsible nation on earth, surely the US of A would be a prime candidate. The land of the free has many redeeming virtues, but fiscal responsibility is not one of them. The US Congress hasn't even passed a budget for the last 3 years. The last time they balanced their budget was 1998-2001 and before that  1969. They have had a President who cut taxes massively and then started two wars. They are now flirting with a sovereign default every 6 months. They have promised Medicare and Social Security to their citizens, then inadequately funded it and have no plan to defuse the time bomb.  Because the dollar is the world's reserve currency, they take on levels of debt that most other nations would shrink in horror at the very thought. And collectively as a nation, they foisted the global economic crisis of the last few years. Even India, another prime candidate for the ultimate fiscal irresponsibility award would be hard pressed to match that.

And the country they are taunting is Germany. Post reunification, they were termed the "basket case of Europe". They lifted themselves out of that by their bootstraps. Their prudence is legendary - they are so scared of inflation that they follow the most conservative  monetary policies of all. They struck a deal with the unions when they were in a mess, to hold wages and little by little built up German competitiveness back again.  When the Eurozone crisis hit, they have been the chief (only ?) lenders bailing out every nation that is in trouble.  They don't manipulate currencies (unlike another country we know which also runs a big current account surplus). Can you imagine America bailing out other nations in today's world (to their eternal credit they did that after the Second World War, but that is 70 years ago - the America of today is a pale shadow of the America of those years).

What is the prescription. The Germans must stimulate their economy. They should take more debt. They should consume more and save less. Great.

The Germans have been more peeved at the newsy bugging of Angela Merkel's phone. They haven't reacted with fury  at the American Treasury. They should tell them to piss off and take their pontification elsewhere.  Perhaps the best way to do it is for "Mutti" to whisper on the phone that the US Treasury is a greater danger to the world than Al Qaeda (probably true) and leave it to the NSA spooks to relay that upwards.

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