Sunday, 3 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.


Vincy said...

Since you brought in the Pontiff himself, to this blogpost, I was reminded of this bible verse - "Why do you look at the speck of sawdust in your brother's eye and pay no attention to the plank in your own eye? But then, with the US of the A, separating church and state, this verse may not go down well with them.

If you have the world's reserve currency, and are the super power, you not only spy on everyone else in the world, but also do shameless lectures such as these.

Sriram Khé said...

Ahem, the Pope might not talk about viagra, but he does talk about sex--heterosexual and homosexual--and marriage without any experience whatsoever in those!

As for Sarah Palin and Shakespeare, I refer interested readers to this post of mine, on "Shakespalins," from three years ago ;)

Ok, I realize that this is no place for fun, and that all the fun happens only at my blog .... muahahahaha ;) so, on to the topic at hand ...

Yes, it is ridiculous that the US constantly advises the rest of the world--especially Germany and China, and Japan too--on how they ought to stimulate domestic demand and invigorate the global economy. The US makes it sound that we Americans spend like there is no tomorrow because we are big-hearted in that we want to generate global economic growth. And that others who are not like us are morons.

If anyone protests, we have those two powerful weapons--the military and the currency. We can bomb a country back to the stone age, or deflate the shit out of others!

I tell ya, it has been decades since we did anything constructive to gain the world's respect and increase our credibility among the world's billions.

Ramesh said...

@Vincy - That's a lovely biblical verse in quote. Will go well in the US - they really haven't separated church and state although they claim to have done so.

@Sriram - Burst my seams laughing at the Shakesapalins. Ha Ha Ha. Now I am convinced there IS REALLY NO topic on which you have not blogged before.

Fair criticism of the humourless place this has become.

Ramesh said...

@Sriram - Your good friend Paul Krugman has written an Op Ed in the New York Times on precisely the same issue. As you can predict, his views are the exact opposite of mine. I am not sure how, but then I am in violent disagreement with every single of his utterances on any topic. Its amazing how it is possible to be a polar opposite - usually with everybody else, there is always something I can find to agree with. Not so, with this venerable member of the Equus africanus asinus species !

Sriram Khé said...

Hey, hey, why beat up on me when my earlier comment was in agreement with you?
Did you not like the Shakespalins?
Was my papal reference inappropriate?
If you prick me, do I not bleed?
Muahahaha ;)

When I read that Krugman piece, I knew you would jump all over it.
As we have discussed so many times, even recently in response to a post of yours, economics is no science and is always subject to interpretations and forecasting ... we can always line up "Nobel" laureates behind any reasonable economic argument that is not asinine. Oh, wait, you called Krugman asinine ;)

Ravi Rajagopalan said...

@Ramesh - there is a case to be made for Germany buying more from the Euro-zone. That is Krugman's point.

Ramesh said...

@Sriram - Muhahahah indeed. You are in an impish mood these days. And no; I wouldn't call Krugman asinine at all - just did some speculation as to the species he belongs to :)

@Ravi - Nobody stops the ordinary German from buying whatever he wants from any other European country. Its a borderless zone as far as trade and commerce is concerned. Germany's competitive situation is such that others desire its goods more than it desire's other's goods. Unlike China, there are no barriers that Germany erects, at least as far as Europe is concerned.

Krugman is nothing short of a commie.

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