by JEFF ALLEN
BOLOGNA — U.S. Treasury Secretary Jack Lew was the latest voice to join the chorus begging Germany to spend more for the sake of the Eurozone recovery. In doing so, he revealed the disappointing reality that even America is nowhere near learning from its painful mistakes. Since the onset of the global financial crisis, the United States and Europe have justified every law-bending, unprecedented program as a measure unique to and necessitated by the current crisis situation. Now six years after the start of the crisis, despite TARP, TALF, QE, OMT, EMS, DFA, QRM, SSM, ESFS and other crisis response program acronyms, we are speaking as if the crisis began yesterday and that we need to continue engaging in extraordinary measures due to special circumstances (in this case—an “impending” fresh Eurozone crisis).
Well, Germany is taking a stand. They have had it with this vicious cycle of hysteria that has driven countries to violate principles of stability, of morality, and of the law for the sake of minor economic Band-Aids. It is inspiring to see a country demonstrate such admirable resolve against a sea of short-sighted policies, designed by those who suffer simultaneously from a remarkable case of economic amnesia.
And still, nobody is listening to what Wolfgang Schaeuble is actually saying. Germany WILL spend. But they will do so in a responsible, efficient manner, and not at the expense of their budget commitments. Is that such a bad thing? Well, according Jack Lew, it is. And forgive Schaeuble for not saying “it’s done!” when Emmanuel Macron said France will save 50 billion euros and Germany will spend 50 billion euros. I would love to see Macron’s economic projections that scientifically justify 50 billion euros as a prudent, yet efficient degree of stimulus.
Germany has yielded tremendous monetary and, particularly recently, regulatory authority to the European Central Bank under the sway of public anxiety. They will not, however, be bullied into yielding their fiscal decisions to the empirically irrational economic peanut gallery. And in the process, they are teaching the world a timely message about responsibility, foresightedness, and most importantly, crisis management.
Schaeuble puts it best when he says “being reliable creates confidence” and in general, talking up crisis scenarios does not help anybody.