Leta i den här bloggen

2019-06-20

Sadly, the eurozone has not learned the debt lessons of Versailles, or heeded the warnings of John Maynard Keynes.

Although the creditor-debtor cards have been reshuffled since 1919, the game remains the same. Creditors want their pound of flesh, and debtors want to avoid giving it. 

Debtors want their debts forgiven, while creditors fret about “moral hazard” and ignore the destabilizing, contagious effects of making debtor countries poorer. 

By raising taxes and cutting public spending, Germany generated the required surplus to meet its annual debt payments between 1929 and 1931, but at the cost of intensifying the slump. 

The German economy shrank by 25%, and unemployment soared to 35%. The policy of “fulfillment” under Chancellor Heinrich Brüning paved the way for Adolf Hitler, who simply repudiated the debt.
Today’s debt charade in the eurozone has many parallels with post-World War I Europe.

The tragedy of the interwar years in Germany was that the Social Democrats - then the world’s foremost socialist party - became fatally tainted by acquiescing in /accepting/ Bruning’s deflation torture from 1930 to 1932. 

Inga kommentarer: