Links 3/23/10

Merkel Takes on the EU and Her Own Finance Minister Der Spiegel (hat tip reader Swedish Lex)

Rifts Widen on Greece Rescue Wall Street Journal and European Disunion New York Times

Merkel’s 5-point plan to save her faltering coalition: Refusing to help Greece is point Nr. 3 Eurointelligence

Frayed String for China’s Property Balloon Andy Xie, Cajing (hat tip reader Don B)

Indian state asks Coca-Cola to pay $47m compensation BBC (hat tip reader John D)

Health Care Bill Myths FireDogLake

Greenspan versus Reality, Part 2 David Merkel

Feinberg Reviews Pay At Bailed-Out Firms Wall Street Journal. I am a big fan of pay reform, but this is not the way to go about it. It looks as if the long suffering Kenneth Feinberg is again being tasked to collect a few scalps so Team Obama can appear to be Doing Something without actually Doing Something Effective.

The Perks of Being a Goldman Kid New York Times. FWIW, even back in the early 1980s, Goldman had a proud tradition of sons of management committee members working at the firm. Some even turned out to be decent bankers.

Geithner warns US could lose regulation initiative Financial Times (hat tip reader Joe C). Has no one told the headline writers at the FT that “US regulation initiative” is an oxymoron?

Antidote du jour:


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  1. DownSouth

    ► “Merkel Takes on the EU and Her Own Finance Minister”

    Merkel is determined to stand up to pressure from her EU counterparts. No hasty aid for debt-ridden countries, and no curtailment of Germany’s export strategy…


    Although the role of the Iron Lady doesn’t necessarily make her more popular in Brussels, it does at home.

    Yep. This is the sad reality that Rob Parenteau and the others in the MMT movement are in denial about.

    When I was in college I taught a course in defensive driving, and one of the instructional films ended with the admonition: “You might be right. Dead right!” All indications are that that’s where Parenteau and company are headed.

    Face it, rational egotism just isn’t salient with a large enough portion of the population. The homo economicuses comprise maybe 20% of the population, 40% at the very most. The MMT guys and gals are going to have to be amenable to including a moral message to go along with their apodictic message, one that resonates with a broader public, and even if it flies in the face of classical economic dogma. That’s the only way they’re going to be able to successfully advocate their cause.

    And I do wish them success. After all, I’m sitting in the passenger seat in the car they’re piloting.

    1. Peripheral Visionary

      Merkel’s response may actually be the rational one; and the difficulty of the pro-Greek-bailout crowd may be in convincing Germany to do the irrational thing rather than the rational thing.

      The assumption underlying German assistance for Greece is that Greece (along with Club Med–it is tacitly recognized that this is about much more than Greece) is that it is Greece and Club Med who are Germany’s primary consumers. Really? I think I am going to need to see some statistics verifying that. International trade within the EU may be high, but I have yet to see concrete statistics verifying that a collapse in demand from the Mediterranean countries would have a crippling impact on German exports.

      The reality is that much of Germany’s (and Northern Europe’s) exports go international outside of the E.U. It is Americans buying German cars, the Chinese buying German precision machinery, etc. Greece may be on the list of destination countries, but I can scarcely believe that they would be anywhere near the top.

      Germany’s exposure to Greece et al. does not seem to be on the export side as much as it is on the lending side; and it is there where the Germans should be the most worried. But this is a familiar, if depressing, situation. The Greeks have borrowed more than they can ever repay, lacking as they do an effective productive economy, and so the decision for their hapless lenders is “extend and pretend”, restructure, or push to bankruptcy. A bad situation, but an entirely familiar one. And one having little to do with German exports and German household savings rates.

      With all the talk of the “rational” decision to be made, that “rational” discussion seems to be from the perspective of the EU as a whole, but with the interests of the most vulnerable members particularly emphasized. That is one perspective, but it is not the perspective of the Germans, who have their own best interests in mind; and the entirely rational move for the Germans to make would be in allowing someone else to rescue the Greeks.

      1. DownSouth

        Peripheral Visionary,

        I don’t discern any factual reality whatsoever in your little excursion into fantasyland there.

        For the first three quarters of 2009, Germany’s current account balance was:

        (Millions of Euros)

        Total: 69,936
        Percent of Total: 100%

        Total Europe: 54,420
        Percent of Total: 78%

        Total Club Med (Portugal, Italy, Greece and Italy): 26,391
        Percent of Total: 38%

        1. Peripheral Visionary

          Germany’s exports to Club Med are 12% of its total exports; hardly the bedrock of its economy. But even that is pointless if all of that exporting is being financed and will never be repaid.

          Exports financed with debts that will never be repaid are nothing more than a gift, and there is absolutely no way that that could be in the best interest of the German people.

  2. angie_is_not_a_song

    Interesting to see speculation about Merkel – you do all realize her previous government included the SPD, right? That the Greens and the CDU are in a coalition in Hamburg, and that if current voting trends hold, the CDU and Greens could actually form a Schwarz/Grün government? Or that Germany is doing just fine in racking up the highest levels of public debt since its founding? That Westerwelle is managing to strangle the FDP by not recognizing the difference between governing and campaigning (yep, he really has learned a lot from American politics – shame he isn’t in America)?

    This list could go on, but when we see credible reports about how the world can solve all its problems by just using debt to pay debt, then the dour East German hausfrau will continue to hector her way into no one’s heart. Just ask HypoReal – the FDP was screaming about ‘Enteignung’ (call it nationalization) when the shareholders became nothing but bagholders. But then, Merkel is as likely to support debt as the solution for debt as she is to support more schaps as a solution for alcoholism – which, actually, it can be – after all, alcoholism can also result in fatal diseases.

    Merkel isn’t really interested in saving capitalism, especially the go-go version she managed to avoid growing up with. And yet, no one seems to understand what that means – after all, she just happens to have a PhD, making her particularly unusual on the political scene – she actually knows how to handle exponents.

  3. a

    From the Spiegel article: “Germany must be careful not to become an object of hate in Europe.”

    Translation: give us your money or we will hate you!

    It’s just amazing to see how much the debt mentality has infected the elite.

    1. DownSouth

      Speaking of the devil, you’re one of those who rational egotism doesn’t seem to be your strong point. It’s more like irrational egotism. To me, your comments reflect the sentiments of the great unwashed, a product of populist demoguery.

      The point that Rob Parenteau has been making forever, and the NY Times article picked up on, seems to be lost on you:

      German voters, proud of their economic competitiveness, resist the idea of helping Greece, or other troubled countries like Ireland, Italy, Spain or Portugal. But Germany’s economic strength is not just built on German hard work and efficiency. It is built on consumer demand elsewhere — including its deficit-plagued euro partners. German voters who favor casting Greece and the others adrift seem to miss that connection.

      1. alex

        True. It’s the same story of how some Americans (and perhaps Chinese) see the US-China trade imbalance as a morality tale of American profligacy and Chinese frugality. Even if true, so what? The hard fact is that Chinese prosperity depends heavily on American consumption. I can see why that’s hard to accept, just as in general Keynes’ paradox of thrift is hard to accept, but it’s nevertheless true.

      2. a

        “Speaking of the devil, you’re one of those who rational egotism doesn’t seem to be your strong point. It’s more like irrational egotism. To me, your comments reflect the sentiments of the great unwashed, a product of populist demoguery.”

        C’mon, can you cut out the ad hominems? It’s clearly not your strong point anyway.

        “But Germany’s economic strength is not just built on German hard work and efficiency. It is built on consumer demand elsewhere.”

        Spoken like a true indebted American! If debtors are so strong, then they wouldn’t be pleading for mercy from their creditors.

        1. alex

          “If debtors are so strong, then they wouldn’t be pleading for mercy from their creditors.”

          Beware the lessons of the Great Depression. Countries that defaulted generally did better than the creditors they owed.

          Moralism aside, without markets, where are those virtuous Germans and Chinese going to sell all those products?

          1. a

            “Beware the lessons of the Great Depression. Countries that defaulted generally did better than the creditors they owed.”

            And beware drawing conclusions from one data point.

          2. alex

            I’m not – there are numerous historical examples. Japan was and still is a major creditor. How have they done with that in the last 20 years?

            Not that I advocate default in any but the most extreme examples (and the US isn’t even close to that yet), or ignore the fact that it can have bad repercussions for the debtor country, but the idea that the creditor countries are necessarily sitting pretty is a moralistic view that doesn’t jive with history.

            BTW, why no response to my question about where those creditor countries are going to sell their goods?

        2. DownSouth

          I’ve been admonishing Rob Parenteau and the MMT bunch to invoke some moral arguments, so I suppose I’ll take this opportunity to do so myself. Actually the theologian Reinhold Niebuhr has already crafted some superb ones, which just need to be reiterated. He wrote a whole chapter in Moral Man and Immoral Society called “The Morality of Nations.” It’s well worth reading in its entirety, but here are some excerpts:

          The development of international commerce, the increased economic interdependence among the nations, and the whole apparatus of a technological civilization, increase the problems and issues between nations much more rapidly than the intelligence to solve them can be created… Co-operation between America and the Allies during the war (WW I) did not help American citizens to recognize, and deal sympathetically with, the issues of inter-allied debts and reparations; nor were the Allies able to do justice to either themselves or their fallen foe in settling the problem of reparations. Such is the social ignorance of peoples, that, far from doing justice to a foe or neighbor, they are as yet unable to conserve their own interests wisely. Since their ultimate interests are always protected best, by at least a measure of fairness toward their neighbors, the desire to gain an immediate selfish advantage always imperils their ultimate interests. If they recognize this fact, they usually recognize it too late. Thus France, after years of intransigence, has finally accepted a sensible reparations settlement. Significantly and tragically, the settlement is almost synchronous with the victory of an extreme nationalism in Germany, which her unrelenting policies begot. America pursued a selfish and foolhardy tariff policy until it, together with other imbecilities in international life, contributed to the ruin of prosperity in the whole world.


          There is always, in every nation, a body of citizens more intelligent than the average, who see the issues between their own and other nations more clearly than the ignorant patriot, and more disinterestedly than the dominant classes who seek special advantages in international relations. The size of this group varies in different nations. Although it may at times place a check upon the more extreme types of national self-seeking, it is usually not powerful enough to affect national attitudes in a crisis.


          When governing groups are deprived of their special economic privileges, their interests will be more nearly in harmony with the interests of the total national society. At present the economic overlords of a nation have special interests in the profits of international trade, in the exploitation of weaker peoples and in the acquisition of raw materials and markets, all of which are only remotely relevant to the welfare of the whole people. They are relevant at all only because, under the present organization of society, the economic life of a whole nation is bound up with the private enterprises of individuals. Furthermore the unequal distribution of wealth under the present economic system concentrates wealth which cannot be invested, and produces goods which cannot be absorbed in the nation itself. The whole nation is therefore called upon to protect the investments and the markets which the economic overlords are forced to seek in other nations.


          The social ignorance of the private citizen of the nation has thus far been assumed. It may be reasonable to hope that the general level of intelligence will greatly increase in the next decades and centuries and that growing social intelligence will modify national attitudes. It is doubtful whether it will ever increase sufficiently to eliminate all the moral hazards of international relations. There is an ethical paradox in patriotism which defies every but the most astute and sophisticated analysis. The paradox is that patriotism transmutes individual unselfishness into national egoism. Loyalty to the nation is a high form of altruism when compared with lesser loyalties and more parochial interests. It therefore becomes the vehicle of all the altruistic impulses and expresses itself, on occasion, with such fervor that the critical attitude of the individual toward the nation and its enterprises is almost completely destroyed. The unqualified character of this devotion is the very basis of the nation’s power and of the freedom to use power without moral restraint. Thus the unselfishness of individuals makes for the selfishness of nations. That is why the hope of solving the larger social problems of mankind, merely by extending the social sympathies of individuals, is so vain. Altruistic passion is sluiced into the reservoirs of nationalism with great ease, and is made to flow beyond them with great difficulty.

          1. a

            “There is always, in every nation, a body of citizens more intelligent than the average, who see the issues between their own and other nations more clearly than the ignorant patriot, and more disinterestedly than the dominant classes who seek special advantages in international relations. The size of this group varies in different nations. Although it may at times place a check upon the more extreme types of national self-seeking, it is usually not powerful enough to affect national attitudes in a crisis.”

            I always roll over laughing when people write this kind of crap. The subliminal message is: you (the reader) and I (the writer) are part of this glorious group who have risen above the rest, who are more intelligent than the average.

          2. DownSouth


            Well you certainly serve as Exhibit “A” as to the difficulty of trying to interject rationality or reason into this debate. To quote Niebuhr again:

            Theoretically it is possible to have a national electorate so intelligent, that the popular impulses and the ulterior interests of special groups are brought under the control of a national mind. But practically the rational understanding of political issues remains such a minimum force that national unity of action can be achieved only upon such projects as are either initiated by the self-interest of the dominant groups, in control of government, or supported by the popular emotions and hysterias which from time to time run through a nation. In other words the nation is a corporate unity, held together much more by force and emotion, than by mind.

          3. Anonymous Jones

            Keep rolling over in your laughter, buddy. It’s not going to make the point any less true.

            a’s comments over the last few day have certainly provoked riotous laughter in some parts of the country, that’s for sure.

            I especially enjoyed the tete-a-tete with Swedish Lex, in which a and Swedish Lex both tried to outdo each other’s special combination of ignorance and hubris with endless taunts that the *other* didn’t understand history while they both clearly didn’t understand the first hints of complexity of what the labels “Germany” and “Greece” even mean in terms of land, populations, governments, power structures, community structures, intertemporal allocations among the different generations of their own populations and across all populations, just to name a few. Absolutely freaking hilarious.

          4. Peripheral Visionary

            Niebuhr has many problems (not least of which his continual confusion of the middle class with the upper class), but at the root of those problems is his inability to recognize that people have responsibilities to other people that depend on the closeness of their relationships. He has taken the Christian mandate to “love one another” to its extreme end, in using as the starting point for his arguments the implicit assumption that each person has an equal responsibility to every other person regardless of distance of relationship.

            He does not comprehend the simple and critical role of relationship in responsibilities; that parents of a child have a greater responsibility to ensure the best interests of that child than they do of a child living in another home on the other side of the world. Nations, consequently, have a greater responsibility to their own citizens than they do to the citizens of other nations. That is not to say that they have no responsibility to the citizens of other nations; but that there is a hierarchy of responsibilities within which the nations, and their citizens, operate; and that, consequently, it is not “selfishness”, but a recognition of that responsibility, when nations act in the best interest of their citizens.

          5. kevin de bruxelles


            I’d just like to say that months ago I was inspired by your posts to order Moral Man and Immoral Society but since I am a book addict and have more books than I can ever read in a lifetime it got placed in a pile. A week or so ago it accidentally fell down at my feet so I took this as a sign, picked it up, and finally started to read it. It is no exaggeration to say that each page is a revelation. Even the introduction was amazing! I can see why you quote him so much; on every page I place multiple marks of important passages.

            The only area I find myself disagreeing with him is that sometimes he tends towards Rousseau’s Natural Man theory while I tend more towards the Hobbesian view.

            What gives his writing so much power is to read his precise and cutting comments about the current events of 1932 combined with our current knowledge of how all these things actually turned out. He was a very perceptive man to say the least. And 1932 was such a key turning point, with so much tragedy ahead of it. While reading his book I could not help but wonder if 2010 was not a similar time in history.

          6. DownSouth

            Peripheral Visionary,

            You completely misconstrue what Niebuhr says.

            What he says is that nations almost always do act in the short-term interests of some of their citizens, but not all of their citizens.

            Furthermore, he asserts that nations almost never act in the long-term interests of any of their citizens.

            Niebuhr was a very talented communicator, and I don’t understand why you should have such a problem comprehending his extremely clear and unambiguous prose.

      3. MyLessThanPrimeBeef

        I would like to see if an argument could be made that while that ‘consumer demand elsewhere’ exists and could be met by you, me, the Germans, the Russians or the Zimbabweans, it was only through their hard work that the Germans get to satisfiy that consumer demand better than others.

    2. MyLessThanPrimeBeef

      I thought the German’s problem started because their currency was not the world’s reserve currency. That problem was not particular to them though; Italy and other countries probably wanted to run trade surpluses as well.

  4. MyLessThanPrimeBeef

    Squirrel: ‘Thank the squirrel gods we don’t have a not-so-sapiens system where if I save nuts for the winter, my squirrel king will run a nut deficit.

    Luckily, by working hard the last few summer months, I have saved enough nuts and my squirrel king did not squander away the nuts he collected from me and so, he will have no need to borrow nuts from me this December.’

  5. Hugh

    Sigh. This is what I tried to point out yesterday on this subject. There is an absence of leadership at the upper level of whatever frame we use. If we are talking the world economy, it is a lack of US leadership. Funny how the word statesmanship seems to have fallen out of our lexicon. No uses it anymore, possibly because no one sees it anymore. In any case, on the European scene, it is the Germans and French who should be pushing for a European solution to a European problem. Instead they have fallen back on nationalist ones. The history of nationalism in Europe in the 20th century was not a brilliant one, and there is no reason to think it will be more successful in the 21st.

    What we see in Europe, as here, are politicians opting for non-viable economic policies because they are popular in the short term. Such choices will not end well for them or us.

  6. MyLessThanPrimeBeef

    Why rejoice over China’s property baloon when we can celebrate our own nascent equity bubble here?

  7. a

    Anonymous Jones has spoken! Bow down to the man who understands such complexity that Germany and Greece are “labels” and not countries!

  8. Jack Parsons

    About the Firedoglake list: all true. But the missing detail is:

    Passing this moves the Overton Window to the left. Health care reform is not over, not by any means, but the momentum has started in the correct (left) direction.

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