Tuesday, December 18, 2012

Galbraith solves Eurzone riddle in one speech

This Galbraith speech goes to the top of my best ever list in several categories.

Below is the first set of comments I posted.

Galbraith truly nails almost everything in this speech as I've been unable to do in arguing with my friend who lives in Germany.  However, I won't bother to send him a link.  He always finds some semantic error in the first sentence and won't go further.

Galbraith especially nails, in what appears to me to be the least offensive way, what's wrong with German policy and (dare I say) ways of thinking about these things.  And the early vs later institutions and what ideas they are based on.  There are somewhat more offensive ways to make similar arguments, and some have appeared in the comments.  I will try to avoid providing too many more here.

The comment wrt the debt brake...is actually presented in the form of a corollary to Murphy's law.  Murphy's law can't be taken entirely seriously, but it can't be dismissed either, and that's the point.  It's an ironic take on the Tao, that which bends doesn't break, etc.  Galbraith knew he was pushing irony here, not always well taken with liberal Americans (who love irony) speaking to Germans, but it seems this audience took it well.  Still, since it only tends toward 60% debt/GDP ratio, as described here, that sounds good, even Keynesian, at least in the abstract (assuming the only country in the world is Germany).  But we can be sure...the perfect rule will always fail.

I like the discussion here too.  Cathartic.  More popcorn please.


In response to one commenter complaining the speech was all about Germany, not the EU, I replied:

Germany is where the largest share of GDP and credit comes from in the EU.
The elephant. Now surrounded by many small debtor nations and an implausible scheme of balancing.
The Euro project was asking for trouble, big time.
I have the strong sense it won't end well, but end it will, end it should, and end it must. More duct tape won't hold the rocket together. Galbraith and Krugman are more diplomatic and possibly more optimistic than I am.
I agree with Galbraith that the Euro project was based on ideas similar to the Monetarist experiment conducted by Paul Volker in the 1980's. Volker himself gave up on the Monetarist program before he was replaced. Now we know Monetarism can't possibly work, since money isn't created by governments or banks, money is created by borrowing.

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