The incredible conservatism of German economists We have seen a number of recent comments in the UK especially, criticising German attutudes and Germanys role in the crisis. The critics of Germany wonder why does Germany not see that we are in a liquidity trap? Or as Simon Tilford of the CER put it: the Germans are still caught in a pre-Keynesian world. German economists, in their vast majority, like to think of themselves as post-Keynsesian, and there is absolutely no way that they will ever buy into Keynesian thinking that is so predominant in the UK and the US, not only among economists, policy analysts and commentators. Yesterdays media coverage presented us a very good example about the kind of economic advice the German government receives at home - from the official body of experts whose job it is to produce such advice. The Council of Economic Experts has severely criticised the Merkel governments policy, according to Frankfurter Allgemeine, which has obtained a pre-release of the councils annual report. Their arguments are the exact opposite of what you hear in the UK. They are livid about the minimum wage and the early retirement programme as these would impede Germanys competitiveness. The advisers consider the foreign criticism of insufficient investment in Germany as misleading and exaggerated. And they are critical of whatever the ECB does, arguing that low interest rates and asset purchase would bring financial stability risks. They also published their annual GDP forecast, which at 1% for 2015 is a touch more pessimistic than that of the government or the joint forecast by the economic institutes. If you consider yourself on the Keynesian side of the argument, you will find this report depressingly typical of prevailing attitudes. But this commentary by Philip Plickert in Frankfurter Allgemeine will get your blood boiling. He calls QE the last stage of escalation in European monetary policy, and criticises the ECB for not paying closer attention to the wise analysts of the BIS, who have warned about the collateral damage from such a policy. Plickert writes that if monetary policy no longer works, there is a temptation to increase the dosis. The headline of his article is thus: Monetary Policy for Junckies. He writes that a large asset purchase programme would trigger distortions and bubbles. And it would discourage eurozone governments to undertake structural reforms. He concludes that Mario Draghi is simply not credible with his assertion that member states should undertake structural reforms. The ECB actively discourages such behaviour through its monetary policy. eurointelligence/news-details/article/the-incredible-conservatism-of-german-economists.html?no_cache=1
Posted on: Sun, 16 Nov 2014 19:51:36 +0000
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