Dominic Lawson: What the Germans can teach America

[Blue_Tires]

When a politician prefaces a remark with the phrase "with all due respect", you know that he's about to say something designed to communicate the full extent of his contempt for the views and intelligence of the recipient of this "respect". Seldom can this rhetorical device have been used to more effect than by Germany's finance minister, in his remarks last week about the conduct of America's economic policy.


"With all due respect," said Wolfgang Schäuble, "the US policy is clueless". Dr Schäuble – whose verbal vigour has not been in the least impaired by being hospitalised for much of this year, the legacy of the devastating injuries caused by a would-be assassin's bullets – was speaking after the US Federal Reserve's decision to throw a further $600bn like confetti to stimulate its flagging economy. "They have already pumped endless amounts of money into the economy with extremely high budget deficits, and with a monetary policy which has already pumped in lots of money. The results have been hopeless."

That was last Friday, at a speech in Berlin. If the Americans had made any back-door diplomatic attempts to get the German Finance Minister to ease off, then they were not successful. Yesterday Schäuble gave an interview for Der Spiegel in which he declared that America should learn some lessons from Germany's recipe for economic recovery growth: " successes are not the result of some sort of currency manipulation ... The American growth model on the other hand is in a deep crisis. The US lived on borrowed money for too long, inflating its financial sector unnecessarily."

This all portends more fireworks at the summit of the Group of 20 leading economies later this week in Seoul. It is the clearest indication that Europe's leading economy will side with China in accusing America of deliberately debasing the dollar, in an attempt to inflate its way out of recession. If it were just a question of the consequences for the American economy, Schäuble's observations would perhaps not be so relevant in the run-up to an international summit; but the point, of course, is that the dollar remains the world's only reserve currency, in which commodities such as gold and oil are priced: thus the accusation is that the US is deliberately infecting the entire global trading system with a very nasty dose of inflation.

In strict logic, that effect on commodity prices should not be a problem for other nations, such as Germany – or indeed the UK. If the dollar depreciates rapidly against the euro or sterling, then the real cost to us in Europe (expressed in euros or pounds) of goods such as oil and copper, will not be affected. Yet what worries the Germans above all is the inflationary expectations that visibly spiralling commodity prices bring in their train. And here we see the huge influence that a nation's past has on its present conduct and interpretation of events.

http://www.independent.co.uk/opinion/commentators/dominic-lawson/dominic-lawson-what-the-germans-can-teach-america-2128821.html

[Demeter]

1. I think lessons from the French of 1789 Would Be Better