I am going to defend the German government.
German Finance Minister Peer Steinbrueck vilifies Britain’s financial stimulus plan in an interview with American magazine Newsweek, saying that making VAT cuts won’t solve the problem, but rather will build a national debt that will take at least a generation to pay off. The problem? Everyone seems to be against Germany’s solution.
Paul Krugman, the recent recipient of the Nobel Prize for Economic Sciences, referred to Steinbrueck as dumb, saying that a refusal to cooperate with debt-financed stimulus packages can cause severe damage.
First Paul, did you you know that Peer Steinbrueck is a socialist? Yes, Peer if he could would spend money left, right, and centre. So don’t you find it interesting that Peer is not spending? A socialist not spending and caring about the debt and future generations.
Second Paul, Peer is somebody who speaks his mind very clearly and he does not mince words. Peer has critiqued Switzerland as well. Living in Switzerland he annoys me.
Thirdly Paul, Peer knows that the real issue here is that will the proposed measures work?
Germans are not Anglo-Saxons. They did a recent poll in Germany and asked, "If I gave you 200 Euros, what would you do with it?" Answer… Save it…
Paul you are not understanding the Germany psychology, and trust me it is hard on my as well. I am a product of the North American education system and think in terms of Americans and Canadians.
Germans right now are saving 11% of their annual income. They are not spending! Want to know what one the biggest debating points were in the reform of the German social system? Whether or not you should spend your savings!
Think hard about this. Germans would be on social benefits, but would have savings! I can’t think of any other country where this dichotomy is possible. Yet in Germany they had that debate.
To motivate Germans to spend you need to make them feel self-assured of their future. And with people like Paul Krugman telling people that Germany is dumb will not motivate Germans to spend more. Thus the government is actually quite correct to not introduce the same measures as other countries.
But as one economist in the German show Anne Wil said, "we might still have to introduce those measures, but it is better to be a bit cautious."
How is Germany approaching this problem? By having a pow-wow get together with all of the bosses in Germany and then deciding what to do. While Anglo-Saxons may say, "wow is that dumb", it is a German consensus reality. This is the way Germany works!
You think Germany is bad, wait until you meet Swiss people. It is completely consensus driven. Some things move along pretty quickly, other things, well not so quickly. Overall though I do like the Swiss approach because it is driven by the people. Whereas in Germany it is driven by mostly elites.
To give you an understanding of how Germans are…
One of the most popular shows in Germany is about people who left Germany to start a life in a new country. One country that is very popular is Canada. When German immigrants reach Canada they need a car. So what do they do? They pay cash, and live within their budget. Think hard, when a North American buys a car what is the first thing they think about?