Thursday, March 26, 2009

Merkel Makes Like Obama With German Stimulus Excluding Europe

Amazing how the media and many analysts just don't seem to understand that Germany's means are limited as the country is now functionally like a state within the United States. Germany cannot credit bank accounts with euros, only the ECB can. If Germany needs to stimulate it must have funds on hand or borrow in capital markets. The U.S. and other sovereign currency issuing nations that spend by simply crediting bank accounts don't have this problem. Their means to sustain output and employment are not limited--only by politics.

As global consumer demand melts away, slowing production lines across Germany, Chancellor Angela Merkel is injecting 82 billion euros ($110 billion) into the economy, the biggest stimulus package in Europe.

But less than 3% of GDP.

Germany’s spending spree came after Merkel exasperated European Union leaders, who wanted her to endorse a collective 200 billion-euro rescue package for the 27-nation trade bloc last November. Instead, she first criticized international stimulus efforts, and her coalition government abandoned three years of fiscal discipline only after domestic demands for action.

Hardly a "spending spree." She couldn't do 200 billion because Germany doesn't have it. Nor does the rest of Europe. Rather than say the truth, she chooses to criticize stimulus efforts, a political move designed to shift blame and skirt around the real issue.

“It’s time now for us to move together and to begin to act,” U.S. Treasury Secretary Timothy Geithner said in Washington on March 11. “Everything we do in the United States will be more effective if we have the world moving with us.”

Add this to the list of things Geithner doesn't comprehend. Under the current structure, the Eurozone is terribly constrained and were it not for the Fed lending hundreds of billions of dollars, they'd be in a freefall. This is incredibly important to understand because the Eurozone is the world's largest economy and it doesn't have the means to save itself! Tim, WAKE UP!!!

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