By John Batchelor on March 27, 2009 9:35 PM Europe Follows Germany, and Germany Follows No One.
Baseline Scenario, the thrillingly dry website by Simon Johnson, Peter Boone and James Kwak, warns that the the Europeans are going to the G20 meeting in London with a plan, and the plan is to stand back and let the Americans sweat while the Germans ponder. They call this "Payback Time." The argument is about the American call for every member of the G20 to spend up to 2% of GDP on so-called stimulus packages -- that is, to spend and spend and spend and spend until the world consumers go back to shopping. Germany regards this as folly. The one and only nightmare for Germany is inflation. It is a German faith that inflation is Satan. European Central Banker and French-born Jean-Claude Trichet and German Prime Minister and East Germany-born Angela Merkel agree that aggressive government spending is unneeded, unwise and self-destructive. Their opinion on stimulus is not negotiable. Baseline Scenario proposes "three possible reasons for this attitude..."
I read through these three possibilities and hesitate to agree that the Germans are wrong-headed. The droll observation recently is that the GOP House is now joined by Germany and Europe in doubts about stimulus and spending and debt. There is wit and not inaccuracy here. Also. Why is this pay back? Perhaps it is a plan, and a Berlin offensive plan.1. The Germans believe that the economy will recover on its own from this point. Given that not even the optimists in the Treasury Department believe this, I don't see how this could be the case.
2. They are so afraid of any risk of inflation that they would rather suffer through an extended recession and high unemployment. This could be possible, although misguided, especially since Germany is already in worse shape than the U.S., with its economy expected to shrink by 3.8% this year (vs. 2.5% for the U.S.).
3. They realize that their economy is driven by exports, and therefore they are planning to free ride off of the U.S. stimulus package. In this scenario, Germany gets to contain its national debt and minimize the risk of inflation, while letting other countries turn the global economy around.
Gordon Brown Makes Germany Cocky .
Who in all Europe joins with the Obama administration's call for a massive G20 stimulus plan? Only one name, Gordon Brown. After his recent visit to the US, in order to praise the Obama administration again, Gordon Brown is now a burden to himself and to Washington. Despised and mocked in London, discounted and ignored on the Continent, laughed at by China and the weasels of Asia, Gordon Brown is the worst sort of friend to the young American president and his administration's stimulus plan. The special relationship is a curse. The Germans regard Gordon Brown as a weakling, and Gordon Brown's alliance with Barack Obama makes the Germans feel cocky. The easy irony here is that German, sixty years later, has launched a winter offensive against the allies of London and Washington. You recall the scene in "Patton," when George C. Scott argues that the Germans haven't launched a winter offensive since Frederick the Great, and therefore he is sure that it is coming, so be ready. My sense is that Germany has caught London defenseless, while France has already surrendered and all of North and East Europe follows Germany. And the U.S.? Numb with one-worldism. Berlin offensive plan.
Baseline Scenario Hedges.
Simon Johnson, Peter Boone and James Kwak close with a reservation about the German strategy:
"Now, we're not blameless here, what with our "Buy American" provision in the fiscal stimulus. But at least our government isn't closing its eyes and assuming the problem will go away."
I do not have superior information, just a well-read prejudice about the culturally adept militarist minds of Germany. I am guessing that that the Germans know that Gordon Brown is no threat and that Barack Obama can be manipulated. Recall how Mr. Obama behaved when he spoke in Berlin in July 2008, and Mr. Obama's peculiar desire to pose with Angela Merkel for the cameras? The Berlin read on the Obama team may be that it won't shout and it won't fight. Note that the Obama embassy, after the London unpleasantness in which the G20 will squabble like wolves, is going to stop at Strasbourg and then skip over Germany to stop at the Czech Republic before going on to Turkey. Let's add this up. The English, the French, the Czechs and the Turks. From the Berlin point of view, this is a quartet of war prisoners and servants. Berlin offensive plan.