Monday, May 07, 2012

Angiebot Jens Weidmann, head of the German central bank, advocates more economic destruction for Europe

Peter Coy reports on his interview with Jean Weidmann, president of the German central bank, the Bundesbank, and a loyal Angiebot disciple of Angela Merkel's austerity economics for Europe, in "A Date With Dr. Nein" in the print edition of Bloomberg Businessweek of 04/30-05/06/2012:

Weidmann's devotion to austerity is even purer than that of German Chancellor Angela Merkel, for whom he once worked at the Chancellery in Berlin as an economic adviser and sherpa [sic] at G-8 and G-20 summit meetings. "Merkel has embraced European integration as the make-or-break issue of her chancellorship," says Christian Schulz, a London-based senior economist at Berenberg Bank, Germany's oldest. "Weidmann has a narrower responsibility. [It's] not all of Europe or even all of Germany. His responsibility is price stability."
This is what people mean when they talk about Germany's chronic commitment to "hard money".

Coy defines the general problem well:

Euro zone unemployment is stuck in double digits, and a crisis of investor confidence that has already forced Greece, Ireland, and Portugal to seek bailouts threatens to claim Spain as well. Backers of "growth now" warn that austerity is plunging Europe into a depression in which fiscal stringency reduces growth, drying up tax revenue and forcing even deeper spending cuts, and so on in a downward spiral.
This disastrous policy has been the consensus among European policy elites, even among the social-democratic parties. It's producing a voter revolt, and understandably so.

On the other, there are Angie and her Angiebots:

Weidmann, in the sober tradition of the Bundesbank, sees things differently. He believes that while deficit spending made sense as an emergency measure, it has gone on for too long, killing business confidence and investment while driving up debt and interest rates, thus making Europe's long-term challenges ever graver. He rejects the argument that the European Central Bank is "the last man standing" in the euro zone and must therefore bend its rules to make money easier and credit more freely available. His prescription for growth is "structural reform" - exercise and diet for an out-of-shape patient, not more medicine.
"Structural reform" is yet another euphemism for the neoliberal prescription for the 99%: lower wages, lower salaries, lower incomes, fewer labor rights, weakened or destroyed labor unions, loss of social services and retirement security. "Business confidence" is the "confidence" in the austerity con-game. In one of those interesting evolution of words, "con-game" in American English has become well know as a word for scam, and people tend not to immediately think that it was once short for "confidence-game", in which a scamster gets money from his mark by winning their (undeserved) confidence.

Also, half-brained metaphors like "exercise and diet for an out-of-shape patient" serve to obscure what is mean by euphemisms like "structural reform" or "labor flexibility", which mean, again: lower wages, lower salaries, lower incomes, fewer labor rights, weakened or destroyed labor unions, loss of social services and retirement security.

Weidmann tells Coy that he admires the late liberal economist James Tobin, but it sounds to me like a smarmy throwaway line to make himself sound well-rounded. His actual policy is the simplistic conservatism of which the One Percenters in Europe and the US are so fond:

Does he care less about keeping the euro zone intact than he does about keeping inflation under control? Seemingly yes. "I have a mandate," he says. "I have one overriding objective, which is price stability. That is fully consistent with monetary union if" -and he hits the "if" hard-"national policy makers do their job. If we have fiscal slippage, erosion of incentives for sound public finances, you have a monetary union that won't last." In other words, Europe's real problem is overspending politicians.
Angiebot Weidmann even actively opposed the European Central Bank's (ECB) recent "Big Bertha" action to stave off an immediate collapse of the eurozone finances, which ECB Mario Draghi undertook despite the vague authority of the ECB to do so:

Draghi hasn't let the Bundesbank stop his rescue efforts, even gleefully describing the trillion-euro liquidity injection that began last December as "BigBertha," an allusion to a German howitzer from World War 1. "Mr. Draghi does the right thing without asking the German government ifhe's allowed to do it or not," says Peter Bofinger, the lone Keynesian on the German Council of Economic Experts. [my emphasis]
That phrase, "the lone Keynesian on the German Council of Economic Experts", says a lot in itself.

Coy reports that Weidmann's opposition to Big Bertha helped further Angie's mission to wreck the economies of the weaker satellite countries EU economies, though he doesn't phrase it quite that way:

The Bundesbank's influence diminished the effectiveness of Draghi's Big Bertha, argues Paul De Grauwe, a professor at the London School of Economics. He says the ECBshould have bought the debt of European governments in the secondary market instead of lending money to the banks so they could buy the bonds. The Bundesbank, under Weidmann, has insisted that bond purchases would be unlawful because the ECB is prohibited from financing governments. It's a classic stance for the Bundesbank. A'no,' because of the role of the Bundesbank, is a very important 'no,' " Weidmann observes.
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