Thursday, October 27, 2011

Merkel's bailouts...

Two headlines caught my eye today in one German newspaper: "Hopefully, they know what they are doing" and "The Germans are becoming fewer and fewer."  I think I mentioned about a month ago that because Germans don't have much more than one child a couple, their share of Germany is in decline.  I don't think I ever posted a reflection on American immigration by way of Germany's issues, but I've found being here helpful in conceptualizing similar issues in America.

The main talk of the town, of course, is the German Chancellor's (Angela Merkel) attempt to hold the Euro and EU together by forgiving a substantial portion of Greece's debt.  Greece is hopeless financially, but the sense of the EU's leadership is that it will be less catastrophic on Europe's banks to write off some of their debt than it would be to let Greece fail.  In return, economic problem states in the EU like Greece will have to become more capitalistic.

I was reminded of the GM, Chrysler bail-outs in America--of course much less problematic.  They've paid their money back.  The US taxpayer lost nothing in the end.  In return, 1000s of people kept their jobs, countless companies (even beyond GM and Chrysler) stayed in business, and the US economy was spared the domino failure effect their failure would have caused. It seems to me like it was a good thing.

We'll see what happens here, where there will be no pay back, and there is always the fear that no amount of money could save the situation.

3 comments:

Angie Van De Merwe said...

I didn't think that GM paid all of their bail out back. Accountants can do their "tricks of the trade"....Ford wasn't bailed out. How have they fared?

John C. Gardner said...

The issue of intervention into the economy is a difficult one today.For example, according to John Steele Gordon in Hamilton's Blessing(2010) the national debt(not the annual deficit of the U.S.) in 1933 was 40.54% of GDP when compared with 2008 when it stood at 67.7% of GDP. This would allow for Keynesian economics to provide stimulus. The national debt percentage of GDP in 1939 has increased to 44.68 of GDP. We started with a higher national debt and have increased it dramatically.

Angie Van De Merwe said...

It seems to me that "bail outs" are a means to enable. When government acts to prevent corporate demise, increasing government debt, does that not limit the average tax payer in their ability to make choices about what they do with their own money in increasing profit margins in consuming goods? (or is consumption really the "issue" in the newly devised "Marxist/socialist world"?Where does enablement begin and where is accountability/responsibility for one's actions/choices? Where does the tangled web of government, corporations, and "pay backs" or even "criminal" or borderline behavior by those in government or positions of power make for "bad results" for the majority? but it brings in profits for those that have the power to make the choices at the costs of the rest of us? The Catholic Church now wants the power of our purse strings. I thought we'd learned our lesson about that during the Reformation!