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Wednesday, May 1, 2013

The 'Creditanstalt', Vienna, Announces the 'Merkel Moratorium'

The 'Creditanstalt' Vienna Proudly Announces the

'Merkel Moratorium'

Herbert Hoover taking office in 1929.
Hoover proclaiming the Moratorium in 1931
Hoover inspecting occupied Germany in 1946
You too can join this illustrious Ahnengalerie

Hans-Werner Sinn and George Soros have been debating Germany's role in the Euro crisis at cross purposes at project-syndicate. Naturally I had to throw in my two cents, so I came up with the brilliant idea of the 'Merkel Moratorium'. Like all of my brilliant ideas, it will be attributed to the 'Creditanstalt' Vienna:

Maybe Germany could make the first step on the road to recovery by issuing a "Merkel Moratorium" suspending international debt payments, analogous to the Hoover Moratorium of 1931 that was the first step out of the Great Depression (followed by abandonment of the Gold Standard and rearmament Keynesianism). This suspended not only Germany's WWI reparations but also the private American Dawes Plan debt that was actually financing them, and was then fully repudiated by Hitler. The Allies had learned their lesson from the Versailles Treaty and did not reimpose the 675% prewar debt level on occupied Germany, allowing it to start the Bretton Woods era practically with a clean slate (more than was vouchsafed the UK - see Robert Kuttner in the NY Review).
 The US, as net world creditor, could afford to absorb these losses and even went on to recycle its export surpluses in the Marshall Plan. Now the world has come almost full circle and Germany is a major net creditor. Does it have any alternative to debt forgiveness and recycling its trade surpluses with the Eurozone periphery? That austerity, deflation and forcible debt extraction are self-defeating is something we already learned in the 1930s. And a Eurozone breakup would be an even bigger debt write-off for Germany. So it's time to unclench the fist in the current account cookie pot and start doing something constructive.

Note: The 'Creditanstalt's' 'Merkel Moratorium' is not to be confused with the current German government's 2011 about-face on extending the lifetimes of nuclear reactors after the Fukushima disaster, also known as the 'Merkel Moratorium'.

Fukushima: another fine example of meltdown economics & complex catastrophes at work that served as a justification for a face-saving political about-face

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