Euro Bond Markets Are Drowning, Not Waving
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  • thibaud

    This is bad news for the US, though not necessarily for the frugal, fiscally-responsible, social democratic nations of the former Hanseatic League region. One might not know it from Mr Mead’s recent lunge in to apocalyptic fear-mongering, but the heavily interventionist economies of Germany and Sweden (and Canada’s) are booming. They all have low debt, healthy government finances, well-run companies and well-educated and productive workers.

    If the publics of Germany, Holland and Finland refuse to mortgage themselves for the next couple of decades to bailing out the PIIGS, then the Eurozone will shrink to comprise basically the Hanseatic League nations plus France. While in the short run a devaluation of Greek, Italian, Spanish, etc currencies may help say, Fiat compete with Volkswagen in export markets, Germany will retain its healthy growth trajectory and sound public finances.

    There’s indeed a lesson here, though it’s not necessarily the one Mead wants to extract: the “blue-state” model isn’t necessarily broken. It depends on several things that Germany, Canada and Sweden have, in spades, and that our current political economy lacks:

    1) a tight rein on bankers, via high and serious capital requirements and separation of prop trading from the core business of lending to companies, households and consumers;

    2) relatively clean and transparent politics

    3) a culture of frugality, of doing more with less, of business moguls who accept high tax rates and who focus on actually MAKING STUFF rather than arbitrage and asset-flipping;

    4) a dual-track educational system that favors vocational training from an early age so that you build a society where everyone has a valued trade, where, as Hans Magnus Enzensberger puts it, “nobody is a nobody.”

    5) an intelligent, points-based immigration policy (Canada does this well; Germany, less so) that favors immigrants with advanced skills and capital and that keeps out illiterate dropouts, however hard-working they may be.

    Yes, we can have growth as well as social solidarity, as the nordics and Canadians might put it, and fiscal responsibility as well. But we don’t need to repent our cleanse our souls to do it. We just need to follow the lead of the Germans, Swedes and Canadians, and rein in our bankers, bring back vocational ed, and stop importing an underclass.

  • Kris

    The reason Canada is in relatively good shape today is that roughly two decades ago, it embarked on a bipartisan effort to get its financial house in order, which included reining in government expenditures. This only occurred after the bond markets put the fear of God into enough politicians.

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