Austerity in Germany – A Keynesian Case

by Andreas Hoffmann*

The positions about economic policies could not have been more divided between Germany and the US during the latest G-20 summit.

On the one side, Barack Obama pushed Keynesian arguments about the need for further stimulus and the danger of austerity measures for economic recovery. On the other side, Miss “No” is back. Merkel promoted consolidation measures to prevent future debt crises and regain markets’ trust in sustainable government finance. And this time Merkel did not cave into US pressure.

I collected some arguments of why this may be a good idea:   Continue reading

Bubble or Growth?

by Jerry O’Driscoll

In an interview with The Wall Street Journal, German Chancellor Merkel called for an end to risky growth policies built on asset bubbles.  “In recent years we’ve had the Asian crisis, the new economy crisis, and now this great international financial and economic crisis — we can’t slide into a crisis every five to seven years.”  As she notes, however, the central banks of the major economies have implemented “unorthdox” policies to increase borrowing and lending in the current crisis.  Those policies risk yet another asset bubble. Continue reading