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Archive for the ‘Germany’ Category

You won’t know whether to laugh or cry after perusing these stories that will be added to our “great moments in government” collection.

For instance, did you realize that American taxpayers were saddled with the responsibility to micro-manage agriculture in Afghanistan? You’re probably surprised the answer is yes.

But I bet you’re not surprised that the money was flushed down a toilet. Here are some excerpts from a report on how $34 million was wasted.

American agricultural experts who consider soybeans a superfood…have invested tens of millions of U.S. taxpayer dollars to try to change the way Afghans eat. The effort, aimed at making soy a dietary staple, has largely been a flop, marked by mismanagement, poor government oversight and financial waste, according to interviews and government audit documents obtained by the Center for Public Integrity. Warnings by agronomists that the effort was unwise were ignored. The country’s climate turns out to be inappropriate for soy cultivation and its farming culture is ill-prepared for large-scale soybean production. Soybeans are now no more a viable commercial crop in Afghanistan than they were in 2010, when the $34 million program got started… The ambitious effort also appears to have been undone by a simple fact, which might have been foreseen but was evidently ignored: Afghans don’t like the taste of the soy processed foods.

Sadly, this $34 million boondoggle is just the tip of the iceberg. It’s been said that Afghanistan is the graveyard of empires. Well, it’s also the graveyard of tax dollars.

…the project’s problems model the larger shortcomings of the estimated $120 billion U.S. reconstruction effort in Afghanistan, including what many experts depict as ignorance of Afghan traditions, mismanagement and poor spending controls. No one has calculated precisely how much the United States wasted or misspent in Afghanistan, but a…special auditor appointed by President Obama the following year said he discovered nearly $7 billion worth of Afghanistan-related waste in just his first year on the job.

I’m guessing that most of the $120 billion was squandered using traditional definitions of waste.

But using a libertarian definition of waste (i.e., money that the federal government should not spend), we can easily calculate that the entire $120 billion was squandered.

Let’s now discuss another example of American taxpayer money being wasted in other nations. I’ve written previously about the squalid corruption at the Export-Import Bank, but Veronique de Rugy of Mercatus is the go-to expert on this issue, and she has a new article at National Review about “a project in Brazil that, if it goes bust and the Brazilians can’t pay the American contractor, your tax dollars will end up paying for.”

And what is this project?

…an Export-Import Bank–backed deal to build the largest aquarium in South America…the taxpayer exposure is $150,000 per job “supported.” Some people in Brazil are rightly upset about this. The Ex-Im loan may have lower interest rates and better terms than a regular loan, but this is probably money the indebted and poor Brazilian government can’t afford. …a real problem with the Ex-Im Bank: On one hand, it gives cheap money to large companies who would have access to capital markets even in its absence. But on the other hand, it encourages middle-income or poor countries to take on debt that they probably can’t afford, whether the products purchased are “made in America” or not.

Gee, aren’t we happy that some bureaucrats and politicians have decided to put us on the hook for a Brazilian aquarium.

But let’s try to make the best of a bad situation. Here’s a depiction of what you’re subsidizing. Enjoy.

Subsidized by American taxpayers

I hope you got your money’s worth from the image.

Perhaps I’m being American-centric by focusing on examples of bad policies from the crowd in Washington.

So let’s look at an example of government foolishness from Germany. It doesn’t involve tax money being wasted (at least not directly), but I can’t resist sharing this story because it’s such a perfect illustration of government in action.

Check out these excerpts from a British news report on over-zealous enforcement by German cops.

A one-armed man in Germany has received a full apology and refund from the police after an overzealous officer fined him for cycling using only one arm. Bogdan Ionescu, a theatre box office worker from Cologne, gets around the usually cycle-friendly city using a modified bicycle that allows him to operate both brakes – one with his foot. But on 25 March he was pulled over by a police officer who, he says, told him he was breaking the law. Under German road safety rules, bicycles are required to have to have two handlebar brakes. After a long argument at the roadside, the officer insisted that Mr Ionescu’s bike was not roadworthy and issued him with a €25 (£20) fine.

At least this story had a happy ending, at least if you overlook the time and aggravation for Mr. Ionescu.

Our last (but certainly not least) example of foolish government comes from Nebraska, though the culprit is the federal government.

But maybe “disconcerting” would be a better word than “foolish.”

It seems that our friends on the left no longer think that “dissent is the highest form of patriotism.” In a very troubling display of thuggery, the Justice Department dispatched a bureaucrat to “investigate” a satirical parade float.

Here’s some of what was reported by the Washington Times.

The U.S. Department of Justice has sent a member of its Community Relations Service team to investigate a Nebraska parade float that criticized President Obama. A Fourth of July parade float featured at the annual Independence Day parade in Norfolk sparked criticism when it depicted a zombie-like figure resembling Mr. Obama standing outside an outhouse, which was labeled the “Obama Presidential Library.” The Nebraska Democratic Party called the float one of the “worst shows of racism and disrespect for the office of the presidency that Nebraska has ever seen.” The Omaha World-Herald reported Friday that the Department of Justice sent a CRS member who handles discrimination disputes to a Thursday meeting about the issue. …The float’s creator, Dale Remmich, has said the mannequin depicted himself, not President Obama. He said he is upset with the president’s handling of the Veterans Affairs Department, the World-Herald reported. “Looking at the float, that message absolutely did not come through,” said NAACP chapter president Betty C. Andrews.

If you look at the picture (and other pictures that can be seen with an online search), I see plenty of disrespect for the current president, but why is that something that requires an investigation?

There was plenty of disrespect for the previous president. And there as also disrespect for the president before that. And before that. And before…well, you get the idea.

Disrespect for politicians is called political speech, and it’s (supposedly) protected by the First Amendment of the Constitution.

That’s even true if the float’s creator had unseemly motives such as racism. He would deserve scorn if that was the case, and parade organizers would (or at least should) have the right to exclude him on that basis.

But you don’t lose your general right to free speech just because you have unpopular and/or reprehensible opinions. And the federal government shouldn’t be doing anything that can be construed as suppressing or intimidating Americans who want to “disrespect” the political class.

P.S. Since we’re on the topic of politicized bureaucracy, we have an update to a recent column about sleazy behavior at the IRS.

According to the Daily Caller, there’s more and more evidence of a big fire behind all the smoke at the IRS.

Ex-IRS official Lois Lerner’s computer hard drive was “scratched” and the data on it was still recoverable. But the IRS did not try to recover the data from Lerner’s hard drive, despite recommendations from in-house IRS IT experts to outsource the recovery project. The hard drive was then “shredded,” according to a court filing the IRS made to House Ways and Means Committee investigators.

Gee, how convenient.

I used to dislike the IRS because of the tax code. Now I have an additional reason to view the bureaucrats with disdain.

P.P.S. One last comment on the controversy surrounding the parade float. Racism is an evil example of collectivist thinking. But it is also reprehensible for folks on the left to make accusations of racism simply because they disagree with someone.

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While I mostly focus on bad government policy in the United States, I also think we can learn lessons from what’s happening in other nations.

In some cases, I share positive stories, such as the success of privatized Social Security in Australia, nationwide school choice in Sweden, and genuine spending cuts in the Baltic nations.

In most cases, though, I’m pointing out bad policy.

Some topics deserve special treatment, such as the ongoing horror story of government-run healthcare in the United Kingdom.

In other cases, though, I share one-off stories about government incompetence and stupidity.

*Such as taxpayer-financed friends for mass murderers in Norway.

*Financing a giant “Burger Boy” in the United Kingdom.

*Promoting welfare tourism in the European Union.

*Spending $30 to collect $1 of tax in Germany.

*Regulation of coffee enemas in Japan.

Today, we’re going to share more stories of feckless behavior by foreign politicians and bureaucrats.

From Canada, we learn that the government of Manitoba is micro-managing daycare lunches in such bizarre ways that a family was fined because “grains” weren’t included in their kids’ meals.

Kristin Barkiw of Rossburn, Manitoba, Canada brought two of her children home from Little Cub’s Den daycare when she saw that her kids were sent home with a note. …the message told the mom she had failed to provide a nutritionally balanced lunch for her children, 5-year-old Logan and 3-year-old Natalie.  Not only that, Kristin was fined $10, $5 per child, for missing grains in their lunch of leftover roast beef, carrots, potatoes, an orange and milk. Further, the note said that the daycare staff gave Logan and Natalie Ritz crackers to fulfill the nutritional requirement of grains, which some see as a less than nutritious option. The nutritional regulation for daycare lunches is actually law in the province. The Manitoba government’s Early Learning and Child Care lunch regulations state that daycare programs must ensure children are given a lunch with a meat, a grain, a milk product and two servings of fruit and vegetables and any missing food groups must be supplemented by the care provider.

Heaven forbid that parents actually be in charge of what their kids eat!

You won’t be surprised to learn that France is on the list. It appears the government’s rail system is staffed by numbskulls.

France’s SNCF rail company has ordered 2,000 trains for an expanded regional network that are too wide for many station platforms, entailing costly repairs, the national rail operator said on Tuesday. A spokesman for the RFF national rail operator confirmed the error, first reported by satirical weekly Canard Enchaine in its Wednesday edition. …Construction work has already begun to displace equipment and widen hundreds of train platforms to accommodate the new trains, but hundreds more remain to be fixed, he added. …The RFF only gave the dimensions of platforms built less than 30 years ago, but most of France’s 1,200 platforms were built more than 50 years ago. Repair work has already cost 80 million euros ($110 million).

I guess I’m not surprised by that story since the French once built an aircraft carrier with a flight deck that was too small.

In Sweden, a novelty tourist hotel made of ice will have to install fire alarms.

The Ice Hotel, which is rebuilt every year in northern Sweden out of enormous chunks of ice from the Torne River in Jukkasjärvi, Kiruna, will this year come equipped with fire alarms – and the irony isn’t lost on the staff. “We were a little surprised when we found out,” hotel spokeswoman Beatrice Karlsson told The Local. …While it might sound crazy that a building made of water needs to be equipped with fire alarms, the fact that the hotel is built from scratch every year means it needs to abide by the rules that apply to every new building, rules set by the National Housing Board (Boverket).

If I had to pick a prize from today’s list, this might win the prize. It’s a stunning display of government in action. Though probably not as bad as the time it took a local government in the U.S. two days to notice a dead body in a community swimming pool.

And from Germany, we have a story about massive cost overruns incurred by a pan-European bureaucracy that supposedly helps encourage fiscal discipline.

“Do as we say, not as we do”

It was meant to cost £420m of European taxpayers’ money but the bill for the new headquarters of the European Central Bank (ECB) has more than doubled to £960m and could rise even further. The bank is the key enforcer of austerity measures in the troubled eurozone nations, but appears to be having trouble keeping its own finances in order. The 45-storey glass and steel building, made up of two joined towers, will be more than 600ft tall when it is finished. But it has already been under construction for a decade and is three years behind schedule.

Of course, it goes without saying that cost overruns and delays are par for the course with government.

Just in case anyone thinks I’m picking on foreigners, here’s a story that makes me ashamed to be American. Or, to be more precise, it makes me ashamed that we have some of the world’s most pathetic bureaucrats.

Honors Night at Cole Middle School is no more. Parents got an email from Principal Alexis Meyer over the weekend saying some members of the school community “have long expressed concerns related to the exclusive nature of Honors Night.” The email goes on to say students will be recognized in other ways. …Parents and students are not happy with the change. “How else are they suppose to learn coping skills, not just based on success, but relative failure, it might not be failure, but understand what it takes to achieve high levels,” said parent Joe Kosloski. …“That made me wanna work harder and a lot of other people work harder, so just the fact you can’t work towards it anymore then there is no goal,” said 8th grade student Kaitlyn Kosloski. Changes are also being made to the middle school’s sports awards.

You read correctly. They also won’t recognize athletic success.

I guess everyone gets a participation medal.

Except, of course, we still single out kids who commit horrible crimes in school. Such as having toy army men, eating a pop tart the wrong way, building a motion detector for a school science experiment, or countless other “offenses” that trigger anti-gun lunacy by brainless bureaucrats.

The moral of these stories, both from America and around the world, it that government is not the answer. Unless, of course, you’ve asked a really strange question.

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Germany isn’t exactly a fiscal role model.

Tax rates are too onerous and government spending consumes about 44 percent of economic output.

That’s even higher than it is in the United States, where politicians at the federal, state, and local levels divert about 39 percent of GDP into the public sector.

Germany also has too much red tape and government intervention, which helps to explain why it lags other European nations such as Denmark and Estonia in the Economic Freedom of the World rankings.

But I have (sort of) defended Germany a couple of times, at least on fiscal policy, explaining that the Germans didn’t squander much money on Keynesian spending schemes during the downturn and also explaining that Paul Krugman was wrong in his column on Germany and austerity.

Today, though, I’m going to give Germany some unambiguous praise.

If you look at last decade’s fiscal data, you’ll see that our Teutonic friends actually followed my Golden Rule on fiscal policy for a four-year period.

Here’s a chart, based on IMF numbers, showing total government spending in Germany from 2003-2007. As you can see, German policy makers basically froze spending.

German Fiscal Restraint

I realize that I’m a libertarian and that I shouldn’t be happy unless the burden of spending is being dramatically reduced, but we’re talking about the performance of European politicians, so I’m grading on a curve.

By that standard, limiting spending so it grows by an average of 0.18 percent is rather impressive. Interestingly, this period of fiscal discipline began when the Social Democrats were in power.

And because the economy’s productive sector was growing at a faster rate during this time, a bit more than 2 percent annually, the relative burden of government spending did fall.

The red line in this next chart shows that the public sector, measured as a share of economic output, fell from almost 49 percent of GDP to less than 44 percent of GDP.

German Spending+Deficit as % of GDP

It’s also worth noting that this four-year period of spending restraint also led to a balanced budget, as shown by the blue line.

In other words, by addressing the underlying problem of too much government, the German government automatically dealt with the symptom of red ink.

That’s the good news.

The bad news is that the German government wasn’t willing to sustain this modest degree of fiscal discipline. The Christian Democrats, who took office in mid-2005, allowed faster spending growth beginning in 2008. As I noted above, the budget increases haven’t been huge, but there’s been enough additional spending that Germany no longer is complying with the Golden Rule and the burden of the public sector is stuck at about 44 percent of GDP.

The moral of the story is that Germany shows that good things happen when spending is restrained, but long-run good performance requires long-run spending discipline.

That’s why I’m a fan of Switzerland’s spending cap. It’s called the “debt brake,” but it basically requires politicians to limit spending so that the budget doesn’t grow much faster than inflation plus population.

And that’s why Switzerland has enjoyed more than a decade of good policy.

To see other examples of nations that have enjoyed fiscal success with period of spending restrain, watch this video.

The Canadian example is particularly impressive.

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At the beginning of the year, I was asked whether Europe’s fiscal crisis was over. Showing deep thought and characteristic maturity, my response was “HAHAHAHAHAHAHAHAHA, are you ;@($&^#’% kidding me?”

But I then shared specific reasons for pessimism, including the fact that many European nations had the wrong response to the fiscal crisis. With a few exceptions (such as the Baltic nations), European governments used the crisis to impose big tax hikes, including higher income tax rates and harsher VAT rates.

Combined with the fact that Europe’s demographic outlook is rather grim, you can understand why I’m not brimming with hope for the continent. And I’ve shared specific dismal data for nations such as Portugal, France, Greece, Italy, Poland, Spain, Ireland, and the United Kingdom.

But one thing I’ve largely overlooked is the degree to which the European Central Bank may be creating an unsustainable bubble in Europe’s financial markets. I warned about using bad monetary policy to subsidize bad fiscal policy, but only once in 2011 and once in 2012.

Check out this entertaining – but worrisome – video from David McWilliams and you’ll understand why this issue demands more attention.

I’ve openly argued that the euro is not the reason that many European nations got in trouble, but it appears that Europe’s political elite may be using the euro to make a bad situation even worse.

And to add insult to injury, the narrator is probably right that we’ll get the wrong outcome when this house of cards comes tumbling down. Instead of decentralization and smaller government, we’ll get an expanded layer of government at the European level.

Or, as I call it, Germany’s dark vision for Europe.

That’s Mitchell’s Law on steroids.

P.S. Here’s a video on the five lessons America should learn from the European crisis.

P.P.S. On a lighter note, the mess in Europe has generated some amusing videos (here, here, and here), as well as a very funny set of maps.

P.P.P.S. If all this sounds familiar, that may be because the Federal Reserve in the United States could be making the same mistakes as the European Central Bank. I don’t pretend to know when and how the Fed’s easy-money policy will turn out, but I’m not overly optimistic about the final outcome. As Thomas Sowell has sagely observed, “We all make mistakes. But we don’t all have the enormous and growing power of the Federal Reserve System… In the hundred years before there was a Federal Reserve System, inflation was less than half of what it became in the hundred years after the Fed was founded.”

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I’ve written before that Obama’s Solyndra-style handouts have been a grotesque waste of tax dollars.

I’ve argued that they destroy jobs rather than create jobs.

I’ve gone on TV to explain why government intervention in energy creates a cesspool of cronyism.

I’ve even shared a column from Obama’s hometown newspaper that criticizes the rank corruption in green-energy programs.

And it goes without saying that I’ve disseminated some good cartoons on the issue.

But even though green-energy programs are a disgusting boondoggle, American taxpayers and consumers should be thankful they’re not in Germany.

Our programs may be wasteful and corrupt, but we’re amateurs compared to what’s happening on the other side of the Atlantic.

Here are some passages from a must-read story in Der Spiegel.

The government predicts that the renewable energy surcharge added to every consumer’s electricity bill will increase from 5.3 cents today to between 6.2 and 6.5 cents per kilowatt hour — a 20-percent price hike. German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energy policy under control, rising prices are already on the horizon. Electricity is becoming a luxury good in Germany.

As is so often the case with government intervention, the promises from politicians about low costs were a mirage.

Even well-informed citizens can no longer keep track of all the additional costs being imposed on them. According to government sources, the surcharge to finance the power grids will increase by 0.2 to 0.4 cents per kilowatt hour next year. On top of that, consumers pay a host of taxes, surcharges and fees that would make any consumer’s head spin. Former Environment Minister Jürgen Tritten of the Green Party once claimed that switching Germany to renewable energy wasn’t going to cost citizens more than one scoop of ice cream. Today his successor Altmaier admits consumers are paying enough to “eat everything on the ice cream menu.”

Perhaps the most shocking part of the story is that Germans are being forced to pay $26 billion in subsidies to get less than $4 billion of green energy.

For society as a whole, the costs have reached levels comparable only to the euro-zone bailouts. This year, German consumers will be forced to pay €20 billion ($26 billion) for electricity from solar, wind and biogas plants — electricity with a market price of just over €3 billion. Even the figure of €20 billion is disputable if you include all the unintended costs and collateral damage associated with the project. …On Thursday, a government-sanctioned commission plans to submit a special report called “Competition in Times of the Energy Transition.” The report is sharply critical, arguing that Germany’s current system actually rewards the most inefficient plants, doesn’t contribute to protecting the climate, jeopardizes the energy supply and puts the poor at a disadvantage.

Here’s what it means for ordinary people.

In the near future, an average three-person household will spend about €90 a month for electricity. That’s about twice as much as in 2000. Two-thirds of the price increase is due to new government fees, surcharges and taxes. …Today, more than 300,000 households a year are seeing their power shut off because of unpaid bills. Caritas and other charity groups call it “energy poverty.”

Not surprisingly, politically well-connected interest groups are the ones reaping the benefits.

…the renewable energy subsidies redistribute money from the poor to the more affluent, like when someone living in small rental apartment subsidizes a homeowner’s roof-mounted solar panels through his electricity bill. The SPD, which sees itself as the party of the working class, long ignored this regressive aspect of the system. The Greens, the party of higher earners, continue to do so. Germany’s renewable energy policy is particularly unfair with respect to the economy. About 2,300 businesses have managed to largely exempt themselves from the green energy surcharge by claiming, often with little justification, that they face tough international competition. Companies with less lobbying power, however, are required to pay the surcharge.

Let’s conclude with an ominous excerpt from the article. Even though prices already are very high, energy will get even more expensive in the future.

If the government sticks to its plans, the price of electricity will literally explode in the coming years. According to a current study for the federal government, electricity will cost up to 40 cents a kilowatt-hour by 2020, a 40-percent increase over today’s prices.

And isn’t it nice to know that Obama is doing everything he can to impose these policies in the United States?

This cartoon from Michael Ramirez is a perfect summary of Obama’s policy.

Ramirez Green Energy Cartoon

You can see why Ramirez won my political cartoonist contest.

P.S. I don’t like being the bearer of bad news, but green-energy subsidies are just one part of the statist/green agenda. The IMF, for instance, has recommended a huge carbon tax (about $5,500 per year for a family of four!) for the United States. A few gullible folks think this might not be a bad idea if the money gets used to lower other taxes, but they’re the same people who get suckered into buying oceanfront property in Kansas.

P.P.S. Germany may be more responsible (less irresponsible) than certain other European nations, but the country’s political elite is hopelessly statist. Even the supposedly pro-liberty political party tilts left and wants bigger government. Yet the Washington Post still thought it was appropriate and accurate to declare that Germany is “fiscally conservative.” Sure, and I’m a socialist.

P.P.P.S. But at least the mess in Europe has generated some amusing videos (here, here, and here), as well as a very funny set of maps.

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Are there any fact checkers at the New York Times?

Since they’ve allowed some glaring mistakes by Paul Krugman (see here and here), I guess the answer is no.

But some mistakes are worse than others.

Consider a recent column by David Stuckler of Oxford and Sanjay Basu of Stanford. Entitled “How Austerity Kills,” it argues that budget cuts are causing needless deaths.

Here’s an excerpt that caught my eye.

Countries that slashed health and social protection budgets, like Greece, Italy and Spain, have seen starkly worse health outcomes than nations like Germany, Iceland and Sweden, which maintained their social safety nets and opted for stimulus over austerity.

The reason this grabbed my attention is that it was only 10 days ago that I posted some data from Professor Gurdgiev in Ireland showing that Sweden and Germany were among the tiny group of European nations that actually had reduced the burden of government spending.

Greece, Italy, and Spain, by contrast, are among those that increased the size of the public sector. So the argument presented in the New York Times is completely wrong. Indeed, it’s 100 percent wrong because Iceland (which Professor Gurdgiev didn’t measure since it’s not in the European Union) also has smaller government today than it did in the pre-crisis period.

But that’s just part of the problem with the Stuckler-Basu column. They want us to believe that “slashed” budgets and inadequate spending have caused “worse health outcomes” in nations such as Greece, Italy, and Spain, particularly when compared to Germany, Iceland, and Spain.

But if government spending is the key to good health, how do they explain away this OECD data, which shows that government is actually bigger in the three supposed “austerity” nations than it is in the three so-called “stimulus” countries.

NYT Austerity-Stimulus

Once again, Stuckler and Basu got caught with their pants down, making an argument that is contrary to easily retrievable facts.

But I guess this is business-as-usual at the New York Times. After all, this is the newspaper that’s been caught over and over again engaging in sloppy and/or inaccurate journalism.

Oh, and if you want to know why the Stuckler-Basu column is wrong about whether smaller government causes higher death rates, just click here.

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Political insiders remember Tim Geithner for his role in promoting the bailout culture and crony capitalism in Washington.

Comedians remember him for the laughable hypocrisy of urging higher taxes for others while cheating on his own tax return.

Gump-GeithnerBut I mostly think of him as being the Forrest Gump of international economics.

This was the guy, after all, who unintentionally caused Chinese students to burst out laughing in 2009 when he claimed the Obama Administration supported a strong dollar.

And Europeans told him to get lost when he tried to lecture them on fiscal policy in 2011. But don’t think they were being rude. They already had to endure his bad advice earlier that year and back in 2010 as well.

Well, Geithner’s successor apparently is equally oblivious. He’s badgering the Germans to adopt Keynesian policies to “stimulate” growth, even though the Germans are doing better than most other European nations – in part because they are one of the few nations that have reduced the burden of government spending in recent years!

Here are some blurbs from the EU Observer on Treasury Secretary Lew’s attempt to export bad ideas.

US treasury secretary Jack Lew will repeat calls for Germany to stimulate demand in order to drag the eurozone out of recession, according to US government sources. …The US stance is likely to meet resistance from the German government, which is reluctant to increase wages and stimulate domestic spending, preferring instead to keep wages low to encourage manufacturing and exports. But Berlin is under pressure to reduce its 7 percent export surplus. In April, Lew used his first trip to Berlin as Treasury Secretary to urge counterpart Wolfgang Schaueble to put in place measures to stimulate consumer spending. For his part, Schaueble commented that neither the US or Germany should try to give “lessons” or “grades” to each other.

I’m actually in favor of giving “lessons” and “grades” to governments, but not if it’s a case of the blind leading the blind.

This is not to say that Germany has good fiscal policy. Indeed, the best that can be said about the Merkel government is that it hasn’t moved Germany much further in the wrong direction in recent years.

The Obama Administration, by contrast, is moving the United States in the wrong direction at faster pace, so the last thing the Germans need is advice from Treasury Secretary Lew or anyone else associated with the White House.

P.S. If you want some unintentional humor, the Washington Post referred to Germany as being “fiscally conservative.”

P.P.S. As you can see here and here, there’s little reason to be optimistic about the intellectual climate in Germany.

P.P.P.S. But at least we have some amusing videos involving Germany, as you can see here, here, and here.

P.P.P.P.S. Geithner also should be remembered for pushing through an IRS regulation that forces American banks to put foreign tax law above U.S. tax law.

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I’m not a big fan of the German government. Angela Merkel has a disturbing desire to impose fiscal and political union on the European continent. And even the supposedly free market Free Democratic Party seems perfectly comfortable with a gradual descent into statism.

No wonder I mocked the Washington Post for labeling Germany a “fiscally conservative” nation.

But everything’s relative in the world of public policy. Compared to some basket cases in Europe, Germany is a laissez-faire paradise.

Here’s a fascinating report from an English-language news site in Europe.

Two Belgian government ministers have complained…that..Belgian companies are facing unfair competition. The two Belgian cabinet ministers were in Hannover (Germany) on Monday. They decided on their visit after often hearing in Belgium that it was cheaper to get Belgian cattle processed in Germany than at home.

So what is the unfair competition from Germany? Are there special tariffs or trade barriers that are artificially raising costs on Belgian products?

Nope, the Belgians are complaining that Germany doesn’t have a minimum wage and that regulations are not sufficiently onerous. Oh, the horror.

The Belgian ministers say that the most striking thing is that this can happen legally because there is no general minimum wage in Germany: “The company is not violating any regulations, because there are no regulations and that must stop” Mr Vande Lanotte told the VRT. The Belgians insist Belgian companies are the subject of unfair competition. Economy Minister Vande Lanotte says that in principle everybody should be treated in the same way: “Belgian companies cannot compete with their German competitors and this has ramifications.”

Gasp, there “are no regulations.” What sort of vicious dog-eat-dog system are the Germans running?!?

The answer, of course, is that Germany has lots of red tape.

More statist than France?!?

But apparently not as much intervention as Belgium. And you’ll notice that the “principle” that “everybody should be treated the same way” is really a stalking horse for the argument that there should be regulatory harmonization.

But the harmonization always means that everyone has to impose more onerous rules. Belgium doesn’t harmonize with Germany’s comparatively market-oriented policy. Instead, Germany is supposed to harmonize with the more statist and interventionist model of the Belgians.

In this sense, regulatory harmonization is like tax harmonization. It always means a heavier burden of government, not a lighter burden. Low-tax jurisdictions are badgered and harassed to make their tax systems worse so that fiscal hell-holes such as France don’t face “unfair competition.”

In an ideal world, the Germans would tell the Belgians to go jump in a lake.

But thanks to the never-ending pressure for regulation, harmonization, and centralization in Europe, it’s not that simple. The Brussels bureaucrats may decide to force Germany to adopt bad policy.

Mr Vande Lanotte intends to raise the issue of the absence of a minimum wage in many German sectors with the European Commission.

P.S. Germany also is better than the United States, at least on the issue of minimum wage mandates. Germany doesn’t have a minimum wage law. Obama, meanwhile, wants to saw off the bottom rungs of the economic ladder by pushing the U.S. minimum wage requirement even higher.

P.P.S. This story helps to explain why I want Belgium to split apart. If it became two nations, one Dutch and one French, I suspect we’d get better policy because they would then compete with each other instead of nagging Germany to become more statist.

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It’s not easy to find some humor in the European fiscal crisis, though this Hitler parody video surely is a classic.

We now have a new video to enjoy.

There are some naughty words, so be forewarned.

And speaking of Greek-related humor, this cartoon is quite  good, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

P.S. If you like Greek-related humor, I have two more posts that have been very popular. The first one features a video about…well, I’m not sure, but we’ll call it a European romantic comedy and the second one has some very un-PC maps of how various peoples – including the Greeks – view different European nations.

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There are several reasons why I’m glad that there are Europeans.

From a serious perspective, the decentralized and competitive states of Europe gave us great gifts such as the rule of law, the enlightenment, and the industrial revolution.

From a policy perspective, today’s Europe gives us examples of policies to emulate and policies to avoid (and also confusing mish-mashes of good and bad policies).

And from a comedic perspective, it’s generally still okay to make fun of Europeans – even if it (gasp!) involves stereotypes.

Now we can add this video, showing the challenges of a transnational couple, to the list.

I would have preferred if the video had an ideological message, of course, but I guess one of the messages is that the Greek guy is a bum who has no intention of pulling his weight.

If you want a serious video about the fiscal mess in Europe, here’s one narrated by an Italian woman.

And here’s another video about the European crisis. I don’t agree with some of the conclusions, but it’s quite clever.

P.S. If you want some American humor about Europe, I recommend this Dave Barry column and this Michael Ramirez cartoon.

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Like Sweden and Denmark, Germany is a semi-rational welfare state. It generally relies on a market-oriented approach in areas other than fiscal policy, and it avoided the Keynesian excesses that caused additional misery and red ink in America (though it is far from fiscally conservative, notwithstanding the sophomoric analysis of the Washington Post).

Nonetheless, it’s difficult to have much optimism for Europe’s future when the entire political establishment of Germany blindly thinks there should be more centralization, bureaucratization, and harmonization in Europe.

The EU Observer has a story about the agenda of the de facto statists in the Christian Democratic party who currently run Germany.

“Harmonization über alles!”

…what Merkel and her party are piecing together is a radical vision of the EU in a few years time – a deep fiscal and political union. The fiscal side involves tax harmonisation, a tightly policed Stability and Growth Pact with automatic sanctions for countries that breach debt and deficit rules, and the possibility of an EU Commissioner responsible for directly intervention to oversee budgetary policy in a crisis-hit country. …On the institutional side, the CDU backs a directly elected President of the European Commission as well as clearly establishing the European Parliament and Council of Ministers as a bi-cameral legislature with equal rights to initiate EU legislation with the Commission.

Keep in mind that the Christian Democrats are the main right-of-center party in Germany, yet the German political spectrum is so tilted to the left that they want tax harmonization (a spectacularly bad idea) and more centralization.

Heck, even the supposedly libertarian-oriented Free Democratic Party is hopelessly clueless on these issues.

Not surprisingly, the de jure statists of Germany have the same basic agenda. Here’s some of what the article says about the agenda of the Social Democrat and Green parties.

…its commitments to establish joint liability eurobonds and a “common European fiscal policy to ensure fair, efficient and lasting receipts” would also involve a shift of economic powers to Brussels. While both sides have differing ideological positions on the political response to the eurozone crisis – they are talking about more Europe, not less.

The notion of eurobonds is particularly noteworthy since it would involve putting German taxpayers at risk for the reckless fiscal policies in nations such as Greece, Italy, and Spain. That’s only a good idea if you think it’s smart to co-sign a loan for your unemployed and alcoholic cousin with a gambling addiction.

All this makes me feel sorry for German taxpayers.

Then again, if you look at the long-run fiscal outlook of the United States, I feel even more sorry for American taxpayers. Thanks to misguided entitlement programs, we’re in even deeper trouble than Europe’s welfare states.

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Guido Westerwelle is supposed to be the German version of a libertarian. Currently serving as Foreign Minister, he was the chairman of the supposedly pro-market Free Democratic Party for 10 years and Wikipedia says he was known as a “proponent of an unlimited free market economy.”

Sounds like a good guy, right? Just the type of person who can explain that Europe’s problem is too much government. The kind of policy maker who can argue for cutting back the welfare state, slashing tax rates, and ending bailouts.

That’s the optimistic spin, but now let’s look at the column Westerwelle wrote for the Washington Post yesterday. Entitled “A Growth Pact for Europe,” he called for six reforms. Unfortunately, four of the reforms mean more government and two were meaningless boilerplate. Let’s look at what he proposed.

First, the European Union’s budget should be consistently oriented toward growth… The E.U. must utilize its resources better than before without spending more. Money is available for future-oriented tasks; in recent months, E.U. officials have been negotiating a 1 trillion-euro budget for 2014 to 2020. We should concentrate on using this huge sum consistently to promote growth and employment, innovation and competitiveness.

I’m glad he says they shouldn’t spend even more than is currently in the EU budget, but he apparently believes that government can redistribute 1 trillion euro in a way that boosts the economy. Good luck with that.

Second, unused E.U. funds must be activated. Around 80 billion euros in the regional cohesion fund have not been allocated to any concrete projects. The European Commission and member states must invest these funds quickly and effectively in new growth through better competitiveness.

Wow, he wants us to believe that wasting money faster is a recipe for growth. This is the same nonsense the Obama Administration was peddling.

Third, access to capital must be improved. …companies are not in a position to make sensible investments that would stimulate growth. The European Investment Bank is an instrument we could use to a greater extent and in a more targeted fashion, not least to ensure that small and medium-size businesses have better access to loans.

I guess this is the European version of the bastard child of Fannie Mae and the Export-Import Bank. But if anybody thinks government-subsidized cronyism is a route to prosperity, they’ve been asleep for the past 40 years.

Fourth, infrastructure projects must be promoted. …Our roads, railways, and energy and telecommunication networks are among the European economy’s trump cards. …State-of-the-art infrastructure opens new prospects for growth by making private-sector investment more attractive. We need to mobilize private capital for the cross-border expansion of European infrastructure and look at innovative forms of public-private partnership.

I’ll be the first to admit that infrastructure spending is less damaging that social welfare spending, but it is a bit of a fantasy to assume that there are lots of high-return projects languishing on the shelves.

Fifth, we must complete Europe’s internal market. In the 1980s and ’90s, realizing the “four freedoms” — the free flow of goods, capital, services and people within the E.U. — released tremendous forces for growth. Today, the expansion of the internal market to cover new spheres again offers great opportunities. That applies to the digitized economy, e-commerce and the energy sector, and it will strengthen small and medium-size companies by reducing red tape and ensuring better access to venture capital.

This boilerplate support for more free trade is fine, but I think all the big benefits of ending protectionism inside Europe already have been captured (and this is the one area where the European project has been a success).

Sixth, we want to strengthen free trade. Three-quarters of the world’s trade occurs outside the European Union. More than 80 percent of global growth is produced outside Europe. The E.U. must work toward making the Doha Round a success while also concluding more free-trade agreements with new and long-established centers of power.

Again, this a good sentiment, but I fear it is a throwaway passage. Almost every nation has empty rhetoric about completing the Doha round, but don’t hold your breath expecting it to happen anytime soon.

What’s notable about Westerwelle’s list is that there is nothing about the overall burden of spending, even though Europe is saddled with bloated welfare states. There is nothing about high tax rates, even though most nations have punitive systems that discourage work, saving, investment, and entrepreneurship. There is nothing about the overall burden of regulation and red tape, particularly the supposedly pro-labor rules that actually discourage hiring (the Germans did implement successful reforms last decade, so he would have been in a strong position to urge other nations to copy those changes).

Heck, even the World Bank has been willing to point out that big government has failed in Europe. So it’s hardly a positive sign that a supposedly strong free market lawmaker is basically arguing that even more government is the way to boost growth on the continent.

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I’ve written many times about the foolishness of bailing out profligate governments (or, for that matter, mismanaged banks and inefficient car companies).

Bailouts reward bad past behavior, encourage bad future behavior, and make the debt bubble bigger – thus increasing the likelihood of deeper economic problems. At the risk of stating the obvious, there’s a reason for the second word in the “moral hazard” phrase.

But I’m not surprised that politicians continue to advocate more bailouts. The latest version is the “eurobond,” sometimes referred to as “fiscal liability sharing.”

It doesn’t matter what it’s called, though, since we’re talking about the foolish idea of having Germany (with a few other small nations chipping in) guaranteeing the debt of Europe’s collapsing welfare states. Here’s how the New York Times described the issue.

When European leaders meet on Wednesday to discuss the troubles of the euro zone, France’s president will press the issue of euro bonds, his finance minister said in Berlin on Monday. …Pierre Moscovici, France’s newly appointed finance minister, traveled to Berlin for talks with his counterpart, Wolfgang Schäuble. In a news conference after the closed-door meeting, both characterized the exchange as friendly and productive, but Mr. Moscovici acknowledged that the two men, and their governments, had real differences of opinion over pooling obligations to use the credit of the strongest European countries to prop up the weaker ones, an approach achieved through euro bonds.

The good news is that the German government is opposed to this idea.

Steffen Kampeter, was much more forthcoming in reiterating German opposition to any such proposal. Mr. Kampeter called the joint bonds “a prescription at the wrong time with the wrong side effects,” in an interview with German public radio. “The government has repeatedly made clear that collective state borrowing — that is, euro bonds — are no way to overcome the current crisis,” said Georg Streiter, a spokesman for Ms. Merkel on Monday. “It is still the case that the government rejects euro bonds.” …German policy makers say, euro bonds would be comparable to the United States’ agreeing to pay off Mexico’s debts, almost like a blank check for nations that are in trouble for overspending in the first place. “Euro bonds are not where the keys to heaven lie,” said Michael Hüther, director of the Cologne Institute for Economic Research, because it would “mix up risk” and act as a disincentive for less competitive economies to reform.

The bad news is that the Germans support other bad policies instead.

Ms. Merkel has signaled flexibility on some of Mr. Hollande’s ideas, including more financing for the European Investment Bank and redirecting unspent European Union funds to try to fight unemployment.

And even when Merkel opposes bad policies, she indicates she will change her mind if one bad policy is mixed with another bad policy!

…the German government is staunchly opposed to euro bonds until deeper integration and harmonization of budgetary and public spending policies have been achieved.

If Ms. Merkel genuinely believes that political and fiscal union will solve Europe’s problems, she’s probably ingesting illegal substances. Centralization of European government will have the same unfortunate pro-statist impact as centralization of American government in the 1930s and 1960s.

Integration and harmonization simply means voters in the rest of Europe will take German funds using the ballot box.

Not surprisingly, all of the international bureaucracies are on the wrong side of this issue. The NY Times story notes that the European Commission is using the fiscal crisis to push for more centralization.

The European Commission floated the idea of bonds issued jointly by euro zone governments in November, suggesting that such “stability bonds” could be created “in parallel” with moves toward closer fiscal union, rather than at the end of the process, as the German government prefers, to “alleviate tension” in sovereign debt markets. “From an economic point of view this makes sense,” a commission spokesman, Amadeu Altafaj, said Monday. “But at the end of the day this is a political decision that has to be taken by the member states of the euro area.” Mr. Altafaj added that “any form of common debt issuance requires a closer coordination of fiscal policies, moving toward a fiscal union, it is a prerequisite.”

And the Financial Times reports that the Organization for Economic Cooperation and Development, which is reflexively supportive of bigger government and more intervention, has endorsed eurobonds.

Mr Hollande…won backing from the OECD, which in its twice-yearly economic outlook specifically called for such bonds…“We need to get on the path towards the issuance of euro bonds sooner rather than later,” Pier Carlo Padoan, the OECD chief economist, told the Financial Times.

The fiscal pyromaniacs at the IMF also are pushing to make the debt bubble bigger according to the FT.

Christine Lagarde, the IMF chief, also called for more burden-sharing. Though she stopped short of explicitly backing euro bonds, she said “more needs to be done, particularly by way of fiscal liability sharing” – a thinly veiled reference to such debt instruments.

What makes this particularly frustrating is that American taxpayers provide the largest share of the subsidies that keep the IMF and OECD afloat. In other words, we’re paying for left-wing bureaucrats, who then turn around and push for bad policies that will result in bigger bailouts in the future.

Episodes like this make me understand why so many people believe in conspiracy theories. Folks watch something like this unfold and they can’t help but suspect that people in these governments and international bureaucracies want to deliberately destroy the global economy.

But as I’ve noted before, it’s not smart to believe conspiracies when corruption, incompetence, politics, ideology, greed, and self-interest provide better explanations for bad policy.

If the Europeans want to hit the self-destruct button, I’m happy to explain why it’s a bad idea, and I’m willing to educate them about better alternatives.

But I damn sure don’t want to subsidize their foolishness when they do the wrong thing.

P.S. It’s very appropriate to close this post with a link to this parody of Hitler complaining about debt crisis.

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The German Chancellor and French President have put together a plan to boost growth. Sounds like a good goal, but what specifically are they proposing?

Some of the obvious ideas include:

But those are only obvious ideas if you want a growth plan that actually leads to…(drum roll, please)…more growth.

Merkel and Sarkozy must have some other objective in mind, because they’ve proposed a plan comprised of new taxes, higher taxes, and tax harmonization.

This is beyond satire. Even if I was trying to make fun of the French and Germans (perish the thought), I wouldn’t be able to make up something this absurd.

Here’s some of what the EU Observer reported.

A six-point plan drafted by France and Germany has suggested corporate tax “co-ordination,” an EU financial transactions tax and the re-deployment of EU funds in troubled countries as ways to spur growth and jobs. …Paris and Berlin have teamed up once more and drafted a six-page paper called “Ways out of the crisis – strengthen growth now!” …The financial transactions tax – a pet project of French President Nicolas Sarkozy ahead of his re-election bid in April – features among the six proposals under “efforts to reinforce the framework of financial market.” …plans for “tax co-ordination” and another Franco-German proposal to be put forward by end of February on the “convergence of their corporate tax.” “European institutions and member states should accelerate the process of tax coordination in order to foster growth” …Apart from the Tobin tax, both leaders want to speed up EU legislation on an energy tax and a “common consolidated corporate tax base.”

Even Obama is not this blind to reality. He’s a big fan of higher taxes, of course, but at least the President realizes you don’t pass the laugh test if you tell people that higher taxes will “spur jobs and growth.”

Returning to Merkel and Sarkozy, the dynamic duo of statism also have some bizarre ideas on the spending side of the fiscal ledger. Here are a couple of additional passages from the story.

…proposal would have 25 percent of unspent EU regional funds in countries under a bail-out program or under serious economic difficulties redirected to a special “fund for growth and competitiveness.”  …As for employment-boosting measures, one of Sarkozy’s make-or-break campaign themes, the document asks governments to instruct employment agencies to make an offer to every unemployed person – be it for a job, an apprenticeship or further training.

The notion that bureaucrats and politicians can boost prosperity with some sort of “fund for growth and competitiveness” is hardly worth a rebuttal. I’ll just wish them luck as they create European versions of Solyndra.

The other idea, though, is worth a bit more analysis. If the article is correct, the Merkozy twins are going to wave a magic wand and direct employment agencies to make an offer to everybody.

Gee, isn’t that wonderful. While they’re at it, why don’t they turbo-charge the wand and insist that all the offers be for jobs making twice the national wage. With this kind of magical thinking, it’s just a matter of time before 90 percent of the population is part of the top-10 percent.

You may be thinking the previous sentence doesn’t make sense, but that’s probably because you’re one of those crazy libertarians who doesn’t understand how higher taxes boost economic performance.

In previous posts, I’ve expressed some pessimism about the future of Europe. After considerable reflection, I want to retract those statements and instead say that the outlook is hopeless. If you’re reading this from Europe, get out while you still can.

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P.S. I’ve been reminded that Merkel and Sarkozy are not alone in their crazy theory that higher taxes are good for growth. The geniuses at the Congressional Budget Office have written that higher taxes are good for long-run growth, even to the point of implying that 100 percent tax rates would maximize economic performance.

P.P.S. I’m further reminded that the Congressional Research Service also seems to think that higher taxes increase economic growth. Perhaps German and French spies have taken over Washington?

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I’m not even sure why this is funny. Maybe it’s the context.

Was it put together by somebody in the United Kingdom, who is irritated by the he way Sarkozy and Merkel are turning a bad fiscal crisis into a worse fiscal crisis and trying to blame England? That’s possible, and we know the Brits have a good sense of humor.

Or was it put together by a German, who is feeling sanctimonious about his country’s relatively strong position (at least compared to other European welfare states) and is tired of having to deal with the French.

Or is it funny simply because it’s amusing to mock the French?

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By European standards, Germany is in pretty good shape.

There’s a very large welfare state and the tax burden is quite onerous, both of which hinder growth, but Germany has been more responsible than the United States in recent years. And while this may be damning with faint praise, this modest bit of fiscal discipline is helping the nation survive as many other European welfare states are on the verge of collapsing.

Moreover, Germany (sort of like Denmark) partially offsets the damaging impact of bad fiscal policy by being free market-oriented in other policy areas, such as trade, regulation, and rule of law.

Knowing all this information, how would you describe Germany’s economic policy? Would you say it was a semi-responsible welfare state? Would you say it had left-wing fiscal policy combined with a social market economy?

I’m not sure about the best description, but I know that only a crack-addicted nitwit would put it in the same category as Hong Kong.

Yet, in an otherwise unremarkable article about the fiscal crisis in Europe, the Washington Post referred to ” fiscally conservative Germany.”

Rather than go through a lengthy explanation of why this is absurd, I figure this chart demonstrates why the folks at the Washington Post are clueless (though, in fairness, perhaps Germany is “conservative” compared to the ideology of the reporters and editors in the newsroom).

Keep in mind that this is a country that has parking-meter taxes for prostitutes and a nation with a supposedly conservative Chancellor who is leading the charge for a global tax on financial transactions.

If Germany is “fiscally conservative,” I’m a socialist.

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Last week in New York City, during my Intelligence Squared debate about stimulus, I pointed out that Germany is doing better than the United States and explained that they largely avoided any Bush/Obama Keynesian spending binges.

One of my opponents disagreed and asserted that I was wrong. Germany, this person argued, was dong better because it was more Keynesian thanks to “automatic stabilizers” that resulted in big spending increases.

This claim was made with such certainty that I wondered if I made a mistake.

Well, we were both right about Germany doing better. In the past few years, it has been enjoying yearly growth of about 3.5 percent while growth in the United States has remained below 3 percent.

But who was right about the key issue of whether Germany has been more Keynesian? At first, I was going to be lazy and not bother combing the data. But then I got motivated after reading an excellent post about Germany’s pro-growth reforms, written for National Review by Veronique de Rugy of the Mercatus Center.

So I looked up the data on annual government spending in the United States and Germany and discovered that I was right (gee, what a shock). As the chart shows, the burden of government spending has increased faster in the United States. And that is true whether 2007 or 2008 is used as the base year.

To make sure the comparison was fair, I sliced the numbers every possible way. But the results were the same, regardless of whether state and local government spending was included, whether TARP spending was included, which base year was selected, or whether I used annual spending increases or multi-year spending increases.

In every single case, the burden of government spending grew faster in the United States from 2007 to 2011.

This does not mean Germany is a role model. Government spending in Germany is far too high and it continues to grow. All we can say is that Germany is not going in the wrong direction as fast as the United States.

Oh, I suppose we also can say that I was right and my opponent was wrong. The United States has been more Keynesian than Germany.

Speaking of Germany, I combed my archives and found only one post that said anything nice about German politicians.

My other German posts mocked the country’s scheme to tax prostitutes, mocked the government for losing the blueprints for its new spy headquarters, mocked the government for a money-losing scheme to tax coffee, and even mocked the supposedly conservative Chancellor for wanting to impose new taxes.

So even though Veronique is correct about some positive changes, the Germans have a long way to go.

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I’m still at the Liberty Camp in Slovenia, doing my best to teach young Europeans about the importance of individual liberty, free markets, and small government. (also doing a bit of sightseeing, as you can see from the pictures below)

This morning, one of the other presenters showed a short video taken from the first-rate “Commanding Heights” program. It told the brief story of how one man, Ludwig Erhard, single-handedly put Germany on the road to post-war recovery by doing away with price controls.

This video is a lesson in character – and an example of doing what’s right.

Erhard did not have authority to change the price controls, but, with a certain degree of cleverness that would make Bill Clinton proud, he decided that this didn’t preclude him from simply abolishing them.

In doing this, he showed personal courage. He did something bold. And he went against so-called expert opinion.

And he helped millions of people enjoy a better life by reducing the burden of government.

We need more people with this integrity. In America and everywhere else.

People who will go against the grain to promote freedom.

People who will take risks to advance liberty.

People who will do the right thing, even if it doesn’t advance their career.

Not that I’m asking for selfless gestures. As Erhard’s episode demonstrates, sometimes doing the right thing at least means people say nice things about you.

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In a perverse way (pun intended), I admire German politicians for their creativity. They will figure out ways to tax just about anything.

Their latest scheme is a plan that requires streetwalkers to put money in parking meters in exchange for a slip of paper that entitles them to…um…ply their trade for a specified period of time.

Here are some excerpts from the Daily Mail report.

German Parking and/or Prostitute Meter

Prostitutes working the streets of the former German capital are now having to pay £5.30 per night to a modified parking meter – to gain permission to ply their trade. Sex workers in Bonn face hefty fines for not forking out the new ‘income tax’ which has been brought in to try and regulate the outdoor aspect of the industry. It is to bring them into line with the country’s brothel workers who already pay out a percentage of their profits in tax, which varies depending on the region. …if caught without a valid ticket, offenders would be reprimanded. They would then face fines, and later a ban. The fee is a daily charge, and irrespective of how many punters are entertained. …specific quarters have been designated as sex work zones. City officials have created ‘consummation areas’, which are wooden parking garages where customers driving cars can retreat to with their prostitutes. Dortmund has a similar system where prostitutes buy tickets from petrol stations.

I suppose this is the point where I normally would make some snide comments about greedy politicians, or perhaps offer some analysis about the economic impact of taxation.

But this story is so bizarre that I can’t even get to that stage.

What happens if you’re just a regular motorist and you put money in the meter and press the wrong button?

And I know that most governments will put a boot on one of your tires to disable your car if you don’t pay your parking tickets. Does this mean hookers who don’t buy a street-walking pass will get a chastity belt?

Does the city government also charge for use of the garages in the “consummation areas”? And when did it become the responsibility of German taxpayers to finance something like that?!?

And for the hookers in Dortmund who get their passes at the petrol station, do the mechanics check “under the hood” if they use full service? (okay, pretty lame, but I couldn’t resist)

Most important, will the politicians take this idea to its logical conclusion and put prostitute meters in Parliament? In other words, require politicians to put money in a meter before  they try to buy support from interest groups by providing handouts and special preferences.

That’s one tax increase even I could support.

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These two stories are completely unrelated, but they both struck me as examples of why governments have a well-deserved reputation for squandering money and making life more difficult for ordinary people.

And even though the stories are radically different, they give us a good opportunity to ask whether government is more stupid and incompetent in Europe or the United States.

Our European entry in the contest is from Germany, where the government apparently has lost blueprints for its new spy headquarters. Here are some excerpts from a BBC report, though I can’t help thinking it should be in the Onion.

Germany is investigating reports that the blueprints for the future headquarters of its BND intelligence agency have gone missing. If the report in Focus magazine is confirmed, it could pose a serious security risk – and would be a huge embarrassment for the spy agency. The new 1.6bn euro (£1.4bn; $2.3bn) agency headquarters are currently under construction in Berlin. …They purportedly show extremely sensitive aspects of the building’s construction, such as the alarm system, anti-terror installations, emergency exits, cable routes and sewers.

By the way, I’m also shocked by the $2.3 billion price tag for the building. But cost overruns and waste are so routine that only fiscal policy wonks like me seem to get upset about such things.

The American entry is from (I’m embarrassed to admit) Georgia, where the Keystone Cops in Midway have stopped a major crime wave of…(get ready to be shocked)…unregulated lemonade! Here’s part of the AP report.

Police in Georgia have shut down a lemonade stand run by three girls trying to save up for a trip to a water park, saying they didn’t have a business license or the required permits. Midway Police Chief Kelly Morningstar says police also didn’t know how the lemonade was made, who made it or what was in it. The girls had been operating for one day when Morningstar and another officer cruised by. The girls needed a business license, peddler’s permit and food permit to operate, even on residential property. The permits cost $50 a day or $180 per year.

Other local governments have been guilty of this type of petty harassment, but what’s remarkable about the Midway story is that the Barney-Fife-wannabee police chief shut down the lemonade stand, in part, because the girls “didn’t know how the lemonade was made.”

So I guess this means that the kids not only should have coughed up big bucks for a permit, but they also should have posted the recipe for some regulator to approve?

I weep for my country.

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Yesterday, I took aim at a truly pathetic human being who lives as an “adult baby.” But what got me upset was not his lifestyle, but rather the fact that he was mooching off the taxpayers thanks to the dumb bureaucrats at the Social Security Administration, who granted him “disability’ status, which means he gets to live the rest of his life at the expense of taxpayers.

Is it possible, though, for an entire nation to live as an adult baby? I don’t know the answer, but some people in Portugal want to give it a try. Here is an excerpt from the EU Observer, featuring some jaw-dropping assertions by a Portuguese union boss.

Speaking at a rally in the western German town of Meschede on Tuesday evening, Merkel suggested southern Europeans are not working enough, while Germans are expected to bail them out. “It is also about not being able to retire earlier in countries such as Greece, Spain, Portugal than in Germany, instead everyone should try a little bit to make the same efforts – that is important,” she said. …”Yes Germany will help but Germany will only help when the others try. And that must be clear,” she said. Her comments sparked outrage on the German political scene, with the Social Democratic opposition calling her “populist” for giving a “coarse representation of Greek realities,” while the European Greens labelled her remarks “absurd.” In Portugal, trade unionist were also angered by the suggestion that southern Europeans are having a nice time on the beach while the Germans are working hard for their bailouts. “This is the purest colonialism,” Portuguese trade union chief Manuel Carvalho da Silva said, as quoted by DPA. He blasted Merkel for showing “no solidarity” and supporting a system where “the rich continue to live at the expense of the poorest countries in a disastrous system of exploitation.”

Let’s parse Mr. da Silva’s remarks. He starts by accusing Merkel of colonialism, but he never explains why refusing to write more blank checks means the German Chancellor is a colonialist.

Mr. da Silva then says Merkel is failing to show “solidarity.” But this assumes that German taxpayers have a moral obligation to support fiscally reckless politicians and interest groups in Portugal and other nations.

Last but not least, Mr. da Silva claims Merkel is promoting a system that allows the rich to exploit the poor. This accusation actually is true, but not in the way Mr. da Silva means. This post, using a chart put together by the New York Times, shows that the bailouts are mostly for the purpose of bailing out the big European banks that foolishly bought bonds from irresponsible governments. In other words, poor German taxpayers are subsidizing rich (and foolish) German bankers.

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We have two completely unrelated topics from Germany and France, but both fit in the broader theme of Europe’s gradual, self-inflicted suicide.

Let’s start with the Germans. I’m not a big fan of the country’s Chancellor, Angela Merkel. She is supposedly a conservative, but she certainly hasn’t done much to reduce the burden of government. But I give her credit for making the rational and moral observation that, “I’m glad that killing bin Laden was successful.”

Based on the reaction, however, you would think she had come out in favor of torturing puppies. Here are some excerpts from a story on a German news site.

Katrin Göring-Eckardt, Green party MP, Bundestag vice president and leading member of the Evangelical Church of Germany, told the Berliner Zeitung she was glad bin Laden was no longer leading a terrorist group. “But you can’t be happy about his death,” she said. On Monday, Merkel told reporters that bin Laden’s death at the hands of US forces was “good news.” “I’m glad that killing bin Laden was successful,” she said. The criticism of Merkel’s comments came not only from political opposition, but from her own party, echoing discomfort expressed by some observers at the emotional, celebratory reaction of many Americans and foreign politicians around the world after bin Laden’s killing. Siegfried Kauder, a member of Merkel’s conservative Christian Democratic Union (CDU), slammed her remarks, calling them reminiscent of something a person would say in the “middle ages.”

I’m not an expert on Germany’s political system and I’m certainly not a close observer of the nation’s various political figures, so I have no idea if these critics really believe the things they said. But does that really matter? It’s a bad sign if you have a nation where the political elite actually feel sadness that a monster is dead. And it’s a bad sign if you have a nation where the political elite think they should act like it’s unfortunate that a monster is dead.

Let’s now shift to the French. There’s been a lot of attention paid to bailouts of Greece, Ireland, and Portugal, which certainly is appropriate since all of us should be outraged that we are paying (via the IMF) to reward profligate politicians and special-interest groups.

Unfortunately, there are more nations in fiscal trouble, which probably means even more bailouts. Most people think Spain, Italy, and Belgium are next in line, but France is a dark-horse contender in the race to fiscal crisis. Read some of what Matthew Lynn wrote in his Bloomberg column.

It is increasingly politically unstable, its debt position is getting worse all the time, it is losing competitiveness against Germany, and it shows little willingness to change. Those are all good reasons for the bond markets to make France the next battleground. …France’s debt position is getting worse all the time. In 2010, the nation ran the fifth-biggest budget deficit in the euro area, at 7 percent of GDP. It was beaten only by Greece, Portugal, Ireland and Spain — hardly great company. Its stock of outstanding government debt hit 81 percent of GDP in 2010. That figure will reach 90 percent this year and 95 percent in 2012, according to London-based consulting firm Capital Economics. Italy has more outstanding debt — 119 percent of GDP in 2010 — but it isn’t adding to the pile the same way France is. What the markets really look at is the direction you are traveling in — and in the case of France, it isn’t good. …Sarkozy came to power promising to shake up the economy. He delivered little. …it is hard to believe that the euro crisis will end with the bailout of Portugal. Other countries are going to get caught in the crossfire. When you look around for the next candidate, France has what it takes to be the next blowup.

I still think Spain goes bust first, but Lynn makes a compelling case. Bad things are bound to happen when politicians expand the burden of government, increase tax burdens, and expand dependency. And that’s been the pattern in France, regardless of who’s in charge.

Notwithstanding my snarky title, the purpose of this post is not mock the Germans and the French. I’m certainly not averse to some good-natured ribbing of foreigners, but there’s a serious point to be made. Moral relativism and big government are signs of societal decay, and my real concern is that America is slowly heading down the same path as Western Europe.

Let’s learn from Germany and France and avoid making the same mistakes.

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Ireland is in deep fiscal trouble and the Germans and the French apparently want the politicians in Dublin to increase the nation’s 12.5 percent corporate tax rate as the price for being bailed out. This is almost certainly the cause of considerable smugness and joy in Europe’s high-tax nations, many of which have been very resentful of Ireland for enjoying so much prosperity in recent decades in part because of a low corporate tax burden.

But is there any reason to think Ireland’s competitive corporate tax regime is responsible for the nation’s economic crisis? The answer, not surprisingly, is no. Here’s a chart from one of Ireland’s top economists, looking at taxes and spending for past 27 years. You can see that revenues grew rapidly, especially beginning in the 1990s as the lower tax rates were implemented. The problem is that politicians spent every penny of this revenue windfall.

When the financial crisis hit a couple of years ago, tax revenues suddenly plummeted. Unfortunately, politicians continued to spend like drunken sailors. It’s only in the last year that they finally stepped on the brakes and began to rein in the burden of government spending. But that may be a case of too little, too late.

The second chart provides additional detail. Interestingly, the burden of government spending actually fell as a share of GDP between 1983 and 2000. This is not because government spending was falling, but rather because the private sector was growing even faster than the public sector.

This bit of good news (at least relatively speaking) stopped about 10 years ago. Politicians began to increase government spending at roughly the same rate as the private sector was expanding. While this was misguided, tax revenues were booming (in part because of genuine growth and in part because of the bubble) and it seemed like bigger government was a free lunch.

But big government is never a free lunch. Government spending diverts resources from the productive sector of the economy. This is now painfully apparent since there no longer is a revenue windfall to mask the damage.

There are lots of lessons to learn from Ireland’s fiscal/economic/financial crisis. There was too much government spending. Ireland also had a major housing bubble. And some people say that adopting the euro (the common currency of many European nations) helped create the current mess.

The one thing we can definitely say, though, is that lower tax rates did not cause Ireland’s problems. It’s also safe to say that higher tax rates will delay Ireland’s recovery. French and German politicians may think that’s a good idea, but hopefully Irish lawmakers have a better perspective.

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One of my first blog posts (and the first one to get any attention) highlighted the amusing/embarrassing irony of having Chinese students laugh at Treasury Secretary Geithner when he claimed the United States had a strong-dollar policy.

I suspect that even Tim “Turbotax” Geithner would be smart enough to avoid such a claim today, not after the Fed’s announcement (with the full support of the White House and Treasury) that it would flood the economy with $600 billion of hot money.

As I noted in an earlier post, monetary policy is not nearly as cut and dried as other issues, so I’m reluctant to make sweeping and definitive statements. That being said, I’m fairly sure that the Fed is on the wrong path. Here’s what my colleague Alan Reynolds wrote in the Wall Street Journal about Bernanke’s policy.

Mr. Bernanke…believes (contrary to our past experience with stagflation) that inflation is no danger thanks to economic slack (high unemployment). He reasons that if people can nonetheless be persuaded to expect higher inflation, regardless of the slack, that means interest rates will appear even lower in real terms. If that worked as planned, lower real interest rates would supposedly fix our hangover from the last Fed-financed borrowing binge by encouraging more borrowing. This whole scheme raises nagging questions. Why would domestic investors accept a lower yield on bonds if they expect higher inflation? And why would foreign investors accept a lower yield on U.S. bonds if they expect exchange rate losses on dollar-denominated securities? Why wouldn’t intelligent people shift their investments toward commodities or related stocks (such as mining and related machinery) and either shun, or sell short, long-term Treasurys? And if they did that, how could it possibly help the economy?

The rest of the world seems to share these concerns. The Germans are not big fans of America’s binge of borrowing and easy money. Here’s what Finance Minister Wolfgang Schäuble had to say in a recent interview.

The American growth model, on the other hand, is in a deep crisis. The United States lived on borrowed money for too long, inflating its financial sector unnecessarily and neglecting its small and mid-sized industrial companies. …I seriously doubt that it makes sense to pump unlimited amounts of money into the markets. There is no lack of liquidity in the US economy, which is why I don’t recognize the economic argument behind this measure. …The Fed’s decisions bring more uncertainty to the global economy. …It’s inconsistent for the Americans to accuse the Chinese of manipulating exchange rates and then to artificially depress the dollar exchange rate by printing money.

The comment about borrowed money has a bit of hypocrisy since German government debt is not much lower than it is in the United States, but the Finance Minister surely is correct about monetary policy. And speaking of China, we now have the odd situation of a Chinese rating agency downgrading U.S. government debt.

The United States has lost its double-A credit rating with Dagong Global Credit Rating Co., Ltd., the first domestic rating agency in China, due to its new round of quantitative easing policy. Dagong Global on Tuesday downgraded the local and foreign currency long-term sovereign credit rating of the US by one level to A+ from previous AA with “negative” outlook.

This development shold be taken with a giant grain of salt, as explained by a Wall Street Journal blogger. Nonetheless, the fact that the China-based agency thought this was a smart tactic must say something about how the rest of the world is beginning to perceive America.

Simply stated, Obama is following Jimmy Carter-style economic policy, so nobody shoud be surprised if the result is 1970s-style stagflation.

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By choosing not to use the economic downturn as an excuse for more wasteful spending, Germany may have avoided Obama’s big mistake, but that does not mean German conservatives and Angela Merkel are supporters of economic liberty and individual freedom. Not even close. A good (or should I say “bad”) example of Merkel’s statist mindset is her push for a tax on financial transactions. And not just a German tax. She wants a global tax. And not just for the typical political reason of wanting more of other people’s money. Merkel has a megalomaniacal view that “every product, every actor, every financial market participant should be regulated.” Ludwig Erhard must be spinning in his grave.

“We will continue to work for a tax on the financial markets,” Merkel said in a stormy debate in parliament on her government’s 2011 budget. “The finance minister is doing this in several discussions and we are going to try to persuade as many countries as possible. Unfortunately, the world is not always as we would wish … but we are not going to give up,” she added. At a meeting of European Union finance ministers earlier this month, members of the 27-country bloc clashed over the idea of imposing a tax of financial market transactions in Europe. The proposal, driven by France and Germany…, has run into stiff resistance from several countries, notably Sweden and Britain. At the level of the Group of 20 developed and developing nations, there is still more discord, with Canada and emerging market economies leading the battle against it. A G20 summit takes place in South Korea in November. “We are sticking to the principle that every product, every actor, every financial market participant should be regulated so that we have an overview of what is happening on the financial markets,” Merkel said.

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It’s hard to believe that anybody would classify the Germans as a master race after reading this Spiegel article. Bill Gates and Warren Buffett plan have a nutty (but at least non-coercive) plan for rich people to give away big share of their fortunes. The German billionaires are rejecting this plan. But not because they are sensible and want capital in the hands of those who know how to create wealth. Instead, they think private charity intrudes upon the government’s responsibility.

Germany’s super-rich have rejected an invitation by Bill Gates and Warren Buffett to join their ‘Giving Pledge’ to give away most of their fortune. The pledge has been criticized in Germany, with millionaires saying donations shouldn’t replace duties that would be better carried out by the state. Last week, Microsoft founder Bill Gates attempted to convince billionaires around the world to agree to give away half their money to charity. But in Germany, the “Giving Pledge,” backed by 40 of the world’s wealthiest people, including Gates and Warren Buffet, has met with skepticism, SPIEGEL has learned.

Here’s an actual section of an interview with a rich German. The most astounding comment is when he basically says that private charity is bad because the state should decide how resources are allocated.

SPIEGEL: But doesn’t the money that is donated serve the common good?

Krämer: It is all just a bad transfer of power from the state to billionaires. So it’s not the state that determines what is good for the people, but rather the rich want to decide. That’s a development that I find really bad. What legitimacy do these people have to decide where massive sums of money will flow?

SPIEGEL: It is their money at the end of the day.

Krämer: In this case, 40 superwealthy people want to decide what their money will be used for. That runs counter to the democratically legitimate state. In the end the billionaires are indulging in hobbies that might be in the common good, but are very personal.

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I’ve decided my one legacy to the world is the phrase, “Bad government policy begets more bad government policy.” This term, which I am modestly calling Mitchell’s Law, describes what happens when government intervention (Fannie and Freddie, for example, or Medicare and Medicaid) causes problems in a particular market (a housing bubble or a third-party payer crisis), which leads the politicians to impose more misguided intervention (bailouts or Obamacare).

Here’s a good example from Germany. The politicians created government-run healthcare. Overweight people are putting a larger burden on the system, imposing costs on taxpayers. The logical response is to shift to a market-based system where people are in charge of their own healthcare costs. Not surprisingly, that option isn’t being considered. Instead, politicians are using the situation as an excuse to consider even more taxes.

Marco Wanderwitz, a conservative member of parliament for the German state of Saxony, said it is unfair and unsustainable for the taxpayer to carry the entire cost of treating obesity-related illnesses in the public health system. “I think that it would be sensible if those who deliberately lead unhealthy lives would be held financially accountable for that,” Wanderwitz said, according to Reuters. Germany, famed for its beer, pork and chocolates, is one of the fattest countries in Europe. Twenty-one percent of German adults were obese in 2007, and the German newspaper Bild estimates that the cost of treating obesity-related illnesses is about 17 billion euro, or $21.7 billion, a year. …Health economist Jurgen Wasem called for Germany to tackle the problem of fattening snacks in order to raise money and reduce obesity. “One should, as with tobacco, tax the purchase of unhealthy consumer goods at a higher rate and partly maintain the health system,” Wasem said, according to Germany’s English-language newspaper The Local. “That applies to alcohol, chocolate or risky sporting equipment such as hang-gliders.” Others are suggesting even more extreme measures. The German teachers association recently called for school kids to be weighed each day, The Daily Telegraph said. The fat kids could then be reported to social services, who could send them to health clinics.

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I’ve been very dismissive of supposed European “austerity” initiatives, in part because the term seems to describe politicians who want tax-financed government spending rather than Keynesian-style deficit-financed government spending. But what really matters is reducing the burden of government spending, regardless of how those outlays are financed. But if this Financial Times report is true and Germany reduces total government spending next year by 3.8 percent, that would be a significant achievement. Indeed, the United States has not seen a one-year-to-the-next reduction in the burden of spending since the mid-1960s. I hope this is true and my pessimism is unwarranted, but I’m still a skeptic. I may be wrong, but I wouldn’t be surprised to discover that the 3.8 percent cut is based on phony US-style budget accounting (a spending increase magically becomes a spending cut if the increase is not as big as politicians want) or some sort of budget shell game (like Obama’s budget freeze, which exempted the vast majority of the budget).
Germany’s cabinet is poised this week to approve a 2011 budget as part of a four-year programme of public spending cuts meant to serve as an example to other European governments without jeopardising the country’s increasingly robust economic recovery. Briefing papers for Wednesday’s cabinet meeting, released by Berlin on Sunday, argue that by curbing spending – rather than increasing taxes – the €80bn ($100.3bn, £66bn) savings programme would differ “fundamentally” from previous fiscal squeezes and offer “noticeable, better growth possibilities”. …Germany’s economy is enjoying an industry-led growth spurt, with engineers rehiring workers and returning production almost to pre-crisis levels. The stronger-than-expected growth and falls in unemployment were making it significantly easier for Germany to reduce its public sector deficit. …the package “would differ fundamentally from earlier consolidation efforts”, avoiding “growth-hindering tax increases”. …Overall government spending is seen as falling 3.8 per cent next year, with smaller reductions in subsequent years before federal elections in 2013.

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CNBC is reporting that 51 German millionaires and billionaires have endorsed the idea of that rich people should have to give an extra 10 percent of their income to the government. I’m tempted to dismiss this story since (according to my rudimentary math skills) these clowns represent only 6/1000th of 1 percent of all wealthy Germans, but there’s a more important point to discuss. There’s no law stopping these neurotic people from giving extra money to government, so the real story is that they want the government to impose this bad policy on all successful people. I’ve debated this topic with a couple of ultra-rich American leftists (see here and here) and they never have a good answer when I ask them why they don’t give away their fortunes to the politicians and stop trying to impose their neurotic views on others.

A group of 51 German millionaires and billionaires founded a Club of the Wealthy and wrote to Chancellor Angela Merkel proposing to give up 10 percent of their income in the form of a “Rich Tax” for 10 years to consolidate the budget. With an estimated 800,000 millionaires (in dollars) — about 1 percent of the total population — Germany is eye-to-eye with the USA and has long overtaken the UK as Europe’s number one “millionaire-land”, both in terms of absolute numbers and as a percentage of the population. But traditionally, the Germans don’t dare to feel good about their riches.

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I spoke today in Prague at the second installment of the Free Market Road Show. I gave a standard presentation about fiscal policy, including strong warnings that all industrialized nations run the risk of Greek-style fiscal collapse because of entitlement programs and demographic changes. What’s remarkable, though, is that nobody pretends anymore that this isn’t happening. The question and answer session saw many people ask when the world was coming to an end (from a fiscal perspective) and whether certain nations would be good places to escape when welfare states descend into lawlessness and chaos. Meanwhile, in the Nero-fiddles-while-Rome-burns category, Europe’s statist Chancellor, Angela Merkel, confirmed to the world that she is a blithering idiot and/or a shallow and reprehensible political hack by imposing a ban on “short selling,” which occurs when investors make decisions based on an assumption that an asset (such as a Greek government bond) will fall in value. In the real world, short sellers perform a valuable role by helping to limit speculative bubbles. In the political world, however, short sellers are targeted by demagogues. If Merkel is right and short sellers are guilty of causing assets to fall, then thermometers are guilty of causing fevers. Bloomberg reports on Germany’s national embarrassment:

German Chancellor Angela Merkel laid out proposals to gain control over “destructive” financial markets, after she imposed a unilateral ban on naked short- selling that sent stocks sliding. …“The lack of rules and limits can make behavior in financial markets driven purely by the profit motive destructive and lead to an existential threat to financial stability in Europe and even the world,” Merkel told lawmakers in Berlin today.

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