The True Gold Standard (Second Edition)
Well, it’s official, the economic talking head establishment has declared war on Germany. The opening shots in this battle were fired by none other than the United States Treasury Department, which had the audacity to blame Germany for a weak Eurozone recovery in its semi-annual foreign exchange report. The Treasury’s criticisms were echoed by IMF First Deputy Managing Director David Lipton, in a recent speech in Berlin — a speech so incendiary that the IMF opted to post the “original draft,” rather than his actual comments, on its website. Things were kicked into a full blitzkrieg when Paul Krugman penned his latest German-bashing New York Times column.
The claims being leveled against Germany revolve around nebulous terms like “imbalances” and “deflationary biases.” But, what’s really going on here? The primary complaint being leveled is that Germany’s exports are too strong, and domestic consumption is too weak. In short, the country is producing more than it consumes. Critics argue that “excess” German exports are making it harder for other countries (including the U.S.) to recover in the aftermath of the financial crisis.