Debt, Guilt and German History: A Reply to Wolfgang Schäuble, by Stuart Holland

On 19th July Mr Wolfgang Schäuble, Germany’s finance minister, published an article in The Guardian entitled We Germans don’t want a German Europe. Two days later I responded by annotating his article while colleague, co-author and friend Stuart Holland wrote the following reply (published in Il Foglio in Italian – click here). As it is a poignant article, I am posting it here in English for the benefit of readers:

Wolfgang Schäuble (The Guardian, July 19th) claims that the idea that Europe should be – or can be – led by a single country is wide of the mark; that Germany’s ‘restraint’ reflects the burden of its history, and that the ‘unique’ political structure that is Europe does not lend itself to a leader–follower dynamic.  This calls not only for scepticism concerning his view of German history but also lessons from Gestalt psychology.

Gestalt stresses that what is perceived depends on the values, dispositions and beliefs of the perceiver. Thus Herr Schäuble sees the Eurozone crisis as one of public debt. This is not unrelated to the German for debt – Schuld – meaning guilt.  In stressing this in his Genealogy of Morals Nietzsche also observed that there was a tendency in Germany among strong creditors to demand penitence from weak debtors for their debt-guilt and to punish them if they did not seek redemption.

Yet Herr Schäuble’s Gestalt also displaces that only one EU member state until the financial crisis of 2008 had a significant public debt problem – Greece. The public debt of the others was sustainable and lower in Spain and Ireland than in Germany, until it soared to salvage the folly of banks which had bought toxic financial derivatives.

Rather than Germany proving a reluctant leader, threats to the single currency which Helmut Kohl had presumed would lock Germany into a democratic Europe instead proved to be the template for German hegemony, with debt distressed member states succumbing to the claims of Herr Schäuble and Angela Merkel that there was no alternative to saving them other than an austerity which denied the very principles of achieving rising standards on which the Rome Treaty, founding a European Community, had been based. 

The outcome, by 2012, was Germany’s insistence on a ‘finite solution’ in a Stability Treaty to ‘encourage and, if necessary, compel’ member states to reduce deficits, to which Herr Schäuble now adds his ‘optimal scenario’ of a European finance minister who could veto national budgets. The Treaty also has insisted on balanced budgets, despite this being as progressive a response to the Eurozone crisis as a return to the gold standard.

The path towards this override of national democracy had been laid by the earlier attempt to impose a European Constitution which was rejected by the electorates of every member state to which it was put for ratification, yet then recycled as a Lisbon Treaty, and endorsed in Ireland in a second referendum only on the basis that it was an offer, backed by Germany, that voters reckoned they could not afford to refuse. Behind this has been a misreading of German history, including the perception that it was deficit spending and hyper inflation in the Weimar republic that brought Hitler to power. 

This displaces that it was austerity by the Brüning government in the early thirties that enabled the rise of Hitler. Until 1929, support for the Nazi Party had not been a threat to democracy. But Brüning responded to the crash of 1929 by tightening credit and freezing wage and salary increases. He also prioritised repayment of reparations under the Versailles Treaty despite there being no imminent need for this since US and other banks already were offering Germany credit without making this conditional on such repayment. Both policies lost him support with the public, and in the Reichstag, and resort to government by decree. Whereas, with austerity and rising unemployment, support for Hitler and the Nazis soared from 1930 to 1933 after dipping in 1932 when unemployment temporarily fell.

Yet little has been learned from this in the policies demanded by Germany in response to the Eurozone crisis. The austerity being imposed since its onset by the Troikas of the IMF, European Central Bank and European Commission replicate the decrees of Brüning by insisting on repayment of debt, credit restrictions and public sector investment and salary cuts. This has been matched by claims from Herr Schäuble that the rest of Europe should work harder to be more competitive which have regrettable echoes of the slogan Arbeit Macht Frei, as well as by a rise of the extreme Right in several EU member states.

Joschka Fischer, the former German foreign minister, has been closer to the mark as an historian than Wolfgang Schäuble in claiming that it would be a tragedy if Germany, which twice destroyed Europe in the 20th century, now were to do the same again through punitive solutions rather than resolve the Eurozone crisis by solidarity. While claims for ‘finite solutions’ to redeem debt and guilt through the imposition of austerity on national governments risk that Europe, which had been the cradle of democracy, under a new German hegemony, shortly could prove to be its grave. 

* Stuart Holland is co-author with Yanis Varoufakis and James K. Galbraith of A Modest Proposal for Resolving the Eurozone Crisis

34 thoughts on “Debt, Guilt and German History: A Reply to Wolfgang Schäuble, by Stuart Holland

  1. In modern Greek, debt, duty, and obligation can all be rendered by the same or similar terms: ΧΡΕΟΣ. I know duty is “ΚΑΘΗΚΟΝ” properly, but there are plenty of expressions in which ΧΡΕΟΣ is used instead.

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  4. Nietzsche’s Genealogy of Morals (GM) may indeed prove to be an important source of understanding for the current Euro-crisis, but not if GM II, the ‘bad conscience’ is misunderstood in terms of it solely applying to Germans, like Stuart Holland appears to do. To be true the intimate connection of debt and guilt was probably more easily available to Nietzsche, due to the fact that the German word ‘Schuld’ can mean both debt and guilt, but this should not be misconstrued into the understanding that this is idiosyncratic of German or of any other language (including my own, Dutch) to which this applies. The fact that the whole of GM concerns Nietzsche’s analysis of the emergence (genealogy) of the concept of morality in Christianity already suggests that this connection of debt to guilt (and sin!) is far more widespread than merely Germanic. In Nietzsche’s view guilt is moralized debt: i.e. the sense that failing to meet the obligation inherent in debt also says something about the worth of the debtor as a person. Nietzsche’s understanding is that people’s inherent tendency to cruelty, which is increasingly restrained by civilization, will be unleashed upon debtors who fail to meet their obligation, but in particular upon those whose debt is moralized, i.e. the guilty. The indeed odd understanding that punishment can somehow serve to repay debt of this kind, is then understood as the satisfaction that can be derived from visiting cruelty upon others. In my view the prevailing opinion in Nordic European countries is clearly that the PIIGS, but most pronouncedly the Greeks, are not only debtors, but can be morally blamed for this debt, and reactions will be infused by the consequences of this moral dimension.
    Undoubtedly attempts are made to pave over this moral dimension. For instance the repeated call that the reason for denying the Greeks (and many other debtors in Europe!) the -in my view -most obvious and rational solution of some form of (partial) debt jubilee is that this is a form of moral hazard –‘they will never learn to live within their means if we do this’. This reminds me of more recent social psychological work (which as a rule vindicates Nietzsche’s views) concerning the reason for punishing crime by Kevin Carlsmith and colleagues in which people stated that they punish to prevent crime from happening in the future –including educating the offender, but are actually motivated by retributive desire: you did wrong, now wrong will befall you. The importance of retribution in the reaction to perceived wrongdoing is particularly prevalent when the wrongdoers are seen to belong to an out-group (see Darley, 2009, Ann.Rev. Law, Soc. Sci.), with a different country being a particular apt target for retributive desire. The more we see ‘them’ as to blame, the more we will start viewing ‘all of them’ as to blame , a process captured under the term outgroup entitativity. ‘All of them’ includes a Greek pensioner, who due to these processes will end up being punished for a problem he had no part in causing, in a manner from which he could not learn even if there was a lesson there to be found, while waxing moralistically about the virtues of these actions.
    We ignore the moral dimension at our peril. Not only does it mislead us from taking the actions that are necessary to revive our economic fortunes, but also because of the impact that morality has on our reasoning. Indeed our moral stance causes our reasoning rather than the other way around. In morality, the emotional dog wags the rational tail (Haidt, 2001, Psych.Rev.). People will come up with reasons and interpretations of the evidence to support their initial intuitive view of ‘the Greeks’, the PIIGS as being to blame, without being aware of the fact they are merely trying to support their initial intuitive understanding. Facts and figures that do not fit the powerful frame of the ‘profligate and irresponsible club med’ will be readily ignored. Hopefully the Modest Proposal can be part of a necessary attempt to reframe this, but for the moment I am not too optimistic.

  5. I don’t know why, but it seems to me, the mentality of many Germans are, they still felt and feel they are all victims, after the firs war, after the second war, and now again in the euro crises, where every else to blame, but for sure not the Germans?

    Germany therefor sees only punishment for those countries in Europe, which are now in trouble, and ignore or refuse to see the reality. The main problem among others is that there was implemented first a currency, instead of implementing first tax, social and fiscal politics true out Europe.

    And Germany knew exactly why, the only reason why Germany implemented first the currency was for the German export only. Internationally Germany has worldwide now the reputation as “the second China” in Europe! Congratulation Germany! What a mess in my opinion, but instead of adjust the false contracts, and stopping the Austerity programs for other countries, Germany blaming other European countries.

  6. Two things in the critiques rang a particular bell with me, and the sound of the bell was not good.

    One, the reference to German unification. The West gave the East an overvalued currency. Like with Greece, experts had warned about that but politicians considered it as a ‘must’. The West considered it as a gift to the East and, at first, it looked like a gift to the East. In the final analysis, it destroyed the economy of the East (even the good parts). The longer I observe the Greek situation, the more I am reminded of the above. Mind you, there are a number of critical differences between East Germany then and Greece now: the same nationality in the East and the West (i. e. greater solidarity); proximity to the West (people could leave the depression of the East by hopping on a train, and millions did that, particularly young talent; otherwise, unemployment in the East would have reached Greek levels); the West gave the East a near-perfect infrastructure, a functioning state of law and administration, etc. etc. Objectively, a nirwana for investors. In reality, investors shied away.

    Annual transfers to the East were around 100 BEUR and they were supposed to last for 5 years. Today, over 20 years later, they are still in place and no end is in sight. The early years were catastrophic for the East (and in the West one could hear comments like ‘let’s build the Wall again’). After over 20 years, things are gradually getting better but far from being a self-supporting economy. So much for what an overvalued exchange rate can do to a regional economy!

    Two, the EIB as a lender/investor. The EIB is a lender AND NOT an investor. Without investors (or ‘proponents’ as the EIB calls them), the EIB can’t do much (there are only 2 or 3 general purpose financing programs like global refinancing lines for banks or, in the case of Greece, trade finance lines).

    Obviously, the Greek state could be the investor and for certain infrastructure projects, that would be the right avenue. However, my enthusiasm about the Greek state being a ‘good’ investor is limited (my guess is that at least 10% of investment sums would end up in ‘private channels’).

    Where are those investors going to come from if Greece doesn’t reform its economy and public administration? It’s difficult enough in ‘normal situations’ to find investors for EIB funds. The CEO of the Austrian bank which I worked for during my last 10 years was an EIB fan. He wanted the bank to become Austria’s largest ‘customer’ of the EIB. The internal pressure to come up with projects was significant but we couldn’t come up with too many domestic projects (for smaller amounts, like 5 MEUR, investors shied away from the documentary requirements of the EIB). When we did do EIB loans, they were typically for large projects which Austrian companies planned in Eastern Europe.

    So, if the EIB got the mandate to disburse, say, 20 BEUR to Greece, that is not at all to say that those monies would be disbursed in the foreseeable future (certainly not if investors shy away from Greece because of political instability and unreformed economic framework).

  7. Sorry, Yanis, this is not only ridiculous, it is impertinent and borders on the racist. And it besmirches the suffering of the victims of the Holocaust.

    Though I have always disliked your anti-German bias – I am German – I have also always felt it was understandable given the terrible hardship that Greece is going through. Morevover I found myself agreeing with many parts of your analyses.

    But this article is simply going too far. “Gestalt psychology”, a quote by Nietzsche whom you can quote on almost anything and the opposite of it will not do. Intellectually I expect more from this blog.

    “Finite solution” which is not quite but almost a “final solution”, “Arbeit macht frei” – how dare you Mr. Holland. How dare you. Millions and millions were murdered under these rubrics. For a good reason Jewish organizations protest when the Holocaust is used – or rather abused – in every-day political discourse.

    Regrettably I will have to turn elsewhere from now on to get a Greek view on this crisis.

    • Dear Rudolf, Hold your horses. Personally I do not think it is fine for anyone to generalise. Whether it is Greeks talking about the Germans as if they are a single person, or indeed the German press, including well meaning, progressive newspapers etc., that explicitly refer to ‘Greek attitudes’, to the ‘Greeks’ work ethos’, to ‘Italian sloth’. However, the German notion of Gerstalt is a helpful, non-racist tool for understanding ‘conventional wisdom’; a social artifact that evolves within a nation’s civil society forging common meanings and shared terms. Stuart Holland made a point about that, quoting Nietzsche out of admiration for the great German philosopher – not in a cheap bid to denigrade anyone. As for the reference to Arbeit Macht Frei, it is, I concede, controversial. But it is also apt, unfortunately (or at least so I think). When Mr Schauble visited Athens the other day he talked ‘down’ to his Greek audience telling us that we need to work harder and that it is wrong to ask for debt write offs. This was a sickening performance. To understand why, do not forget that the greatest beneficiary of debt forgiveness in the history of Europe was Germany – in 1953 when even Greece ‘forgave’ a huge loan that was extracted by the Nazis from Athens during the Occupation. Personally (as I say in today’s post) I think it was right that Germany received that debt relief in 1953. But it is quite rich to have the German finance minister lecture us about the sanctity of debts. In Athens! At a time when Greeks simply cannot find work in order to earn the money necessary to repay debts. To be told, in this context that only ‘hard work’ will redeem us, and in a German accent too, is to add insult to injury and, yes, to revive memories of Arbeit Macht Frei. As for your invocation of the Holocaust, let me tell you (since you seem unaware of it) that Auschwitz was also the ‘home’ of Greek resistant fighters who died and suffered there in droves for having opposed the Nazis – the same Nazis that extracted a huge ‘loan’ from our starving people – the same loan that was written off in 1953, with Athens’ consent.

      Having said all that, I agree that the last thing we need is to be drag up the hideous past. Europe has enough challenges today as things stand. However, it takes two to tango. German politicians and German newspapers should know that if they point moralising fingers at Greeks, Italians, Spaniards, while remaining in denial about the true causes of the Euro Crisis, moralising fingers will be pointed back toward Germany. This is how the European Union will cease to exist, at everyone’s expense.

    • In my view the analogies drawn by Holland are quite valid. Are you upset because you share Schauble’s ideas that are paralleled to natzi policy, or because, although you disagreee, think its “unfair” to treat him so?

      About “anti-German” bias: Germans (as a people) historically have the habit of marching enthusiastically (even if critically) to the orders of whoever is their leader. This works well when they have good leaders, as they often do, and badly when they have bad leadership, like now–or 80 years ago. But they always tend to think of attacks to their leadership as “anti-German”.

    • Your observations about the Germans “as a people” are all totally correct. But it is also true that the Jews “as a peoplel” completely stick together and form a society within a society wherever they are and are constantly undermining the values of their host society through manipulation of “the system”. See Goldman Sachs and Lehman Brothers and Michael Milkin and Ivan Boesky – the list goes on and on. (not to mention the Rothschilds!). How does your argument about the Germans feel to you now?

  8. what a mess. why talkabout debt when the Germans’ concern is the current account: nobody has to spend money he doesn’ have!
    The how can you control the ladrons appetite in certain euroland countries?

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  11. Yanis,

    isn’t the problem of the modest proposal that it still demands too much solidarity, which doesn’t exist in Europe. Even in the US, where there actually is an American people they don’t have enough unity to agree on fiscal stimulus (like investments in infrastructure to fight unemployment), so why should this work in Europe, where there is no European people?

    The other big problem: it’s not even clear that we can escape years of stagnation if we do fiscal stimulus. Look at Japan, where they build bridges to nowhere without ending their stagnation. Zombie banks remained in power, hidden unemployment (the young, the women…), low birth rates etc. Only now with Abenomics there is a sign of hope…

    So why not concentrate on monetary policy? We don’t have to create a common monetary policy, we already have one. All we have to change is the mandate of the ECB. Instead of inflation targeting we need NGDP level targeting (which gives us room for much higher inflation expectations). With NGDP targeting we can fight the part of unemployment which is due to weak aggregate demand.

    Isn’t a different monetary policy the most important task?

    The absence of monetary policy was also my biggest problem with the “Global Minotaur”. The whole problem of suplus recycling wouldn’t exist if you target NGDP. Inflation expectations would make money into a “hot potato”, which make a liquidity trap like we have now (where there is so much money with nowhere to go) impossible.

    Is your silence on monetary policy based on skepticism via the expectation channel?
    If so, why not advocate NGDP level targeting done by helicopter drops? The ECB could send each and every Eurozone citizen” freshly printed” money on their accounts! Debt free money! Some would call this fiscal policy but it’s not discretionary, so you don’t need any consent what should be done with the money. Just print and spend till aggregate demand is on target.

    Wouldn’t this be an ultra-modest proposal but still very powerful in its effects? What’s your opinion?

    • Well fiscal policy is much more powerful in tackking this kind of problems instead of monetary policy.Especially when it comes to EU, monetary policy becomes even less useful if not harmful.

      The Eurozone economies never really converged so you had differently structured economies,with different problems and different cycles.This caused even the current monetary policy to be inappropriate and exaggerate the trade imbalances (through encouraging bubble creation).The ECB targeted inflation at a eurozone level but you actually had different inflation rates through out the eurozone economies that deviated from the ECB target (more here

      Similarly i dont see why NGDP targeting would be any different.The ECB would have to target the NGDP zonewide.This would in no way guarantee even growth,or tolerable inflation rates through out the eurozone.

      The problem with monetary policy is that it is difficult for it to be discretionary.It always is one size fits all (i.e. none).In my eyes, targeted fiscal policy would be superior over any approach the ECB would choose to take.

  12. This article is so poorly written that it is actually difficult to read. Where that use of the word “displace” comes from I would love to know. I suspect this is a translation – it has all the earmarks of someone writing in a foreign language. To that must be added that the analysis itself is so sophomoric as to be embarrassing. The pseudo-psychological point about “Schuld” being both debt and guilt is just clever nonsense. The meaning of words comes from their context and nobody speaking German mixes up the two any more than an English speaker confuses “desert” and “desert” although I´m sure some deep psychological insight could be dragged out of those homonyms as well. Or bank and bank. Then there is the “history” part. We suddenly have the Brüning government “prioritizing” reparations payments – is this a joke? What possible advantage could accrue from that? The fact is that the Germans resisted payment every step of the way – but that fact doesn´t fit into this anti-German propaganda. The villain in the Euro crisis is not Germany but the MAJOR BANKS. From Germany, France, Holland, etc.! And they are loving the finger being pointed elsewhere, i.e., at Germany. You are being USED.

    • @ Barry Fray: I don’t know how proficient you are in the german language, or how deep your insights into the german way of thinking might be, but I beg to differ.

      There is nothing “pseudo-psychological” about Mr Hollands remarks concerning the use of the german word “Schuld”. In fact – unlike the english term you mentioned, describing either a dry waste or a tasty dish – this word is exactly the same either in spelling or pronounciation, wether it is used for “debt” or “guilt”. Furthermore, for the majority of germans, the distinction between the two is usually more than blurry.

      Not coming from a family of “investors”, or “entrepreneurs”, I was taught at a very young age that debt was something that decent people should best avoid at all costs. The notion that being indebted equals being “guilty” of living beyond your means is actually a very strong and deeply rooted concept in german culture and has been translated very successfully into both german economic policy and mainstream puplic opinion.

      If one follows german public discourse about the euro-crisis (which is almost exclusively called a “debt-crisis” in this country), it is more than obvious how closely related the two meanings of the word “Schuld” are both to policy makers and their potential voters. It all boils down to the more or less undisputed narrative that the GIIPS have been borrowing hard-earned german money to indulge in spendthrift consumerism and outright debauchery, are thus very much guilty of having lived beyond their means and therefore must be punished for their sins.

      Of course, to well-educated fact-hardened economists and other less uniformed visitors of Mr Varoufakis’ Blog, this may seem as a gross exaggeration or, as you wrote, “pseudo-psychology” but the sad truth is, the majority of Mr. Schäubles and Ms Merkels voters don’t give a damn about what you or I may think about their state of mind. In their universe debt = guilt. Period.

    • @Hubert Marcks
      I completely agree with Barry Fray. Let me remind you that the expression “Schuld” is not used in everyday language in Germany in the case of debt (yes, I am also a native German speaker). However the term “Schulden” has the same root as “Schuld”, it has a completely different meaning than “guilt”. Instead we maybe say “Ich schulde Dir (Geld/einen Gefallen)” which means “I owe you (money/a favor)” and not “I am guilty to owe you…”. No native speaker would ever confuse these terms, so it is indead pseudo-psychological to stress the same root word.

      “I was taught at a very young age that debt was something that decent people should best avoid at all costs.”
      You won’t believe, but the children of my Spanish friends are educated in the same way. It’s not helpful to be focused on national stereotypes here. BTW the same with the so called pathological German Angst regarding inflation.

    • @Hubert Marcks: First, the English homonyms I used were “desert” and “desert” with the meanings “arid region” and “to leave or abandon” – a third possibility would be “a deserved reward or punishment”. No Nachtisch to be seen! And no real “confusion” either – the meaning comes from the context, as I said, and the fact that there are at least HUNDREDS of homonyms bares that assertion out. As for my proficiency in German I am a professional translator German to English and have lived in Berlin for 20 years. You´re talking about the “blurred” distinction between guilt and debt being special to Germany because the words for both are the same actually relies on the notion that those homonyms are actually CAUSAL (which is absurd on the face of it!). But that aside, the idea the debt is bad is FAR from being a special German cultural trait. It runs through the whole history of civilization. You can see this easily in the cultural beliefs that stem from Confucian values in the East, which considers borrowing as shameful because it means living beyond one’s means. And of course the laws against “usury” that ran throughout all of the Middle Ages as well as the Muslim lands are a further examples of debt being a moral question EVERYWHERE. I was raised in Los Angeles and inculcated by my parents with a complete aversion to debt – that type of educating taking place in the cave of the beast, so to speak. These “special German” arguments are all just scapegoating of the worst kind, ones that play on the old resentments from the Second World War and ones that smack of more than a little jealousy as well! Note, as well, that the Republican Party in America has the exact same attitudes as the ruling German party when it comes to “austerity”.

    • Please forgive me for not seeing that your comparison was between a noun and a verb. (Although it seems to me that there is a relation between an arid region and same region being propably quite deserted)

      Since I am not an expert on the subject of homonyms and their origins or other ethymological topics, it was not my intention at all to disregard the fact that “Schuld” or “Schulden” has different meanings in differnt contexts. Of course there is a distinction between debt and guilt even if they are both the same word if translated into german.

      What I was trying to point out is that especially in german it is quite easy to relate those two meanings because of said similarity. And I don’t mean in a confucian or otherwise philosophical way, but in a very simple and rather primitive manner in order to feel superior toward those one presumes guilty of being less virtuous and that the majority of germans has been manipulated by this kind of wordplay for the last four and a half years now.

      Although you are certainly right saying that in most other cultures being in debt is also considered less than ideal, I don’t recall any other european head of state comparing a national economy to a private household like the chancelor did when she came up with the dreaded “schwäbische Hausfrau” who knows how to stay free of debt and is therefore free of being guilty of living beyond her means. One doesn’t have to actually say it to evoke this kind of association. It would be rather difficult to do this in another language that uses different words for these two different things.
      So I still think Mr Holland was right in pointing that out.

      Besides, usury being shunned in many cultures is not the same as demonizing debt. Please correct me if I’m wrong but I always thought that what was considered unethical in medieval christianity, judaism or still in modern day islam was not the lending or borrowing of money but the adding of interest. Of course there is another german word for this.

  13. “The public debt of the others was sustainable and lower in Spain and Ireland than in Germany, until” it became apaprent that in fact it was NOT sustainable in Spain and Ireland. So what’s the point?

    • Until it became apparent that as is the usual case, in a recession deficits (automatically) rise and so does debt.Even the public debt of Greece was stable during the whole period from the adoption of the euro until 08.
      Yet not only Greece, but all of the south was framed as spend-thrift,profligate, party crushers or whatever name you like to call them.

    • @ Crossover:

      Public debt is intrinscly unsustainable. Almost always and almost everywhere it rises. Not just during recessions. So what’s your point?

      In this universe there is no such thing as neverending growth w/o causing havoc sooner or later. The bubbles explode, always.

      The public debt bubble is the by far largest of all bubbles that ever existed. And idiots like Draghi, Bernekane and so on fuel the fire.

      It will be desastrous once this bubble explodes (which it will), there is no way to deflate it smoothly.

    • Along with your spelling, your complete lack of any understanding of economics is a joy to read! Such an insight into “voters´” minds!

    • @VSS

      “Public debt is intrinscly unsustainable. Almost always and almost everywhere it rises. Not just during recessions. So what’s your point?”
      Sure.Any examples? Is there ONE country whose public debt denominated in its sovereign free-floating domestic currency became unsustainable?Show me just one !
      Argentina is not one,Russia is not one,Germany is not one,Greece is not one….I seriously dont know of ONE country that ever faced such a problem.Perhaps you can enlighten me.

    • PS.
      And why dont you go short on Japanese Govt. Bonds?
      You could be making a lot of money based on your theory,just like everybody else that has been short on them since the 90s…NOT.

    • @ Crossover

      I never buy debt (bonds). I only buy equities. Anyway, here a short list of examples for public debt denominated in sovereign free-floating domestic currency became unsustainable. Well, meybe sa few of them were not free-floating, but given the sheer number of the rest, this shouldn’t be an issue.


      Austria-Hungary (1802, 1805, 1811, 1816, 1868)
      Austria (1938, 1940, 1945[2])
      Bulgaria (1932[citation needed], 1990)
      Croatia (1993–1996)[2]
      Germany (1939, 1948[2])
      Hesse (1814)
      Prussia (1807, 1813)
      Schleswig-Holstein (1850)
      Westphalia (1812)
      Greece (1826, 1843, 1860, 1893, 1932)
      Hungary (1932, 1941)
      Poland (1936, 1940, 1981)
      Portugal (1828, 1837, 1841, 1845, 1852, 1890)
      Russia (1839, 1885, 1918, 1947,[2] 1957,[2] 1991)
      Spain (1809, 1820, 1831, 1834, 1851, 1867, 1872, 1882, 1936-1939[2])
      Turkey (1876, 1915, 1931, 1940, 1978, 1982)
      Ukraine (1998–2000)[2]
      United Kingdom (1822, 1834, 1888–89, 1932)[2]


      Algeria (1991)
      Angola (1976,[2] 1985, 1992-2002[2])
      Cameroon (2004)[2]
      Central African Republic (1981, 1983)
      Congo (Kinshasa) (1979)[2]
      Côte d’Ivoire (1983, 2000)
      Gabon (1999–2005)[2]
      Ghana (1979, 1982)[2]
      Liberia (1989–2006)[2]
      Madagascar (2002)[2]
      Mozambique (1980)[2]
      Rwanda (1995)[2]
      Sierra Leone (1997–1998)[2]
      Sudan (1991)[2]
      Tunisia (1867)
      Egypt (1876, 1984)
      Kenya (1994, 2000)
      Morocco (1983, 1994, 2000)
      Nigeria (1982, 1986, 1992, 2001, 2004)
      South Africa (1985, 1989, 1993)
      Zambia (1983)
      Zimbabwe (1965, 2000, 2006[2] (see Hyperinflation in Zimbabwe)


      Antigua and Barbuda (1998–2005)[2]
      Argentina (1827, 1890, 1951, 1956, 1982, 1989, 2002-2005[2] (see Argentine debt restructuring))
      Bolivia (1875, 1927,[2] 1931, 1980, 1986, 1989)
      Brazil (1898, 1902, 1914, 1931, 1937, 1961, 1964, 1983, 1986–1987,[2] 1990[2])
      Canada (Alberta) (1935)[2]
      Chile (1826, 1880, 1931, 1961, 1963, 1966, 1972, 1974, 1983)
      Colombia (1826, 1850, 1873, 1880, 1900, 1932, 1935)
      Costa Rica (1828, 1874, 1895, 1901, 1932, 1962, 1981, 1983, 1984)
      Dominica (2003–2005)[2]
      Dominican Republic (1872, 1892, 1897, 1899, 1931, 1975-2001[2] (see Latin American debt crisis), 2005)
      Ecuador (1826, 1868, 1894, 1906, 1909, 1914, 1929, 1982, 1984, 2000, 2008)
      El Salvador (1828, 1876, 1894, 1899, 1921, 1932, 1938, 1981-1996[2])
      Grenada (2004–2005)[2]
      Guatemala (1933, 1986, 1989)
      Guyana (1982)
      Honduras (1828, 1873, 1981)
      Jamaica (1978)
      Mexico (1827, 1833, 1844, 1850,[2] 1866, 1898, 1914, 1928-1930s, 1982)
      Nicaragua (1828, 1894, 1911, 1915, 1932, 1979)
      Panama (1932, 1983, 1983, 1987, 1988-1989[2])
      Paraguay (1874, 1892, 1920, 1932, 1986, 2003)
      Peru (1826, 1850,[2] 1876, 1931, 1969, 1976, 1978, 1980, 1984)
      Surinam (2001–2002)[2]
      Trinidad and Tobago (1989)
      United States (1779 (devaluation of Continental Dollar), 1790, 1798 (see The Quasi-war), 1862,[3] 1933 (see Executive Order 6102),[2] 1971 (Nixon Shock)
      9 states (1841–1842)[2]
      10 states and many local governments (1873-83 or 1884)[2]
      Uruguay (1876, 1891, 1915, 1933, 1937,[2] 1983, 1987, 1990)
      Venezuela (1826, 1848, 1860, 1865, 1892, 1898, 1982, 1990, 1995–1997,[2] 1998,[2] 2004)


      China (1921, 1932,[2] 1939)
      Japan (1942, 1946-1952[2])
      India (1958, 1969[citation needed], 1972)
      Indonesia (1966, 1998, 2000, 2002)
      Iran (1992)
      Iraq (1990)
      Jordan (1989)
      Kuwait (1990–1991)[2]
      Myanmar (1984,[2] 1987,[2] 2002)
      Mongolia (1997–2000)[2]
      The Philippines (1983)
      Solomon Islands (1995–2004)[2]
      Sri Lanka (1980, 1982, 1996[2])
      Vietnam (1975)[2]

      Now you again.

    • @ Barry Fay

      what exactly is it you want to prove with your swanky showing-off? Please note that unlike you I’m not a “professional translator German to English. Besides, Mr. professional translator, stupid ad ad-hominem attacks like yours tell more about you than about the targets of your mockery.

    • I’m sorry VSS, but you are not expecting me to respond for every country presented on your list when you just copied and pasted a list of sovereign defaults from wikipedia that makes no distinction between currency unions (such as Austria – Hungary ), foreign denominated debt (Germany), pegged currencies (Panama,Ecuador,Argentina), or gold standard regimes.

      Most defaults that took place during the bretton woods system era were obviously not fiat free floating currencies so they are out of question.
      You will also find numerous of the countries that you presented here:
      where you can see that they defaulted on FOREIGN Currency debt.Thus they too are out of the question.

      It would be interesting if you presented a sovereign default after the collapse of B.W. in 1971 when we actually started adopting free floating fiat currencies.Before then, currencies were usually convertible to something, either gold or another currency so they do not fit your agrument.

  14. I find these pleas to Germany rather hopeless and pathetic. It was a dumb idea to have a single currency in the first place with the high degree of diversity in Europe. It denies the concept of nation state and right to self-determination. It is just common sense for any self-respecting country not to want to get tied up in a monetary union with Germany – something where the UK exhibited an entirely realistic viewpoint in terms of the risks having prior bad experience with the EMU.

    On the one hand, the Germans have every right to choose the politicians and policies that serve Germany. On the other hand, the same applies to every self-respecting country in Europe. So why not avoid this sort of giant clusterfuck with a one-size-all currency union that does not really suit anyone. OK, this could work on a limited basis between certain countries who meet Mundell optimal conditions, but that is all!!!

    No one can blame larger states like the UK, France and Germany for retaining their national sovereignty over critical areas like monetary policy, foreign affairs, etc. The smaller countries like Greece suffer from tragic over-dependencies with a hopeless client-state mentality. In effect, because Greece has never had for years any coherent national policy, it is a failure and problem state. The EU was never going to be an automatic pilot to fix things and now Greece is crashing into a mountain, so to speak. Time for Greece and other smaller EU countries to realize the importance of coherent national policies.

    Finally, why academics like Stuart Holland are Varoufakis are so oblivious of the basic human rights guaranteed by the nation state and the ugliness of the European Union concept with the history of hideous attempts like the Soviet Union and Hapsburg Empire to force diverse peoples together, I really do not know. I have very different values that they do. They have to learn about the concept of political culture and the political economy to understand these matters.

    Why academics like Varoufakis

    • “It was a dumb was a dumb idea to have a single currency in the first place”

      It is an even dumber idea to stick to it after seeing all the damage it is causing!

    • ” It was a dumb idea to have a single currency in the first place with the high degree of diversity in Europe”

      Indeed, but the French got what they wanted. Right now they (and the rest of the GIPSIFs) find out the hard way that there are a whole lot of advantages a national currency has. And Europe is no nation, won’t ever be one, can’t ever be.

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