Category Archives: bonds (negative-yielding)

A sure way to revive German nationalism

Oddly enough, the Germans don’t seem keen to furnish the bazooka

Impose redistributive loans on Berlin for Keynesian purposes!

Dalrymple observes that negative-yielding bonds, representing a quarter of debt issued, are

hardly a resounding vote of confidence in the future. They are like an umbrella to protect us from an approaching monsoon.

He points out that economic gloom

is growing in Europe, where growth remains low and youth unemployment in many countries is high.

Yet-lower interest rates, penalising savers,

will not revive EU countries’ economies. Having lost control of their currencies as a result of monetary union, these countries cannot apply a fiscal stimulus.

Lagarde thinks she has the answer

We hear calls, echoed recently by Christine Lagarde, for a large European budget that can apply a stimulus to various countries as necessary. Such a budget, Dalrymple explains,

is seen by some as an antidote to the growth of populist nationalism in Europe, supposedly the consequence of the continent’s economic woes. An editorial in the Guardian, daily bible of the bien-pensants of much of the English-speaking world, was headed: The nationalism that taps into people’s angst and dislocation can be effectively challenged with a bazooka of a eurozone budget. In other words, if only governments of countries in which populism—that is to say, the popularity of one’s opponents—spent enough money to revive their economies, the people would return to their senses and re-enter the social-democratic fold that has served Europe so well—even if it led to the present trouble.

Where will the firepower of the proposed bazooka come from?

There can be only one answer under the present dispensation: from Germany. Oddly enough, the Germans don’t seem keen to furnish the bazooka. They have had some recent experience of large-scale lending, and it was not altogether happy in its results, economic or political.

A genuinely closer political union (the supposed aim of the European Union, but which Europeans have repeatedly said they do not want) might impose redistributive loans on Germany for Keynesian purposes—other countries in the EU outvoting Berlin.

It’s not easy to imagine the Germans accepting this. There could hardly be a better way to revive German nationalism, one of the eventualities that is the target of the proposed bazooka to destroy.

The situation would be even more dangerous because Germany

has achieved its pre-eminent economic position, in part, by not allowing a commensurate increase in the standard of living of its people, who may not be pleased to play the role assigned them by the EU. Polls already suggest that this is so.