Tuesday, November 9, 2010

Germany Takes Gloves Off: U.S. Lived on Borrowed Money for Too Long; German Success Not Due to Currency Manipulation

Germany's Finance Minister Schauble has had it with Mrs. Geithner and Bernanke. Extracts from Der Spiegel interview:

"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. They make it more difficult to achieve a reasonable balance between industrialized and emerging economies, and they undermine the US's credibility when it comes to fiscal policy. 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 German export successes are not the result of some sort of currency manipulation, but of the increased competitiveness of companies. 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. There are many reasons for America's problems, but they don't include German export surpluses."

"The proposal is not acceptable for Germany under any circumstances. If we were to introduce such measures, we would be restricting international competition. But for years we, together with the Americans, have believed that world trade needs to be opened up further. We should stick to that approach and, for example, press ahead with the Doha round to promote world trade. This would stimulate global growth far more effectively than a bilateral agreement on quotas."

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