Piketty: "Germany Has Never Repaid Its Debts; It Has No Standing To Lecture Other Nations"

Tyler Durden's picture

One year after Tomas Piketty sold a record number of economic textbook paperweights which virtually nobody read past page 26, once again showing the power of constant media hype, the French economist and wealth redistributor is out and about, this time pouring more gasoline on the fire started by the IMF last week when it released the Greek debt sustainability analysis showing Greece needs a 30% haircut, only to be met with stern resistance by, who else, Germany who know very well that should Greece get a debt haircut it will unleash the European dominoes which not even all the bluster and rhetoric of the ECB can halt.

And while Piketty's book may have sold out in socialist France, it seems Germany did not leave a pleasant taste in the celebrity economist's mouth, and in an interview with Germany's Zeit magazine, translated into English, the Frenchman just made sure he will never sell another book east of the Rhine. Here is the reason why:

When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.

 

... Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.

What he said is perfectly factual and accurate, but in the new normal, truth is not a welcome commodity, especially when it pulls the scab on the single biggest problem with the modern economy, namely the gargantuan debt overhang (see Greece) which nobody can possibly default on without triggering massive contagion around the globe and thus leaving (hyper)inflation as the only possible way out.

A good question is whether this philosophical contrast exposed by Piketty is also indicative of the fundamental schism that is appearing not only within the Troika, where the IMF effectively won Tsipras' referendum for him, but also within the Eurogroup, where Germany may soon find itself increasingly isolated as not only peripheral countries but soon France start clamoring for debt haircuts not only abroad but also back at home...

Full interview:

Thomas Piketty: “Germany has never repaid.”

In a forceful interview with German newspaper Die Zeit, the star economist Thomas Piketty calls for a major conference on debt. Germany, in particular, should not withhold help from Greece. This interview has been translated from the original German.

Since his successful book, “Capital in the Twenty-First Century,” the Frenchman Thomas Piketty has been considered one of the most influential economists in the world. His argument for the redistribution of income and wealth launched a worldwide discussion. In a interview with Georg Blume of DIE ZEIT, he gives his clear opinions on the European debt debate.

DIE ZEIT: Should we Germans be happy that even the French government is aligned with the German dogma of austerity?

Thomas Piketty: Absolutely not. This is neither a reason for France, nor Germany, and especially not for Europe, to be happy. I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history.

ZEIT: But we Germans have already reckoned with our own history.

Piketty: But not when it comes to repaying debts! Germany’s past, in this respect, should be of great significance to today’s Germans. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe.

ZEIT: But shouldn’t they repay their debts?

Piketty: My book recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.

ZEIT: But surely we can’t draw the conclusion that we can do no better today?

Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.

ZEIT: Are you trying to depict states that don’t pay back their debts as winners?

Piketty: Germany is just such a state. But wait: history shows us two ways for an indebted state to leave delinquency. One was demonstrated by the British Empire in the 19th century after its expensive wars with Napoleon. It is the slow method that is now being recommended to Greece. The Empire repaid its debts through strict budgetary discipline. This worked, but it took an extremely long time. For over 100 years, the British gave up two to three percent of their economy to repay its debts, which was more than they spent on schools and education. That didn’t have to happen, and it shouldn’t happen today. The second method is much faster. Germany proved it in the 20th century. Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief.

ZEIT: So you’re telling us that the German Wirtschaftswunder [“economic miracle”] was based on the same kind of debt relief that we deny Greece today?

Piketty: Exactly. After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed the second method with the three components that I mentioned, including debt relief. Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured.

ZEIT: That happened because people recognized that the high reparations demanded of Germany after World War I were one of the causes of the Second World War. People wanted to forgive Germany’s sins this time!

Piketty: Nonsense! This had nothing to do with moral clarity; it was a rational political and economic decision. They correctly recognized that, after large crises that created huge debt loads, at some point people need to look toward the future. We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s. We need to look ahead. Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.

ZEIT: The end of the Second World War was a breakdown of civilization. Europe was a killing field. Today is different.

Piketty: To deny the historical parallels to the postwar period would be wrong. Let’s think about the financial crisis of 2008/2009. This wasn’t just any crisis. It was the biggest financial crisis since 1929. So the comparison is quite valid. This is equally true for the Greek economy: between 2009 and 2015, its GDP has fallen by 25%. This is comparable to the recessions in Germany and France between 1929 and 1935.

ZEIT: Many Germans believe that the Greeks still have not recognized their mistakes and want to continue their free-spending ways.

Piketty: If we had told you Germans in the 1950s that you have not properly recognized your failures, you would still be repaying your debts. Luckily, we were more intelligent than that.

ZEIT: The German Minister of Finance, on the other hand, seems to believe that a Greek exit from the Eurozone could foster greater unity within Europe.

Piketty: If we start kicking states out, then the crisis of confidence in which the Eurozone finds itself today will only worsen. Financial markets will immediately turn on the next country. This would be the beginning of a long, drawn-out period of agony, in whose grasp we risk sacrificing Europe’s social model, its democracy, indeed its civilization on the altar of a conservative, irrational austerity policy.

ZEIT: Do you believe that we Germans aren’t generous enough?

Piketty: What are you talking about? Generous? Currently, Germany is profiting from Greece as it extends loans at comparatively high interest rates.

ZEIT: What solution would you suggest for this crisis?

Piketty: We need a conference on all of Europe’s debts, just like after World War II. A restructuring of all debt, not just in Greece but in several European countries, is inevitable. Just now, we’ve lost six months in the completely intransparent negotiations with Athens. The Eurogroup’s notion that Greece will reach a budgetary surplus of 4% of GDP and will pay back its debts within 30 to 40 years is still on the table. Allegedly, they will reach one percent surplus in 2015, then two percent in 2016, and three and a half percent in 2017. Completely ridiculous! This will never happen. Yet we keep postponing the necessary debate until the cows come home.

ZEIT: And what would happen after the major debt cuts?

Piketty: A new European institution would be required to determine the maximum allowable budget deficit in order to prevent the regrowth of debt. For example, this could be a commmittee in the European Parliament consisting of legislators from national parliaments. Budgetary decisions should not be off-limits to legislatures. To undermine European democracy, which is what Germany is doing today by insisting that states remain in penury under mechanisms that Berlin itself is muscling through, is a grievous mistake.

ZEIT: Your president, François Hollande, recently failed to criticize the fiscal pact.

Piketty: This does not improve anything. If, in past years, decisions in Europe had been reached in more democratic ways, the current austerity policy in Europe would be less strict.

ZEIT: But no political party in France is participating. National sovereignty is considered holy.

Piketty: Indeed, in Germany many more people are entertaining thoughts of reestablishing European democracy, in contrast to France with its countless believers in sovereignty. What’s more, our president still portrays himself as a prisoner of the failed 2005 referendum on a European Constitution, which failed in France. François Hollande does not understand that a lot has changed because of the financial crisis. We have to overcome our own national egoism.

ZEIT: What sort of national egoism do you see in Germany?

Piketty: I think that Germany was greatly shaped by its reunification. It was long feared that it would lead to economic stagnation. But then reunification turned out to be a great success thanks to a functioning social safety net and an intact industrial sector. Meanwhile, Germany has become so proud of its success that it dispenses lectures to all other countries. This is a little infantile. Of course, I understand how important the successful reunification was to the personal history of Chancellor Angela Merkel. But now Germany has to rethink things. Otherwise, its position on the debt crisis will be a grave danger to Europe.

ZEIT: What advice do you have for the Chancellor?

Piketty: Those who want to chase Greece out of the Eurozone today will end up on the trash heap of history. If the Chancellor wants to secure her place in the history books, just like [Helmut] Kohl did during reunification, then she must forge a solution to the Greek question, including a debt conference where we can start with a clean slate. But with renewed, much stronger fiscal discipline.

This interview was translated by Gavin Schalliol.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
jmcadg's picture

Bravo. The truth hurts.

Deathrips's picture

Piketty is a lying slimy collective socialist shill...yeah..hes a bitch. After his rimming of kirgman on keynsian retardedness....hes a piece of shit.

 

Show any of them had the money to lend and the can of worms opens.

RIPS

Big Corked Boots's picture

Picketty is a slave-boi to left wing governments.

They like giving it in the behind and he's thrilled to take it, which is OK if you roll that way, but he wants everyone to get it good and hard.

Pinto Currency's picture

 

 

 

Clearly Picketty has standing to lecture other nations.

Mister Ponzi's picture

A brilliant refutation of his Marxist book "Capital in the 21st Century" can be found here:

http://www.georgereismansblog.blogspot.de/2014/07/pikettys-capital-wrong_28.html

whotookmyalias's picture

He might be a lying sack of shit, but he's right. Foreign debt service ranks right up with derivatives and whatever else worthless shit the banks are calling assets these days as THE problem.  Get rid of it all.  That's the only way to get back to a decent monetary standard.

J S Bach's picture

This ass-Piketter has no clue about history.  The overwhelming scam foisted upon the Germans after WWI known as the Versaille Treaty was a travesty.  Never has there been a more egregious example of "Victor's Justice".  The reparations the Allies expected Germany to repay were completely untenable.  So, this dweeb dares to preach to us about this?  Go back to your ivory tower at whatever Ivy League school you attended - where such ludicrous claims have imaginery validity.

Headbanger's picture

WTF!!!??

GERMANY DID REPAY ITS WW I REPARATIONS AS OF 2010

http://content.usatoday.com/communities/ondeadline/post/2010/09/germany-...

PIKETTY YOU FUCKING MORON!

Pinto Currency's picture

 

 

Piketty should study history.

Adolf Hitler's financing included Ford, Rockefeller and Harriman money:

http://www.reformed-theology.org/html/books/wall_street/chapter_07.htm#Some%20Early%20Hitler%20Backers

 

From: Wall Street and the Rise of Hitler by Antony Sutton

http://www.reformed-theology.org/html/books/wall_street/index.html

Captain Debtcrash's picture

But they had half their WW2 debt forgiven in 1953 under the London Debt Agreement. 

"Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact.[2]"

I truly hate Piketty but get your facts straight.

 

https://en.wikipedia.org/wiki/London_Agreement_on_German_External_Debts

Captain Willard's picture

The Greeks had 60% net present value debt relief in 2012.

Should it have been 100%? Perhaps.

But Piketty is utterly disingenuous to suggests no debt relief has been forthcoming.

Fod's picture

If you're talking about PSI, keep in mind that the state raided the reserves of hospitals, universities, schools and pension funds, turned them into Greek junk bonds then did a haircut on said bonds. Not much of a debt relief there. More like destruction of basic sovereign infrastructure.

chisler's picture

Did you read this part: "The initial sum of 269 billion gold marks, the equivalent of 96,000 tons of gold, was reduced to 112 billion gold marks by 1929."

Stop banging your head and focus on the facts. Greece needs a similar concession, this isn't about economics its about politics. Economics is not a war weapon. You can't undo the massive financial loss resulting from war and neither can bad lending policies. Its a simply accounting line item, its called "bad debt". That is economics over ruled by politics. It comes under the heading,"Shit happens".

TheABaum's picture

Never let facts intrude upon a socialist rant.

rpc's picture

What Piketty says is BS, a few years ago, Germany paid the last annual rate (a few millions Euros) to France following the Versailles treaty dictate. Same to other countries. Piketty is just a "good old" french communist/socialist, that's all. The Euro was a french idea (Delors, Mitterrand, Attali), so France should bear all the costs. The haircut after the war was ~55%, but Germany since then paid hundreds of billions in subsidies to it's neighbour countries through EU, also to France's farmers. This is war reparartion/debt repayment toooooo.

 

Greece has never paid back any debt, has been broken half time since it's existence. Greece got since it's entry to EU (~1980) more than 500 billion €:

* >150 bill. € from EU subsidies

* >100 bill. € first haircut 2012

* >350 bill. € now outstanding and since it is broken, they will "cash it".

chisler's picture

Please get your facts right. Its not for others to correct your rantings so do the research.

Fod's picture

Germany has never paid war reparations to Greece, one of the nations it obliterated in WW2 and has never signed a peace treaty with Greece. In addition, concerning honoring debts, Greece has defaulted 5 times in its history and NEVER reneged on its old debts but honored them in full.

Also, check your facts, you still believe the EU loans went to Greece? Then how is it possible that Greece is still in such a state?

rpc's picture

You are wrong. In the beginning 1960's, Germany made a treaty ("global reparations agreement") with Greece about 115 mill. DM at the time. In todays buying power, that would be quite a few billion €. So there were reparations. And dont forget, Greece got > 150 bill. € in subsidies, mainly paid by Germany. Subsidies are easier to sell to the German voter than "war reparations", but the result is the same, money flows.

If you want to look where this money got in Greece, go to the noble quarters of Athens and ask the elected family-clans that are/were in power in Greece for the last decades.

Greece never payed anything back, unless they took new credits to pay off the old ones. You can only pay something back if you export more than you do import. Has Greece ever had a positive balance of current accounts in foreign trade? Not that I remember ...

Grexit now ! Greeks need to live within their means, that's only possible with the Drachme and outside the "free money"-Target2-System.

Fod's picture

Concrening war reparations: https://en.wikipedia.org/wiki/German_reparations_for_World_War_II#Greece . Just because the Allies arbitrarily signed off the war reparations on behalf of other countries involved in the war does not mean that the other countries agreed to their resolution.

Concerning Greece's debt history: http://greece.greekreporter.com/2014/01/26/born-in-debt-greeces-history-...

Concerning the Greek debts to EU/IMF/ECB: http://www.zerohedge.com/news/where-does-greek-bailout-money-go

You are correct that EU funds were squandered by going into the pockets of the elite. And I totally agree with you that we should exit the EU and print drachmas and, if I may add, declare the debt odious.

http://www.zerohedge.com/news/2015-06-17/greek-debt-committee-just-decla...

rpc's picture

Yes, the deal should be €-exit (not EU exit, I hope) against haitcut (since anyway, Greece won't be able to redeem most of the credits).

 

Still better IMHO would be a complete disintegration of the €, starting with a Dexit.

Oldwood's picture

And yet, his discussion centers around default and some sort of economic justice to allow proper schools to be built, and not one word about staying out of debt. Oh God, the hardships we would endure if forced to live within our means!!!

By all means borrow and spend, and then foist the debt onto whatever public remains that is still stupid enough to work. Never, not once is there a suggestion that we tend our own garden, rely on not the thievery of State but our own productivity and skills.

NO, our path to prosperity is always through theft. The key is to always make those being robbed believe they are the robbers. If you should endeavor to actually work and save, then yes, you deserve to be FORCED to support those who will not....just as he says, because that is always been the way it is done.

Fucking assholes would like to put everyone who actually works and saves to have a better life in the same category as the fucking thieves these elitists represent.

Just as we can no longer refer to illegal immigrants as anything but immigrants, and anyone who  resists illegals are to be shunned and called racists and bigots, so is now anyone who has anything worth stealing called a thief....except those handing out such judgements of course as they are but doing God's work, or THEIR God's work....what ever rock he resides under.

joseJimenez's picture

THANK YOU!!!!  I kept scrolling down hoping someone would weigh in on the little inconvenience truth.  Many feel that this was the reason for Hitler rise to power that lead to WWII.  Did Greece go to war with the EU and as result debt was, as you so succinctly put it,  "The overwhelming scam foisted upon the Greeks".  I will dare to suggest that the two were very different situations.  As a country, the Greeks did not have to accept the wad of money.  Instead, they should have been looking for investors that foster economic growth  not predatory scams.  Everyone is guilty here.

But it is obvious to me that this is yet another attempt by socialists, communist and everyone else of that ilk, to show how bad capitalism is.  Trying to snatch victory or vindication out of the jaws of defeat.  A defeat of which has been completely demonstrated for all to see. Yes not even the proverbial Sweden which collectivists like to point to as a success.  The world is on fire, everybody is broke and it begs the question.  Who's holding all the cards?  It is rather strange.  Unless, could it be, No! there I say it; A FUCKING SCAM

 

 

 

Oldwood's picture

Every thief in history has attempted to use all prior thefts as rationalization of their own. This asshole would turn the world on its head to promote his collectivist theme. Never once suggest that we should all be held to a higher expectation, one premised upon NOT relying on theft (or debt if you prefer) to achieve prosperity (a word you will NOT hear them use). Progressives continually discard conservative or traditional values like thrift and hard work and accountability until they find a statistical nugget of bullshit form history that can be used to justify their continued destruction. Yes, the answer is debt that is converted to theft...the ultimate redistribution tool.

chisler's picture

Over simplification.  Look up how much of the German debt was convert to "theft" as you call it and maybe you see why.

HardAssets's picture

Isn't it amusing that bankers used their paid off politicians to talk about 'morality' when they want to rape the public - but none of that applies to them when they get bailouts, are declared 'too big to fail', and use other con games (to further rape the public).

Their fiat 'monetary' system is nothing but a means of mind control, a way to enslave the vast majority of humanity, who ignorantly go along with it.

reedsch's picture

I read Mr. Reisman. A wonderful 18th century analysis of a 21st century problem.

two hoots's picture

Get rid of scheming money lenders/banksters then their entrapping debt will go away.   If debt could be clean and not covered with CDSs and BS deals then it would be much easier to manage as the players would drop down to lender vs. borrower. 

Hopefully the current arousing climax the Greeks just felt will not be replaced by hungar pains.   Greece is the head on the stick at the gates of the EU as a signal to the others pursuing a similiar course. 

World leaders must get a grip on these crippling lending programs with the same intensity as chasing drug lords.  caveat: if they care about people.

Troy Ounce's picture

 

Have a conference to forgive all bankers...and start anew with same Keynesian shit?

 

greenskeeper carl's picture

That's exactly what he is advocating. No mention of debt based fiat money. Only the same Keynesian/socialist garbage that got every country into this mess in the first place. Moar inflation, higher taxes. I just summed up the entire article for you. Also, austerity bad. They should spend moar money. Where exactly does that money come from? Oh right, borrowed or printed into existence. Fuck this guy ZH shouldn't waste time with this establishment douche bag.

whotookmyalias's picture

Back to PMs as money.  It's harder to dig it out of the ground than to hit the print button.

Troy Ounce's picture

 

Have a conference to forgive all bankers...and start anew with same Keynesian shit?

 

Milestones's picture

No; Hang them all (LYNCHING LAMPOSTS) Then we start over with State Banks owned by the citizens and funded by them. No CENTRAL BANKS. Really quite simple. 

Oh yea, certain debt relief for the people--no corportations. Let them go down the toliet.            Millestones

chisler's picture

What would one expect from a kaiserhoff? That is German isnt it? Yah, Germans including Merkel, should shut mouth because they have a bad history of dealing with other peoples possessions, money and lives. This is one more piece of the "repayment of historic debt to the world." German legacy can't be simply forgotten because they think they are todays EU leader and all is forgiven.

reedsch's picture

Being Red does not automatically make them wrong. Or is political orientation a sufficient condition for error to occur? Like a reverse Midas Touch, everything a Red touches turns to scheiss, right?

reedsch's picture

Being Red does not automatically make them wrong. Or is political orientation a sufficient condition for error to occur? Like a reverse Midas Touch, everything a Red touches turns to scheiss, right?

where_is the_nuke's picture

Do you even know what you are talking about? You dumbfuck.

Government needs you to pay taxes's picture

I'm not familiar with Piketty's socialism or his fellating Keynes'n'Krugs, but his positions in this interview struck me as spot-on.

El Vaquero's picture

Except for this:

 

A new European institution would be required to determine the maximum allowable budget deficit in order to prevent the regrowth of debt. For example, this could be a commmittee in the European Parliament consisting of legislators from national parliaments. Budgetary decisions should not be off-limits to legislatures. To undermine European democracy, which is what Germany is doing today by insisting that states remain in penury under mechanisms that Berlin itself is muscling through, is a grievous mistake.

What he wants is MOAR central planning. He wants to undermine European democracy, but in his own way, not in the same way that the Eurocrats are today.  He probably even has himself convinced that his solution is not undermining it, and that it is a democratic solution, despite the fact that it would inevetabily turn out to be technocratic.  The problem is that most technocrats are either unknowledgable about the real problems, are out to benefit their friends, or both. 

Captain Willard's picture

Exactly! More "wise men and women" from Brussels will solve everything. Sure.

Government needs you to pay taxes's picture

Fair enough, thanks for pointing that out for me.

reedsch's picture

So, your alternative is centralized planning by central bankers, correct? How's that been working out so far?

Oldwood's picture

That's the problem with propaganda. It always almost makes sense...especially if you accept their premise...that theft is good because there has always been theft, and who amongst is qualified to judge???

I say I am, as long as I work to feed myself and take nothing from others, and further reject his theme as all it does is seek to tax, to punish, to demean those who still actually do produce, rather than simply EAT.

Mark Urbo's picture

A great line - very true...

"After his rimming of  krugman on keynsian retardedness....hes a piece of shit."

SethDealer's picture

Piketty is a French piece of shit, I'll be glad when the press quits giving him undeserved air time

Urban Roman's picture

Of course, you can continue any train of thought to its logical extreme ...  Rome probably still owes somebody something from when they murdered Jesus.

Might be hard to research that one though. I think the Romans deleted their emails.

two hoots's picture

in line with this BS:  "I can't punish my kids for smoking dope because I did"   ????