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Piketty: "Germany Has Never Repaid Its Debts; It Has No Standing To Lecture Other Nations"
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.
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Piketty is referring to German government bonds, nor to war reparations.
Incidentally, any future war reparations claims on Germany by Greece were waived in an agreement involving Germany, the US and UK but NOT Greece.
If it wasn't for Vichy DC & MSM Goebbels Propaganda the German's might elect some proper leadership and tell their masters to FUCK OFF.
"...which nobody can possibly default on without triggering massive contagion around the globe and thus leaving (hyper)inflation as the only possible way out."
That isn't a way out, as Zimbabwe found out.
As Mises said, there is no preventing the final collapse of a debt fueled boom, whether it is the debt or the currency that collapses.
There is no way out.
mises underestimates the nazis.
Human hubris of the sort that leads men to think that they truly can control the economy via government planning.
The Germans paid their debt by giving up the deutsche mark.
they are the greatest beneficiaries of the Euro and extended market without trade barriers.
You can't tell pure juice from gutter water.
Both Yanis and Piketty are to be complimented for their financial and economic acumen as straight talking men who can see beyond the fog of austerity and Bankster protection on a nationalistic basis.
He, Piketty, is 100% right about the historical analysis and has pinpointed the key player who has prevented Euro bonding soldiarity and debt restructuring to occur in EU : Mutti Merkel.
Kohl and Schroeder made Germany what it is today and Mutti could send it back to the rubbish heap.
She has a huge responsibility, until it disappears under the coming political crisis around the corner, which she can still avoid.
You know things are bad when the only people telling the truth are the fucking communists.
The whole concept of the Euro was punitive against Germany from the start. Everyone knew the Germans would prosper and accumalte most of the wealth in the union and in turn extend credit to the less capable. Now that Germany has won the economic match it is time for the players to reset and start over. Without a national defense the Germans can do nothing but smile and be agreeable as their wealth is redistributed across Europe. Thats the price of loosing a pair of wars.
Very amusing. Here's Piketty's problem - he tries to be rational, in a world that is not.
Greece's problem is that everyone there has been stealing from the government for fifty years. The ECB banksters took advantage of that, made bogus loans to the Greek "government", when any fool could see the money would be stolen the next day and never repaid. How do you fix that? Well, ya don't.
California and much of the blue state USA is in just about the same boat as Greece, it's a contest to see who can bankrupt the state first, a million public service pensioners and welfare clients, or the banksters. Yes, California still has some productive industry, mostly the silly social media Internet companies, but I guess money is money. Yes Chevron oil is our biggest company, and there is still some entertainment and some aerospace, and a busy port importing stuff from China and maybe Korea. And some nice real estate, but even Greece has that. California politics is pretty much on a par with Greece, too. So, we watch the situation with interest.
Fuckin A. Well said.
"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."
I think Piketty is right.
There lots of management tricks to government, they should all be doing them all the time.
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If Greece Claws back Ill-gotten Gains, Bonuses, Pensions, Government Retirements... then set up a fund for these moneys so that incentive is fully visible and goals can be set for the use of this booty
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If would be helpful to create incentives to feel proud of each of our countries, and manage budgets, conflicts of interest, political gifts & Lobbying with transparency and simple, easily understood intentions & procedures, penalties for lawyers who try to confuse the policies, procedures, rules, regulations, and laws,... and to standardize financial instruments, financial services, limit excessive interest rates by category, provide mechanisms for loans... some progressive financial solutions for growing small and medium companies and for Greek companies including banks to compete with other European like companies.
Simplify, Streamline, Standardize.
Be on the lookout for companies that pay richly for their Executives, for admin costs, for perks, remodeled offices, new buildings, that show up in Overhead... but not in Financial ratings.
No one likes a Reformer when they are one the winning side of the Economy or work for the Government or enjoy power & status in an official position.
Screw it. This is just normal government monitoring, tracking, policy formation, implementing policy, and fight corruption and swinging doors to industry that makes a few very happy but does not lead the government or people forward.
Why? You spend time and ink to just rebate this writing, when you have the true reality in this Interview...
{http://bit.ly/1CayDcZ }
Forget the Germanicus (means the Other White Europeans), they never wanted it a REFERENDUM; Now they had one…To bad!.
Suerte, humanos Blanco Europeos contra Los Sicópatas…Scopri subito le offerte e inizia a risparmiare fino al 70%!
...so Piketty means that government debt has RISK? ..but why is then centralbanks all around the globe pushing down interest rates on it, it really looks like its risk free....aha ok I see
Kiss my a&^ Pikkety.
Germany finished paying its WWI debts in 2010:
Germany finishes paying WWI reparations, ending century of 'guilt'http://www.csmonitor.com/World/Europe/2010/1004/Germany-finishes-paying-...
You are an Obama/new world order shill. You and Jonathan Gruber probably get together and do bong hits - in the back of the choom wagon - when you should be in the library checking facts.
Of course Germany is being stoooopid WRT Greece - both in lending to it and expecting to get paid back. Greece is stoooopid for not having gone the way of Iceland ten years ago. That requires intelligence and character, as opposed to intimate sexual relations with Goldman Sachs.
One would have thought thaqt Goldman would have offered Germany a debt consolidation back in 1946. I was amazed back in '10 when that final rep payment story caught my eye.
Did i say kis my a(* Pikkety? Oh yes. i see I did. Well i will just leave the second one up.
I smell higher interest rates for government debt coming, Piketty's model - borrow til you cant pay it back - then default, that ought to make it somewhat more expensive for governments to borrow or is it only me?
Dear M. Piketty,
We would like to inform you that France has been re-added to our next Europanzer "scenic tour". We will see you soon (after Greece of course).
Regards,
Germany
0.o. I'm not so sure that would work out real well for Germany todau...it's not the Germany of old with regatd to military. Just saying...and lining up allies would be awfully tricky.
The Russians would love that popcorn show though probably.
I wonder how Piketty feels about Greece repaying France, or Italy, or Spain...
"...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."
Stronger fiscal discipline on the part of Greece ain't gonna happen.
Everyone also forgets the US defaulted when Nixon abandoned the gold standard to avoid repaying various EURO nations the gold they wanted to claim dollars for. Same game with diff mechanisms.
one caveat pikkety missed about the brit payback in the 1800s is the empire was growing at a rapid pace during that time so they had extra money to service debt and the pound sterling was the reserve currency of the time.
Germany never repaid its debts? LOL Now thats funny. Just look at a map pre-WWI and a map today.
Maybe if Germany imposed this austerity here upon the US, the Zeroheads might change their minds' about this guy and his ideas.
Soooooo. Germany never repaid its debts. Today it is the most successful country in Europe. I guess that's the way to go. Copy success.
the problem is germany is now owend completely by jews
after the owner changed, it dont have to repay to .... non-jews
I happen to side with Piketty regarding his advocacy for the Greeks in this situation, but not for the reasons he sites.
Piketty, like most socialists, never quite understood the concept of fiscal responsibility - which undermines his comparison between unpaid German and unpaid Greek debt.
His main problems in this post are two-fold: 1) he equates all debts as the same from a moral perspective, irrespective of how they were incurred or caused, and 2) he makes no mention of the role that manipulation of the situation by the cabal played in the creation of the illegitimate debts he references - both in the case of Germany and Greece.
Being biased towards the French interpretation of events during WW I and WW II, this is not surprising.
Let me illustrate my point:
In the Greek case, the cabal was instrumental in influencing their puppet Greek government(s) to continue to indebt the country, knowing full well that it did not have the ability to repay, but relying on its other puppet regime(s) in the EU, IMF, ECB etal to bilk the German (and other EU nations') taxpayers into footing the bill when the inevitable bailouts were required.
Who were the losers? Both the Greek people and the German people. Who were the winners? The cabal.
In the German case, war reparations for WW I (a war Germany did not start) and WW II (which resulted from the confiscatory provisions of the Versailles Treaty architected by the cabal, despite repeated attempts by Germany to avoid war) were converted to a debt by the allies - who ascribed a value to it that only a victor could justify. While Germany is certainly not faultless in losing the war, the issue as to what constituted fair reparations in a series of wars it did not start is subjective at best. The cabal not only fomented these wars, but was central to architecting the punitive and unjust reparations that perpetuated them.
Who were the losers? Both the Greek people and the German people. Who were the winners? The cabal.
Based on his comment "Germany is profiting from Greece as it extends loans at comparatively high interest rates." you would think that it is the German people that are benefiting from this con, not the cabal. Is he serious?
In my view it is Piketty that demonstrates the “infantile” behavior that he ascribes to Germany, by failing to properly attribute blame. He looks like a spoiled child just itching to revisit old national world war wounds without any grounding in the facts to justify his position.
Given the great cover he ran for them, I wonder what ties he has to the cabal?
A whole lot of Bankster penis was shined in these comments.
Expect more from ZH.
Fuck the Krauts, the ECB and the fucking IMF.
Fuck Ben and Krug too.
Pickett loves to make his comparisons & they make great judgments of what is approriate.
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.
OK The Great Depression was equivently equall to the Great Recession. 2008 ve. 1929. but 2015 is not 1953. There was this BIG WAR in between. Germancy, France, much of the world pield on debts to rebuidl their destroyed societies & deal with the massive lose of life.
Ok so how many Greek cities were bombed to ash & how many millions of Greek citizens died in this Financial Crisis because that's your real comparision. While the Great Depression was Great it was not hugely out of line for the other large depression that occurred after the start of the industrial revoluiton.
Of couse Greece has never been prohibited from defaulting. They just will have an issue staying in the EU if they do.
German government makes final war reparations WWI in 2010. I think Pikkety has proven to be quiet flexible with the facts.
http://www.spiegel.de/international/germany/legacy-of-versailles-germany...
Anybody remember France paying any reparations after the French Revolution and Napoleanic Wars? Go back to sleep Piketty.
And this guy thinks he invented something. Germany overpaid in many ways for their loss in WW1 in Versailles. For the WW2 it's paying up to this day, those were true calamities. Now tell me, what war did the Greeks accumulated their debts in? They're simply living it up on the backs of other nations.