Germany's Schaeuble Blasts Central Banks: Money Printing Leads To Financial And Debt Crises

Thanks largely to his prominent role in Greece’s protracted bailout negotiations, German Finance Minister Wolfgang Schaueble has become something of an international symbol for fiscal rectitude. 

Over the course of six painful months of talks between Athens and Brussels, the incorrigible FinMin was the go-to source for the prompt denial of any and all “Greece is fixed” rumors and by the time it was all said and done, Schaeuble managed not only to humiliate Alexis Tsipras by forcing the Greek premier to effectively sell out the Greek people’s referendum “no” vote, but also to serve notice to France and any other EMU debtor countries who might be listening that anyone unwilling to get in line may be served with a euro “time-out” notice from Berlin. 

By “get in line”, we of course mean adopt the German version of fiscal responsibility, which is the subject of some debate currently as pressure mounts to find a solution for the region’s worsening refugee crisis.

Speaking to the Bundestag on Tuesday, Schaeuble delivered a sharp critique of the world’s addiction to debt and central bank printing press money, excerpts from which along with some commentary, can be found below, courtesy of Reuters:

An excessive reliance on debt and central bank stimulus is no way to manage an economy, German Finance Minister Wolfgang Schaeuble said on Tuesday, defending Berlin's pursuit of a balanced budget.


Germany has faced calls from European peers to invest more to stimulate demand with a view to generating more growth across the euro zone, but Schaeuble said a policy aimed at delivering sustainable public finances was the best course Berlin could take.


"Fewer debts, fewer crises, more sustainable growth ... that is the best policy we can produce in these times."


The government, which has agreed to free up an additional 6 billion euros ($6.7 billion) to pay for a record number of refugees arriving in Germany this year, wanted to deal with the influx without taking on new debt, Schaeuble said.


"We shouldn't pass on the bill for the tasks that are facing us now to future generations," he said, adding: "...being in favour of more debt and a further flooding of the markets with central bank money is neither original nor serious."


"Too much growth in credit does not solve any structural problems but leads to financial and debt crises," Schaeuble said. "Central banks' monetary policy measures can do little to change this in the long run."


"In international debates, the voices are growing louder that the overweighting of the financial sector versus the real economy - due in particular to the immense short-term profit opportunities - is a danger for sustainable, global growth."

So summing up, the solution to a debt problem is not in fact more debt, and borrowing from the future to finance the present isn't a very good idea. Furthermore, excessive credit growth leads to crises as can-kicking doesn't solve structural problems while the sacrifice of DM productive sector employment at the altar of short-term profit opportunities along with the financialization of the global economy only serves to undermine sustainable growth. Finally, anyone who advocates flooding the world with freshly-minted fiat money shouldn't be taken "seriously." 

Someone forgot to tell Schaeuble that this kind of thinking has now been officially equated with terrorism...