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article imageOp-Ed: Herr Katastrophe — Schaubleism ‘Narr Diktat’ and hurting the poor

By Paul Wallis     Mar 18, 2013 in World
Sydney - The habit of ripping in to the poor in as many ways as possible is quite noticeable in European bailouts. Greece and Spain already know the consequences. Now, in Cyprus, depositors are expected to foot the bill for the mistakes of the finance sector.
These things have a common denominator- Wolfgang Schauble, Germany’s finance minister. Disingenuous to a fault, Schauble’s main contribution whenever he appears in the news is to add hardship to a situation.
This guy just doesn’t get off the financial news front pages:
Deutsches Welle quotes Schauble on the much-muttered issue of Britain’s leaving the EU:
German Finance Minister Wolfgang Schäuble has warned against the idea of Britain leaving the EU, claiming it would be "catastrophic." The comments came after the UK failed to stop an EU agreement on new banking rules.
"We have to try not to make the British think ‘Europe isn't concerned about us, we will leave,’" said Schäuble. "Try to imagine explaining to, for example, an Indonesian, that Europe is an incredibly strong, dynamic entity but that it is not in the position to keep a globally oriented member such as Britain. The damage to our reputation alone would be a catastrophe."
The Irish Times quotes Schauble on the Cyprus bailout:
Amid criticism in Germany, German finance minister Wolfgang Schäuble has defended the Cyprus plans as a fair outcome. The German Banking Federation welcomed the Cyprus plan, saying it would “help bring about a return to financial stability in the euro zone”.
The Financial Times on the subject of the German budget, where Schauble has ignored European calls for a stimulus of the German economy to help boost trade in Europe:
...Publication of the budget was deliberately brought forward by a week to bring out the figures before the EU summit, according to German officials. In spite of tough cuts for health, social security and environment, the plan was rushed through the cabinet well ahead of schedule.
It could scarcely have come at a more sensitive moment, with other members of the eurozone, led by France and Italy, looking for relaxation of the tough budget guidelines laid down in the stability and growth pact that underpins the euro.
Note the areas of cuts. All quality of life cuts, and in Europe’s only truly solid economy. The idea is to deliver a surplus in 2015, a year ahead of schedule, and not raise any new debt.
At every turn, Schauble has shown himself to be oblivious to some very odd things when it comes to economic management.
This is a thematic list of motifs for Schaubleism:
1. Cuts will always be made in areas which affect the poor and money flow in that part of the economy.
2. The burden of paying for services will be placed on the people least able to afford it. Hardship for the public is the 100% consistent outcome of EU bailouts under Schauble.
3. Rewards for bankers- The EU has agreed to “limit” banker’s earnings to twice their salary, despite the fact that this collection of layabouts has done absolutely nothing useful in recorded history in the EU. Throughout the Eurozone debt crisis, the bankers have been rewarded at every turn, instead of being arrested or fired as they should be.
A clear series of concepts provide the motive power for Schauble’s decisions:
1. The best way to stabilize an economy in the EU is to shrink it and saddle it with difficult conditions which will apply for decades. Reducing German spending will also help mute one of Europe’s major economic turbines.
2. There is no other way to manage bad and very suspicious loans than to penalize the borrowers.
3. A touching faith in the banking sector which apparently involves believing that the sector has any idea at all what it’s doing or why it’s doing it. The rest of the world got over that idea about 5 years ago.
Schauble is quite unique in one way. His actions are invariably in direct contradiction of economic best practice. Austerity, as practiced by Thatcher and various others, is a nation-killer. Its sole effect is to suffocate employment, strangle investment and reduce the amount of actual economic activity to a timid trickle.
Austerity has never worked. It can’t work in small economies. Cyprus is a case in point. The original demand for € 7 billion was made on a nation which has a net GDP of €30 billion. That’s nearly a quarter of every euro in the economy, simply to qualify for a bailout for a loan. The average per capita earnings of Cypriots are about €25,000- 30,000 per year. Reducing whatever’s been saved out of this paltry sum will hit the bottom line of every Cyprian national.
The idea is to come up with €10 billion to “qualify” for a bailout of Cyprian banks. 30% of national total GDP, to bail out a bank?
There are many ways of dealing with bank debts, and none of them are in play or even being mentioned.
1. Debt can be deferred.
2. Debt can be written off.
3. Debt and interest can be waived.
4. Debt can be quarantined, as in the US.
5. Lenders can be penalized for making bad loans. (This is particularly important in an environment where bizarre loans have been being spruiked around the world and done nothing but cause trouble)
6. Corrupt lending practices can be penalized.
It’s interesting to note that in a banking environment where comparatively small banks are likely to be borrowing small amounts, this situation has arisen.
That’s not a topic for discussion, either. Quite the opposite, under Schaubleism the poor bankers and their rabid incompetence are being limited to making only double their nominal incomes.
The mathematical ability of some of the poorest people in Europe to make any sort of meaningful contribution to the macro-financial situation is zero. If Greek pensions were the sole source of debt repayment, it’d take hundreds or perhaps thousands of years to repay even a few of the bigger amounts involved.
The lower strata of the European economy is a matter of people getting money and waving it goodbye as it sails out the door a few minutes later. This money, however, underpins the cashflow of local businesses, utilities and other economic assets.
The average kid who’s spent 5 seconds in an economics class knows this, but Schauble doesn’t?
I’d like to introduce a new expression into the financial lexicon: “Narr Diktat”. It means literally the “dictate of a fool” in German.
This arbitrary collection of spreadsheet-shuffling by Schauble will do nothing but cause hardship, won’t restart the European economy and can’t seriously be expected to achieve a damn thing in terms of really managing sovereign debt.
Those debts, and the idiots responsible for incurring them, should be obliterated, not “managed”. Improper lending practices, particularly those associated with corruption, should be stamped out with sharpened jackboots. These loans and debts are a clear and visible risk to the EU and to the global economy. It is either naïve in the extreme or corrupt in the extreme to tolerate these practices.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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