Germany's Lead

Germany is taking a "wait and see" attitude before throwing any more into the "bailout" pyre.

Maybe the pain remembered is keeping some from repeating the past.

The policies started during the Weimar Republic, which was organized after the brief "German Revolution" of 1918, were meant to accomplish two goals; 1) Unite all Germans under a more democratic representation, and 2) Manage the economy after the austere repayment structure placed on Germany by the Versailles Treaty.

As history notes, the Weimar period was devastating for Germany. In 1922, the Germans defaulted on some reparation payments stemming from Versailles, and the industrial centers of the Ruhr were occupied by French and Belgian troops. The economy spiraled downward into hyperinflation as the Weimar leaders printed more and more money to keep the miners and laborers of the Ruhr, as well as the industries which used their output, from fomenting revolution.

Starting in 1923, Germany appeared to be on the mend. Yet, the only reason was the increasing amount of debt, taken mainly from the US. From 1923 - 1929 unemployment rose and exports dropped, yet because of the level of foreign borrowing, the government was able to spread the money sufficiently enough to give the appearance the economy was OK.

As unemployment grew, the political atmosphere heated up, and the Weimar leaders borrowed more and more, attempting to create jobs. The US crash of 1929 ended all delusions that Germany was a stable investment for profit. With no more money to borrow, the Weimar leaders were at the end of the road.

The effects of reparations from WWI, the occupation of the Ruhr, and hyperinflation, lead only to insurmountable debt. In 1932, Germany entered another phase.........

History is apparently not lost on the Germans.

"As the United States pushes governments around the world to spend more to replace the demand lost from declining American consumption, Chancellor Angela Merkel’s main argument is that heavy debt could be a drag on the Continent’s economy far into the future.'

"At the same time, Germans warn, a bailout would keep more profligate countries — Greece, Italy and Spain are often mentioned — from making the hard choices....."

Lost in the discussion of the past few years were attempts by the Germans to cut the current crisis off at the pass;

"When Germany tried to put hedge fund regulation on the agenda two years ago, Britain sided with the administration of George W. Bush in opposing the idea. But two weeks ago at a meeting in Berlin, Mr. Brown lined up alongside Mrs. Merkel and Mr. Sarkozy in demanding close regulation of the financial sector."

“These reforms, which I have been calling for some time and before the global meltdown, are crucial,” Mrs. Merkel said. “It is about introducing transparency into the system.”

Transparency in the system. Now there's an idea.