Apparently, it was all a misunderstanding. You may recall, last week Mirek Topolánek, the man who finds himself in the rather odd position of no longer being Prime Minister in his own country, the Czech Republic, and yet is EU President, said that Barack Obama’s wishes for a global fiscal stimulus were a “road to hell”.
Well, it appears media coverage of his comments was not actually telling us what he meant at all.
In a rather sombre article in The Times this morning he said: “I used the rather hyperbolic simile of the ‘road to hell’ in my speech to the European Parliament last week to warn against the danger of temporary measures – such as excessively increasing public borrowing, nationalising or subsidising banks and industries, putting up protectionist barriers or enforcing ‘buy American’ clauses – becoming permanent. It was in this context that I referred to the adverse experience of protectionism and state intervention in the US in the 1930s.”
You see, the hapless Mr Topolánek, who one assumes has sore knuckles after they were rapped last week, was worried about protectionism.
But there is a snag.
If the US spends, and the Germans keep stum, then that means US taxpayers’ money will leak out, and some of it will be used to buy German products.
This will create resentment in the United States, and the call to ‘buy American’ will grow.
Germany may lecture the US and the UK on excessive Anglo-Saxon spending, but it was this excessive spending that boosted her economy. Without Anglo-Saxon excess, German prudence would have been catastrophic for the German economy.
Germany wants the world to be like her, and enjoy big balance of payments surpluses. But as Roger Bootle pointed out this morning in the Telegraph, it is just not possible for all countries to be in surplus. After all, globally, exports and imports should balance out.
If a country sells more than it buys, the result is someone else must be buying more than they sell.
The only possible sustainable fix to the global crisis, is one in which countries with big surpluses spend more. And frankly, countries with big deficits spend less.
So when Angela Merkel slates Anglo-Saxon excess, and Mirek Topolánek warns we are trading his road to hell, they are half right. The US and the UK do need to save more, and spend less. But they are also half wrong, for other countries, and that very much includes Germany and Japan, need to spend more and save less.
And for as long as this debate rambles on, more bad news will come hurtling at us, just like a bat out of hell.
© Investment & Business News 2013