Here is a thought. Is it possible that the economic crisis we face today was caused by the very practices that the government is now trying to encourage in order solve it?

Okay, it isn’t anything new. Cheap money led to a credit boom, the bubble burst, and now the government is responding by trying to make credit cheap. The complaint has been aired here enough times, and across the ether the blogosphere is alive with similar observations.

But yesterday saw a different twist on this theme. The significance comes not so much in what was said, but who said it. And its implications go right to the nub of the matter.

Angela Merkel, the German chancellor spoke out yesterday. “Excessively cheap money in the US was a driver of today’s crisis,” she said before Germany’s parliament. “I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis.”

The EU commission wants to see action. It has proposed a 200bn euro stimulus plan across Europe – with the EU commission contributing 30bn euros.

It’s a bold plan, and comes straight out of the Gordon Brown school of economics.

It is strange, though. GB himself may criticise Cameron and Osborne for being the only people in the world who are against fiscal stimulus, and yet his colleagues from Germany seem to share Tory doubts.

As was said here yesterday, however, the issue is more complex than that.

If there is just one economy that could justify a big Keynesian fiscal boost, that economy is called Germany.

Just as you can criticise us for spending more than we produce, you can criticise Germany for spending less than it produces – meaning it has been relying on other countries’ spending to fund its businesses.

Germany’s lack of spending is just as much a part of the modern problem as the UK’s lack of saving.

The real problem we have today is that productive potential has outstripped global demand.

The solution lies in adjustment. The likes of Germany and Japan need to consume more. So does China, although the problem there is complex. After all, China still suffers from massive poverty, and it is still very much a developing economy.

The likes of the UK and the US need to spend less, and invest more.

Perversely, government action is back to front.

In the US and UK they are responding to this crisis by trying to get spending moving again.

In Germany they are responding by being even more frugal.

Until the two sets of attitudes go into reverse, this crisis can not have a long-term fix.

© Investment & Business News 2013