German austerity v. US profligacy – guess which one is working out best?
While the US remains mired in recession (despite the claim its over) and the usual suspects are claiming we need to spend even more money we don’t have, Germany has managed a minor miracle. Eschewing a large stimulus package and instead opting for austerity and pro-business legislation, it has seen almost the opposite of US results:
"Although October’s decline in unemployment turned out weaker than expected, the underlying trend in the German labor market clearly remains one of rapid improvement on the back of strong economic growth," said Aline Schuiling from ABN Amro.
Data on Europe’s biggest economy over the past week has been bullish, signaling its unexpectedly strong recovery could hold up in the face of signs of fragility in the global economy.
Consumer morale remains at its highest level since May 2008 going into November on expectations for a further rebound, a survey by GfK market research group showed on Tuesday.
Business sentiment hit its highest level in 3-1/2 years in October and firms’ expectations also improved, a survey showed last week, and the corporate outlook continued to improve on Thursday.
As I’ve pointed out in many other posts, this isn’t rocket science. People respond to incentives. People respond positively to positive incentives. That’s what is happening in Germany which has economically battled back first from the absorption of East Germany and now a deep recession to a position of prosperity and growing economic stability.
Meanwhile here we’re about to go into QE2 all while popinjays like Paul Krugman encourage us to go more deeply in debt as a country because everyone knows that government spends money much more wisely and well than do individuals.