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What the NYTimes should have written

Here is the NYTimes’ twisted characterisation of the difference between the Obama and Merkel visions –

At the heart of the debate is the question of how far governments must bend to the power of markets. Mr. Obama sees retaining the stability of markets and the confidence of investors as a primary goal of government and a prerequisite for achieving any major changes in public policy. Mrs. Merkel views the financial industry with profound skepticism and argues, in almost moralistic fashion, that real change is impossible unless lenders and borrowers pay a high price for their mistakes.

“It’s a battle of ideas,” said Almut Möller, a European Union expert at the German Council on Foreign Relations. “There is a different understanding of how to set up a sustainable economy in a globalizing world. Here there is a major rift.”

It will be difficult to know for weeks, or maybe even in months, which approach is right. But it is clear that the stakes are high, with the health of the world economy, the European Union and perhaps Mr. Obama’s presidential hopes hanging in the balance. Economists have fretted for months that forcing austerity plans on Europe’s troubled economies — while a good long-term solution — could lead to deep recessions in the short term, compromising any chance for effective change.

On a political level, Mrs. Merkel could look back on last week’s meeting of leaders in Brussels and declare, “We have succeeded.” Where her mentor, former Chancellor Helmut Kohl, failed, Mrs. Merkel managed to push through enforceable oversight of government spending that would allow the European Court of Justice to strike down national laws that violate fiscal discipline.

Initial market reaction to the Brussels meeting was positive, but that has happened before as deal after deal has been struck between European leaders. Skeptics say that, economically, Mrs. Merkel, the hard-line austerity queen of Europe, has won a hollow victory, one that will fall apart like every other solution that was proclaimed as lasting but proved to be fleeting.

“If the new arrangement turns out to be too toothless to enforce the rules, we’ll be back to square one,” said Thomas Klau, a political analyst and head of the Paris office of the European Council on Foreign Relations.

Just ahead of Mrs. Merkel’s unexpectedly robust success, Mr. Obama issued his unheeded warning from across the Atlantic. “There’s a short-term crisis that has to be resolved,” he said, “to make sure that markets have confidence that Europe stands behind the euro.”

Mr. Obama is fiercely proud of the record he achieved in keeping not just the United States but also the entire world out of an acute financial meltdown after 2008, presiding over enormous stimulus spending in tandem with unrestrained support from the Federal Reserve. The president and his allies now say that in doing so, they may well have prevented the world from falling into another Great Depression.

By ignoring the short-term threat, American officials say, Mrs. Merkel is unwittingly courting the very threat they so narrowly managed to keep at bay. Strong governments can borrow cheaply, mainstream economists on both sides of the Atlantic argue, and have an obligation to intervene more aggressively than they would in normal times to make up for the slump in private demand.

Germans are staunchly opposed to any solution that involves greater debt, but even more so to policies that might court inflation, their historic obsession. Policy makers in Berlin and at the Bundesbank headquarters in Frankfurt have urged restraint on the part the European Central Bank, insisting it should not buy up too many bonds from heavily indebted euro zone countries.

I have a different take.

Let me write this article again –

At its heart, Germany and the US have different views on the danger of the banking system and financial markets.  The US currently views banking as not only benign, but vital to the health of the economy.  Fractional reserve banking is seen as the font of wealth and dynamism.  Germany sees the making of real things, rather than embezzlement and counterfeiting, as the source of real wealth.  Who has the correct view?  Self-evidently Germany.  But that doesn’t mean the bully can’t steal indefinitely and call it wealth building.  Which is why the UK decided to protect its banks from regulation and why the US decided to save its banking system instead of the broader economy.

This is a fight over the legitimacy and efficacy of modern banking.  One side sees it as deeply flawed and in need of control and regulation.  The other side sees it as morally beneficial – or at least as morally neutral – and does not have an aversion to embezzlement but rather celebrates it as a source of national wealth.

The unfortunate reality only occurs at the end of the Ponzi scheme, when the scales fall from people’s eyes and reality is revealed.  It has been – all along – a scam to induce the productive to transfer their effort and toil for little or no value.  They have been enslaved.  Germany doesn’t like enslavement.  The US doesn’t like giving up the long-standing master-slave relationship that it has found impossible to forgo since its inception.

It is about morality.  And the wealthy today are rarely moral.  They rarely have been.

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