What the USA can learn from Germany

A great post by Tyler Cowen (author of Discover Your Inner Economist). History may help in explaining why Germany has adopted a policy of fiscal shrewdness. It lost two World Wars had hperinflation and post war the country was ideologically divided. Keynesians have advocated fiscal expansions during times of low economic activity but does this always work? Germany spent a significant amount of money in improving the supply-side of their economy and it has now paid dividends in the form of booming exports and falling unemployment (currently 7.5% and falling). Germans believe that adding debt, which is either private or public, will not solve the current economic problems. For the Germans debt can provide the illusion of relief and thus delay their resolve. An expansionary fiscal policy tend to be a band aid for what are very often more underlying problems. Click here for the whole posting.

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