Friday, December 2, 2011

Odd Use of “Bold”

European sovereign debt is held by countries. The lenders are banks and other investment combines. The sovereigns borrowed money in perfectly legal transactions. Failure to pay those debts has consequences. So why is it suddenly bold to transfer those obligations to third parties, thus to the populations of yet other countries, by inflating the Euro? All Europeans lose purchasing power so that some sovereigns are rescued and lenders are held harmless. Rob the weak to pay the powerful—and do so in such a way that it takes a long time to notice? That’s sophistication, not boldness. The sophisticates, like Paul Krugman, are on it. The Germans are resisting. They are now the bad guys.

The author of the piece in the NYT, Nicholas Kulish, through no fault of his own, was born in 1975. He is therefore quite able to write a paragraph like this:

The prospect of a dim historical memory — the antique photograph of the wheelbarrow full of nearly worthless bills — helping to drive the world off the economic precipice and into another deep recession may seem like the height of irrationality and even irresponsibility.

The memory is not dim for somebody like me, born in 1936. I actually saw a big box full of Reichsmarks at a street corner as a boy. The wind was blowing the bills down the street, and nobody bothered picking them up. 1947. I just happened to be on my way to the bakery. My mother gave me half of a cigarette—knowing in advance that it would get us two baked rolls. And it did. Indeed the baker immediately put it in his mouth and smoked it right then and there.

Kulish then goes on to contrast the American love affair with consumerism and the Germans’ dislike of consumer debt, high savings rates, and relatively low rates of home-ownership. In other words the Germans don’t get it. The sophisticated view is that you can stimulate growth, kick-start economies, and get rid of debt by inflating the currency.

The drums are beating because, directly or indirectly, American banks are exposed to the European liabilities as well. We’ve had to bail them out once already—meaning that the innocent had to pay for the guilty. We have not bailed out the miserable little borrowers who signed mortgages they shouldn’t have. We weren’t bold enough. But if our banks start failing again, believe you me we will be bold enough to bail again—if we can’t persuade those timid Germans to embrace the good old times to save our 1 percent.

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