My letter to the Wall Street Journal re: Italy and Germany

Re: Germany, Italy Data Show Divergence

Dear Sirs:
Let's assume that your neighbor's finances are completely out of control. His family runs a deficit every month, and that deficit gets bigger and bigger. But, not to worry, he can print all the money he needs in order to buy your farm produce and everything else he needs and desires from your extended family, which runs a budget surplus due to a history of financial probity. Would you be happy with this arrangement? You are producing and handing over real goods for ever depreciating pieces of paper. That is what is happening in Europe. Italy, Greece, etc. run budget deficits, print euros, and buy German goods. German exporters are happy, as are their union laborers. But Germany's capital is being decumulated before its very eyes. It is being shipped to Italy, Greece, and the rest of the profligate countries of the eurozone, who have no compelling reason to stop the spending.