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546 sats \ 2 replies \ @GhostofTruth 4 Feb 2024 freebie \ parent \ on: Fiscal Rules Do Not Undermine Investment, But Government Profligacy Does econ
Yes, thank you for mentioning me, but that is really not necessary, in my opinion it is important that we regularly repeat the central topics here and go into them in greater depth. Generally speaking, I would like to add that the German debt brake is a political initiative that was incorporated into the constitution at the time, but which has been and can be revised at any time. This means that, if necessary, this rule can be violated or the debt brake can be abolished altogether. What is important is that at a certain point, the bond market sets a limit for the legislator and the players through rising interest rates and a strong sell-off of government debt. Germany has benefited from the introduction of the euro from the massive economic difference and has cultivated a kind of neo mercantile trade model through a relative undervaluation of the currency (the Deutschmark would be much firmer) so that it could keep its debt halfway under control with a high trade surplus. But this model seems to be coming to an end due to de-industrialization.
What is important is that at a certain point, the bond market sets a limit for the legislator and the players through rising interest rates and a strong sell-off of government debt.
Do you think the debt brake is something legislators only need to consider when there are credibly safer places to store money? I mean on a global scale if there's nothing safer than treasuries, a strong sell off seems impossible, so there's less need to nudge with fiscal rules.
neo mercantile trade model
Does this mean Germany is importing things to resell to other EU states?
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''Neo mercantile'' in the sense that they constantly maintained relatively low labour costs and a cheap currency to get a price advantage on global markets. Of course that had its price as german banks are crediting the deficits of the trading partners.
I think the debt break was a signal to german taxpayers after the debt and banking crisis 2010 with massive bail-outs of german banks to regain trust.
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