My late mother always told me that name-calling is bad.  She was right, of course, but she was looking at it from an etiquette standpoint.  I think she was also right from an economics standpoint.  If you are going to invest precious resources, like time and effort, into another person, relationship, or situation, then name-calling is a risk to your investment.  I avoid calling anybody by any name worse than “dork” or “geek,” which are both terms of endearment used to describe myself.

Still, I nearly collapsed with laughter when CNBC Jim Cramer referred to Chancellor Angela Merkel as “Herbert Hoover in a pantsuit.”

During the stock market crash in 1929 and the subsequent economic collapse, all we understood about economics was that surplus budgets were good and deficit budgets were shameful, with even moral implications.  Therefore, President Herbert Hoover raised taxes and slashed spending, which seemed logical at the time, but the economy promptly went from recession into depression.  He took precisely the wrong action at the wrong time, and history has been unkind to him because of that.  (No, I’m not endorsing either the Keynesian or Supply Side approaches, but either would have worked better in that particular situation than the simplistic Austrian approach of Hoover.)

Not surprisingly, the Austrian approach is still taken as gospel in its home of Germany, where the hyperinflation following World War I is still a vivid, relevant memory.  As the European economy remains stalled, in desperate need of lift-off by its economic engine (Germany), Merkel wants higher taxes and less spending, like Hoover.  Compounding the problem is that she is pushing hard to impose the same solution on “basket-cases” like Greece, which makes recovery from their depression even more difficult.  European history will be unkind to Merkel, I’m afraid, but Greek historians will be even more unkind.

There is a time for this Austrian approach, but not when the economy needs a kick-in-the-pantsuit.