The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
Subscribe to the Flinchum File
View Archives

Generational Fairness ?

11/26/2012

Despite all the coverage of America’s Fiscal Cliff, the most intransigent obstacle to America’s stock market recovery is the continuing drama in Europe.  Of the 27 member states, most realize that Greece needs help — badly.  The nation most opposed to helping is Germany (along with Finland & Denmark).  In fact, even the IMF has had harsh words for German obstructionism in the last week.  Still, I can understand the sentiment shared by 78% of the Germans of — why should they decrease their standard of living to benefit the “lazy” Greeks, who retire at age 50?

I recall talking with a European tourist in Williamsburg one day, when she said — “You Americans do so love your history.  It’s a pity you have so little of it.”  Maybe, Europe should study its history.

Imagine your grandfather owed money to my grandfather and then your grandfather fell on hard times. Fortunately, my grandfather helped your grandfather and forgave the debt.  Imagine your father owed money to my father and then your father also fell on hard times.  Fortunately, my father helped your father and again forgave your family debt.  Now, imagine I owe you money and have fallen on hard times.  Would you forgive my debt and help my family — as my father and grandfather did to help your family?

After World War I, Germany was deeply in debt.  Some of it was written down, but most of it was forgiven, including Greece’s share.  After World War II, reparations against Germany for starting the war was crippling its recovery.  Germany invaded Greece in 1941 and immediately looted the Greek National Bank.  After the war, Germany agreed it owed Greece about $14 billion in wartime damage.  At 3% interest since Germany signed the 1953 contract to repay the wartime damage, it would now have to repay $97 billion to Greece, largely eliminating this international financial crisis overnight.

Since Germany was forgiven it’s debts, it has produced an economic miracle, while the Greeks have indulged themselves shamelessly on entitlements and early retirements.  Now the tables are turned.  The Greeks owe more money to the Germans and others than they can afford to pay.  So far, the rescue operations have not been enough to save Greece.  The primary obstacle is Germany, but the question is whether Germany will return the favor of forgiving debt of Greece — the same favor that Greece has shown to Germany in the past.

If you are Angela Merkel, how do you tell the German people they should lower the standard of living for their children to support the “lazy” Greeks, just because Greece forgave the debt that the past two generations of Germans owed?  She could say that history demands it!

But, since she faces re-election in September next year, I doubt she will even ask the question.  Still, I pray she has the courage to do the right thing and “fall on her sword” before then.

We are a fee-only advisor providing best interest fiduciary services to clients
in Chesapeake, Newport News, Norfolk, Suffolk, Virginia Beach, Williamsburg, and the surrounding areas of Hampton Roads.

CONTACT BAY CAPITAL ADVISORSWe Will Respond Promptly

Contact Us Bottom