Tag Archives: germany

UPDATE: Europe is paying for its past excesses: European interest payments as % of GDP.

With news out today of a weak German bond auction and troubles with the Dexia bailout, I thought it time to update my table of European interest payments as % of GDP. But first, the news:

  • Germany auctioned 6 billion euros of 10-year government bonds, but attracted just 3.889 billion euros of bids, a bid-to-cover ratio of just 0.65. Six of the last eight bond auctions have seen bids below supply. In these cases, the Bundesbank has bought the remaining debt. German yields are rising as a result. Germany’s 2-year yield is up 0.06% to 0.44% and 10-year yield is up 0.13% to 2.12%.
  • Belgian yields are soaring to new highs on reports that the bailout of Dexia was failing. Belgium’s two-year yield rose 0.69% to 4.98% and 10-year yield increased 0.40% to 5.47%. In France, also a partner to the Dexia bailout, the 2-year yield rose 0.14% to 1.86% and the 10-year yield jumped 0.15% to 3.68%.
  • No news other than the above is pushing up rates across most of Europe. Greece’s 1-year yield skyrocketed 38.6% to 306.7%. The 2-year rate jumped 4.6% to 117.9% and the 10-year year yield rose 0.18% to 29.04%. All are record highs. Over in Italy, 2-year yields rose 0.17% to 7.15% and 10-year yields increased 0.15% to 6.97%.

So now, let’s see an updated table of where Europe stands in its ability to pay the interest on its debts.


2-year interest rate


Interest payment %age of GDP

Change in Interest payment









































Great Britain





United States





As you can see on the above table, only Portugal had a significant decrease in interest payments going forward. In contrast, Greece, Ireland, Belgium, Spain, and France all say significant increases. Whereas previously, only four countries had interest going forward exceeding 3 percent of GDP, six nations now face that situation.

Clearly, as anybody watching the stock market decline here knows, the European debt crisis is getting worse and the European leaders have yet to find a solution. Unfortunately, with the budget mess in Washington and debt-to-GDP ratio of about 100%, higher than most of those “risky” European nations, the United States will soon be facing the same problem.

Repeating history: The future of Greece, Europe, and the United States.

I’m rereading The Path to Tyranny to prepare it for a second printing and came across this section about Germany in the late 1920s and early 1930s (before the Nazis took over) very relevant for today:

The country’s economic problems worsened and the government approached bankruptcy. To reduce the budget deficit, the government raised unemployment insurance premiums, increased duties on wheat and barley, reduced pension and unemployment benefits, and cut the salaries of civil servants. The Social Democratic Party’s popularity declined even more when these measures pushed up unemployment even further and weakened the already fragile banking system. The government was trapped in a no-win situation. It cut back on spending to avoid bankruptcy, but this increased hardship on the people and reduced the government’s popularity. On the other hand, the government could have continued providing welfare to the people, but this would likely have forced Germany to default on its debt, which would have resulted in massive inflation and a flight of capital out of the country. The German government’s large deficits, which were the result of the economic depression combined with Germany’s already semi-socialist economy, forced Germany to decide between two equally bad choices. The resulting economic and political crisis was inevitable, regardless of what the government chose to do.

Are we in the same no-win situation today? If governments cut back on spending, this reverse-stimulus will hurt the economy and the removal of economic support will certainly increase the pain for many poor people. However, if the government continues with its deficit spending, bankruptcy will eventually occur, first in Greece which already has debt to GDP of 173%, but eventually in most if not all Western countries.

The socialist promises of the Nazis

A “friend” of mine just wrote “Hitler’s Mein Kampf is a conservative favorite” in a comment to a facebook post of mine. As a conservative and a Jew, I am upset and angered by this comment. Furthermore, as somebody who has studied conservatism and Nazism, I am perplexed by people’s ignorance and/or stupidity.

In a first, I am going to post an entire section from my book, The Path to Tyranny: A History of Free Society’s Descent into Tyranny. (The bracketed numbers are the citations which are not included here.) Of course, it helps to read the previous sections showing how Germany got to where it was in the late 1920s and also the previous chapters which explain some of the terminology, including what is meant by socialism and fascism.

Nazi Promises

Throughout the 1920s, the Nazis were a non-entity in German politics. In the May 1928 federal election, the National Socialist German Workers Party received just 2.6 percent of the vote.[766] Within four years, the Nazis would become Germany’s largest political party. After another year, Adolf Hitler would become dictator of Germany and all other political parties would be banned. This remarkable rise to power came about through the skilled use of populist rhetoric, including promises of wealth, equality, and national rebirth. The German people, disillusioned with the failures of the center-left coalitions of the 1920s, were swayed by this new party that promised the benefits of both left-wing socialism and right-wing authoritarianism and nationalism.

As the name implies, the National Socialist German Workers Party was founded primarily to promote socialism in Germany. National Socialism originally stood for partial collectivism aimed primarily at large industrial corporations, leading financial institutions, and wealthy landowners, as detailed in the party’s Twenty-Five Points of 1920.[767] The Twenty-Five Points included the following socialist demands:[768]

  • “Every citizen shall have the possibility of living decently and earning a livelihood.”
  • “All unearned income, and all income that does not arise from work, be abolished.”
  • “Total confiscation of all war profits.”
  • “Nationalization of all trusts.”
  • “Profit-sharing in large industries.”
  • “Increase in old-age pensions.”
  • “Communalization of large stores which will be rented cheaply to small tradespeople.”
  • “A law to expropriate the owners without compensation of any land needed for the common purpose.”
  • “The abolition of ground rents, and the prohibition of all speculation in land.”
  • “Usurers, profiteers, etc., are to be punished with death, regardless of creed or race.”
  • “The State must assume the responsibility of organizing thoroughly the entire cultural system of the people.”
  • “Specially talented children of poor parents, whatever their station or occupation, be educated at the expense of the State.”

Many today believe that the Nazis were capitalists, despite the evidence of Nazism’s socialist roots and agenda. Jacques Ellul, a leader of the French Resistance in World War II, philosopher, and law professor, writes, “The dogmatic and elementary interpretation of Nazism as having been conceived by capitalists to counter communism, and a bourgeois tool in the class struggle, has gained incredibly broad acceptance as a self-evident fact, despite its contradiction of fact. Even after his alliance with certain capitalists, Hitler controlled them as much as they did him.”[769] In 1927, Hitler said, “We are socialists, we are enemies of today’s capitalistic economic system for the exploitation of the economically weak, with its unfair salaries, with its unseemly evaluation of a human being according to wealth and property instead of responsibility and performance, and we are determined to destroy this system under all conditions.”[770]

The Nazis failed to draw left-wing support away from the Social Democratic Party and the Communist Party, so they toned down their socialist economic propaganda beginning in 1927, though they continued to believe in government control of the economy.[771] The Nazis adopted the “third way” style of the Italian Fascists by supporting partial socialism with some government ownership of business and heavy regulation of large businesses, but limited regulation of small businesses and individuals.[772] In 1931, Hitler said, “I want everyone to keep the property he has acquired for himself according to the principle: common good takes precedence over self-interest. But the state must retain control and each property owner should consider himself an agent of the state… The Third Reich will always retain its right to control the owners of property.”[773] Hitler claimed that property could be privately owned but, in reality, the individual would not retain control over it. By controlling “the owners of property,” the state obviously controls the property as well. As Stanley Payne, the eminent authority on fascism writes, Hitler “boasted that there was no need to nationalize the economy since he had nationalized the entire population.”[774] As late as 1941, Hitler declared, “basically National Socialism and Marxism are the same.”[775]

Though Hitler and the Nazis remained committed to socialism throughout, in theory and in practice, their new toned-down “third way” socialism found support among the middle class,[776] who feared the radical left but were still enchanted by the utopian promises of socialism. The new Nazi economic platform also found support among the land-owning farmers. Whereas the Twenty-Five Points vowed to take land away from its owners without compensation “for the common purpose,”[777] by 1930 the Nazis had dropped that proposal[778] and were offering aid to the land owning peasant farmers and praising the peasants as the defenders of German morality and tradition.[779] The Nazis also promised high prices and ready markets for the farmer’s agricultural products and extolled the virtues of “blood and soil” and the “agricultural estate.”[780]

Considering the working class was already aligned with the Marxist parties, Hitler and the Nazis focused their campaign on the middle class, who were also suffering under the weak economy.[781] The new strategy resulted in gains in state elections and increased campaign donations.[782] The Nazis also sought the support of the industrialists, a natural ally when they started presenting themselves as the alternative to the communists and other radical left-wing socialists. Many industrialists were wary of the new, unstable, violent, and radical Nazis, yet some industrialists still gave the Nazis much needed financial support in the 1920s, though they also supported the much larger and less radical conservative German National People’s Party.[783] As the Nazis attracted larger shares of the vote in elections and especially after Hitler became Chancellor, the industrialists gave much more money to the Nazis,[784] partly to help the Nazis defeat the communists, but also to win their favor after their inevitable political victory.

The Nazi agenda went well beyond promises of economic prosperity. The Nazis also promoted German nationalism and Aryan superiority, which helped lift the spirits of many native Germans after the humiliating defeat in World War I, the disastrous hyperinflation of the early 1920s, and the economic depression that began in 1929. Point four of the Twenty-Five Points detailed the Nazis’ German exclusivity: “Only those who are our fellow countrymen can become citizens. Only those who have German blood, regardless of creed, can be our countrymen. Hence no Jew can be a countryman.”[785] Although this anti-Semitism became a centerpiece of the Nazi agenda once in power, it was not instrumental in the Nazis’ rise to power because they toned down their anti-Semitic propaganda during their election campaigns.[786] Thus, the rising fortune of the Nazis had little to do with any anti-Semitic rhetoric, though everybody voting for the Nazis understood their hatred of the Jews, given that it was part of the Twenty-Five Points and was a centerpiece of Hitler’s Mein Kampf. Nevertheless, by promoting Aryan superiority and blaming the Jews, capitalists, republicans, and other liberals for Germany’s problems, German nationalism became the centerpiece of the Nazi agenda and enabled the Nazis to attract members from all economic and social classes.[787]

Like their fascist cousins in Italy, the Nazis also took a pro-military position. After World War I, the Weimar republic did not support the military, even refusing to build a monument to the war dead or issue a commemorative medal.[788] Of course, this upset many veterans and families of the war dead, and the Nazis pursued these disaffected Germans by favoring a strong military, reoccupation of territory lost in the war, and expansion of Germany to include all German-speaking people. The Nazis claimed “National Socialism means peace,” arguing that only a strong Germany can defend against an invasion by France or the Soviet Union.[789] Like the Fascists in Italy, the Nazis were always seen in their military uniform. When Hitler met Mussolini for the first time in 1934, Hitler wore civilian clothing at the insistence of his advisors, whereas Mussolini was dressed in his military uniform. Hitler appeared weak next to Mussolini and he vowed never to make that mistake again. From then on, Hitler was always in uniform when making public appearances.[790]

The Nazis managed to exceed the Italian Fascists in their development of a myth culture, with their ever-present swastika and promotion of the old German folk traditions and rituals. The Nazis also exalted Hitler, well beyond what the Italians did with Mussolini. Many Nazis saw Hitler as a Christ or a Messiah[791] who will save Germany from Jews, foreigners, capitalists, and communists. For example, in 1941, the Nazi newspaper Volkischer Beobachter announced, “The Fuhrer is the highest synthesis of his race… He embodies the universalism of Goethe, the depth of Kant, the dynamism of Hegel, the patriotism of Fichte, the genius of Frederick II, the realism of Bismarck as well as the tumultuous inspiration of Wagner, the perspicacity of Spengler.”[792] Thus, their youth organization was not called the German Youth or even the Nazi Youth, but the Hitler Youth. Hitler became the infallible god of the Nazis and of Germany.

By adapting their agenda to meet the desires of the people and courting unaffiliated groups, the Nazis drew support from various geographic areas and several economic and social classes.[793] Their focus on nationalism, a strong military, authoritarian leadership, and “third way” socialism, with promises of economic prosperity and equality, enabled the Nazis to win over industrialists on the right, peasants on the left, and many in the center, especially World War I veterans. By organizing this coalition of disparate interests, the National Socialists quickly grew from a political non-entity into Germany’s dominant political party.

* This was an excerpt from The Path to Tyranny: A History of Free Society’s Descent into Tyranny.

Ready for round three of the sovereign debt crisis?

First came Greece. Next was Ireland. Next up may be Portugal.

Portugal under pressure to seek EU/IMF aid

Pressure is growing on Portugal from Germany, France and other euro zone countries to seek financial help from the EU and IMF to stop the bloc’s debt crisis from spreading, a senior euro zone source said on Sunday.

Some preliminary discussions on the possibility of Portugal asking for help if its financing costs on markets become too high have taken place since July, the source said.

No formal talks on aid have started yet, a number of euro zone sources said, but the pressure was rising in the Eurogroup, which brings together euro zone finance ministers.

“France and Germany have indicated in the context of the Eurogroup that Portugal should apply for help sooner rather than later,” the senior source said, adding Finland and the Netherlands had expressed similar views.

The article continues that Portugal and Germany are denying all the above, but then points out that this was the case before Ireland got its bailout. The article then returns to reality.

The growing pressure on Lisbon follows a sharp rise in Portuguese 10-year bond yields at the end of last week to euro lifetime highs above 7 percent, as investors worried about the prospect of up to 1.25 billion euros of bond supply it will offer at an auction on Wednesday.

The yield of five-year Portuguese bonds on the secondary market is 6.43 percent and 10-year paper trades at 7.26 percent. Economists say a key question for Portugal is how long it can sustain the high yield levels, and the auction will be an important gauge of that.

Portugal and the EU can fight reality for only so long. In all likelihood, the bond market will force Portugal to get help. And then it will force Spain and Italy to do so. Belgium may also need help if they can’t form a government. With the at-risk economies slowing due to austerity and countries like Germany and France giving free money to them, even those countries will be in economic trouble.

How long will Germany and France give away their money to others instead of saving it for themselves? How much longer will the Euro last?

Portugal and Spain deny need for aid, but it doesn’t matter what they think or say.

Even if the MSM and government officials did not see this coming, you and I certainly did.  Marketwatch reports:

Portuguese and Spanish officials scrambling Friday to head off speculation that Lisbon or Madrid could soon be forced to seek help to meet their borrowing needs.

A spokesman for the Portuguese government said a report in the Financial Times Deutschland newspaper — that Lisbon was under pressure from the European Central Bank and a majority of euro-zone countries to seek a bailout in order to ease pressure on Spain — was “totally false,” news reports said.

Meanwhile, Spanish Prime Minister Jose Luis Rodriguez Zapatero said in a radio interview that he “absolutely” ruled out a rescue for Spain, saying the nation’s deficit-reduction measures were well under way and that the economy, while still weak, has touched bottom.

OK, so Portugal and Spain continue to deny their need for a bailout or loans from the EU or IMF. Nothing new there. But the market disagrees:

The yield premium demanded by investors to hold 10-year Spanish bonds over German bunds widened to a record 2.63 percentage points as Spain’s 10-year yield continued to climb above 5.10%.

The cost of protecting Portuguese and other peripheral euro-zone sovereign debt against default through credit default swaps, or CDS, continued to rise.

The spread on five-year Portuguese CDS widened by 20 basis points to 500 basis points, according to data provider Markit. That means it would cost $500,000 annually to insure $10 million of Portuguese debt against default for five years, up from $480,000 on Thursday.

The euro fell to a two-month low versus the dollar to change hands at $1.3236 in recent action.

Portugal, with 10-year bond yields above 7%, was long seen as the next most likely candidate to seek a bailout after Ireland. Borrowing costs under the EFSF are seen at around 5% to 6% over three years.

Uh oh! As I wrote in a previous post:

Spain, Portugal, and Italy may not be in trouble, but if people start thinking they are “at risk,” they’ll withdraw their funds and it will become a self-fulfilling prophecy.

Technically speaking, Portugal and Spain may not need help right now, but they will most certainly need help if interest rates rise too much. But the report continues:

News reports, meanwhile, said that Germany this week rejected a suggestion by the European Commission to double the size of Europe’s 440 billion euro ($588 billion) bailout fund for euro-zone governments. The euro-zone contribution is part of the total €750 billion rescue program put in place with the International Monetary Fund in the spring.

Will Europe be willing and able to bail out Spain if it comes to that? Germany appears to be having second thoughts. Why should Germany waste its money bailing out another country? More so, how much money did Spain contribute to the bailouts of Greece and Ireland as part of the EU, money it no longer has to fix its own problems? Germany may want to keep its cash just in case it needs it.

In fact, Germany is one of the best fiscal situations in the entire world. Yet even it is balking. As Margaret Thatcher reported said, “The trouble with socialism is that eventually you run out of other people’s money.” Ireland and Greece have used up much of Europe’s money and good will. Now, there is a lot less left for Portugal and Spain.

Good luck Europe.

Head of European Commission warns we are back on the path to tyranny

The UK”s Daily Mail reports:

Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned.

In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money.

Meanwhile, the head of the European Trade Union Confederation said:

This is 1931, we’re heading back to the 1930s, with the Great Depression and we ended up with militarist dictatorship. I’m not saying we’re there yet, but it’s potentially very serious, not just economically, but politically as well.

After World War II, just about everybody swore off fascism, even though it continued to exist, most notably in Spain and Argentina. After the fall of the Soviet Union, the world said the same thing about communism. But Friedrich Hayek warned us in the 1956 preface to The Road to Serfdom:

Though hot socialism is probably a thing of the past, some of its conceptions have penetrated far too deeply in the whole structure of current thought to justify complacency.

Not only have we seen outright socialism reappear in places like Venezuela and Bolivia, it slowly took over Europe and the United States so that government now accounts for 47% of the European economy and 43% in the US.

Now we face a challenge similar to the one we faced in the 1920s and 1930s. Will we embrace totalitarianism and its false promises of effective government, cradle-to-grave support, and national rebirth as Germany, Italy, and the Soviet Union did? Or will we re-embrace liberty, economic freedom, and personal responsibility that our Founding Fathers gave us and resulted in the freest and wealthiest society the world had ever seen?