The New York Times scored a useful interview where German Chancellor Angela Merkel lays out her opposition to increased stimulus spending at greater length. In America, the consensus has been that Germans are simply irrationally afraid of inflationary pressures -- that their resistance to amping up their stimulus package is the product of post-traumatic stress from the hyperinflation that birthed Hitler. But Merkel makes an argument that it's more than that: Demographic trends make it harder for Germany to escape the consequences of debt:Where long lines of unemployed people are the indelible image from the Great Depression in the United States, it is the wheelbarrows of worthless currency during the hyperinflation of the 1920s that preoccupies Germans. Mrs. Merkel has exerted discreet but stubborn leadership in Europe to prevent the kind of overspending that could lead to inflationary pressure on the euro.It is not, she pointed out, simply a philosophical difference. Borrow and spend today, repay down the road, is a particularly difficult proposition for a country with a shrinking population, she said.“Over the next decade we will undergo a massive demographic change, and, therefore, borrowing is a greater burden for the future than in a country with a much more continuously growing population, as in the United States of America,” Mrs. Merkel said.
That's not, on the face of it, an absurd objection. But it's a better argument for loosening Germany's immigration policy than for letting the world's economy collapse. Indeed, elsewhere in The New York Times today, Krugman writes that "one thing that stands out from the history of the early 1930s is the extent to which the world’s response to crisis was crippled by the inability of the world’s major economies to cooperate." Everyone surely had good reasons then, too.
