Economic Snapshot

Christian Weller’s latest CAP economic snapshot is full of bad news. Here’s median income by race—going down:

Germany business and policymaking elites seem pretty uniformly convinced that the government has been preventing an unemployment explosion through unsustainable measures (basically paying employers to not lay people off) and that in winter 2009-2010 unemployment is going to explode. They think that recent growth is a minor rebound from a very low level, and that future growth will be sluggish or possibly even feature a “double dip.” Nevertheless, they think we need to be very worried about inflation!. The one person who bothered to face up to this contradiction at all said that in his opinion there’d been a reduction in Europe’s growth potential, comparable to what happened during the oil shocks of the seventies. But he didn’t provide any account of what would have caused such a reduction or why he believed it happened.

I note that Americans often say Germans are paranoid about inflation because hyperinflation led to the Nazi takeover. This is just bad chronology. The hyperinflation ended about five years before Hitler started his rise to power. The economy had stabilized and in principle the Weimer Republic could have kept on keeping on, but then came the Great Depression, a spike in unemployment (but not inflation!), a succession of elections in which the Nazis did better-and-better, and eventually they took over. On any kind of straightforward reading of the sequence of events the moral of the story is that we should be very afraid of mass unemployment.