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 Germany Fails to Learn the Lessons of 1931

By Shlomo Maital

 

 

The leaders of Europe all hold shares in Eli Lilly, the drug company that makes and sells Prozac, an anti-depressant. That is the only way I can explain why they are causing a global Depression, and widespread despair among individuals.   The chief culprit is the leader of Germany, the brilliant (no sarcasm intended) Angela Merkel.

     This is not just my opinion. It is the opinion of Niall Ferguson, a  Harvard economist, and Nouriel Roubini, Columbia Univ. professor who foresaw the global crash of 2008-11.  They are writing in the Financial Times, June 9-10, p. 9.  What they say is deeply disturbing.

      The rise to power of a murderous German dictator in 1933 was preceded by massive German bank failures in 1931.  Today Spanish banks are failing, as are banks in Greece, and perhaps in Italy.  Only Germany can initiate a plan to bail them out.  Instead, Angela Merkel foresees a two-tier Europe.  Translation: the strong responsible countries in the North stay, the weak irresponsible spenders in the south, the lazy bums who don’t work or pay taxes, will leave.  The two-tier Europe is her solution. 

   It is pure folly.  Widespread bank failures in Spain will be the beginning of the end for the euro.  You either save the euro, or you abandon it. And according to Ferguson and Roubini, if the euro sinks, Germany will pay a devastating price.  So while Germany now battles the memory of the hyperinflation of the 1920’s,  what it really should fear is the deflation of the 1930’s.  There is no two-tier Europe. Only one tier, or no tier.

   The EU single market had a political vision – to have Germany and France trade and grow wealthy together, so that they would never again fight.  Economic wealth creates political unity.  Now, Germany has forgotten that vision, created by France’s Jean Monnet, and France is too weak to revive it.  Collapse of the economic union will bring political conflict back to Europe. Perhaps not war – but hostility, and the price will be very high, for Europe and for the world.  Blame Germany. 

    The closing paragraph of the article is chilling. “The EU was created to avoid repeating the disasters of the 1930s.  It is time Europe’s leaders –and especially Germany’s – understand how perilously close they are to doing just that.”

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 Is the UK Committing Suicide By Hiking College Fees?

By Shlomo Maital

   Together with my colleague Amnon Frenkel, I recently wrote a report on the rate of return to investment in educating a Technion science and engineering graduate.  The report was based on a Web survey of some 4,450 Technion graduates. The results were striking.  The return (risk free) is on the order of 76 per cent to 192 per cent.   Despite this, during the 2001-2009 decade, university budgets in Israel, including Technion, were mercilessly slashed by governments who believed fiscal austerity was more important than investing in the nation’s future.  All of Europe is now afflicted by this wrongheaded misguided fumble. 

   Now comes a British study, reported by the BBC, which states:

UK graduates contribute to the economy almost 10 times what it costs the state to educate them to degree level, research suggests.   An IPPR think tank and UCU academics union report suggests graduates bring in £180,000 more than those with A-levels over their working life.  An average degree costs the state just under £18,800 per student.

Do the math.  This is a 1,000 % rate of return.  And the British government is scrapping it. 

  The consequence? 

….. in 2000 the UK had the third highest number of graduates among advanced industrialised nations.By 2008 it had fallen to fifteenth because competitor nations had been investing at a faster rate, the report says.   China quadrupled its number of graduates between 1999 and 2005 and is expected to become the world’s largest producer of PhD scientists and engineers.  Recent research has suggested that the number of students graduating in the UK is likely to fall further following tighter restrictions on student numbers, with 15,000 fewer higher education places in September 2012 compared with the previous year and around 25,000 fewer places in English universities.   Recent UK reforms to the higher education system have led to reductions in courses available in key areas such as science, technology, engineering and mathematics (STEM) skills.

      What possible future can Britain have, other than that created by its scientists and engineers?   And what utter folly can lead a government to destroy that future, while competitors in Asia singlemindedly build and enhance theirs?  And why are governments all through Europe committing the same madness?  And since when does scrapping a 1,000% return on investment make sound economic sense?  And why are there economists, some with Ph.D.’s, who approve of this folly and support it? 

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
June 2012
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