Michael Lewis on Germany’s Culture and It’s Role in the Debt Crises

August 16, 2011


In light of Germany’s growing power in Europe and the South’s perceived reliance on Germany’s kindness to resolve their debt issues, Michael Lewis, author of the Big Short and eight other books, examines the situation and the role of Germany’s culture.

Specifically, Lewis discusses how German banks found itself in the thick of the subprime mess, Germans obsession with cleanliness, but hidden preoccupation with poop, and how Germans can be so frugal, yet so susceptible to being beguiled.

Cultural differences & Credit Bubble

The curious thing about the eruption of cheap and indiscriminate lending of money during the past decade was the different effects it had from country to country. Every developed country was subjected to more or less the same temptation, but no two countries responded in precisely the same way. The rest of Europe, in effect, used Germany’s credit rating to indulge its material desires. They borrowed as cheaply as Germans could to buy stuff they couldn’t afford. Given the chance to take something for nothing, the German people alone simply ignored the offer. “There was no credit boom in Germany,” says Asmussen.

German banks, subprime, and ethical differences.

The same instincts that allowed them to trust the Wall Street bond salesmen also allowed them to trust the French when they promised there would be no bailouts, and the Greeks when they swore that their budget was balanced.

“We entered Maastricht because they had these rules, ” he says as we move off to his kitchen and plates heaped with the white asparagus Germans take such pride in growing. “We were talked into this under false pretenses. Germans are by and large gullible people. They trust and believe. They like to trust. They like to believe.”

On why Germany keeps bailing out the periphery and their own banks indirectly :

One view of the European debt crisis—the Greek street view—is that it is an elaborate attempt by the German government on behalf of its banks to get their money back without calling attention to what they are up to. The German government gives money to the European Union rescue fund so that it can give money to the Irish government so that the Irish government can give money to Irish banks so the Irish banks can repay their loans to the German banks. “They are playing billiards,” says Enderlein. “The easier way to do it would be to give German money to the German banks and let the Irish banks fail.” Why they don’t simply do this is a question worth trying to answer.

Lewis thinks there are deeper underpinnings at work :

If you are obsessed with cleanliness and order yet harbor a secret fascination with filth and chaos, you are bound to get into some kind of trouble.

Meanwhile, Germany’s power and influence in the region grows.

As a senior official at the Bundesbank put it to me, “If we say ‘no,’ it’s ‘no.’ Nothing happens without Germany.

Just a year ago, when German public figures called Greeks cheaters, and German magazines ran headlines like why don’t you sell your islands, you bankrupt greeks? , ordinary Greeks took it as an outrageous insult. In June of this year the Greek government started selling islands or at any rate created a fire-sale list of a thousand properties—golf courses, beaches, airports, farmlands, roads—that they hoped to sell, to help repay their debts. It was safe to say that the idea for doing this had not come from the Greeks.

“For better or for worse, the Germans now own Europe. “


Taking all this together, one is left with the conclusion that remains the highest probability and mentioned repeatedly – convergence. Germany will end up underwriting the debt of the periphery in exchange for power over budgets and loss of sovereignty for the periphery.  Over the long run however, Germany will be duped and the German citizens will be subsidizing Greek largess. The Greeks do not pay taxes to their own state. They will not pay taxes to the German empire.  Thus, If Germany is underwriting all European debt, then their bonds are infected. While talk of Germany leaving the Euro will grow, Germany likes the artificially cheap currency for their multinational exporters and is unlikely to leave without an inflation crises.

It’s the Economy, Dummkopf!

Q&A: Michael Lewis on the Future of Europe’s Economy

Jim Rickards on Germany’s Takeover of Europe

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