"Piketty examines the German situation and sees a big reduction in national debt. He says: "After the war ended in 1945, Germany's debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP."
But for starters, Germany's debt was not meaningfully worth 200% of its gross domestic product, because it wasn't servicing it. In fact, it hadn't been doing so for about two decades. In the early years of the Nazi government, Germany defaulted on most of its foreign loans.
What's more, a huge event is completely ignored here. In 1948, Germany reformed its currency in a spectacular fashion, giving birth to the Deutsche mark. The change wiped out "approximately 90% of Germany's cash holdings and deposits," according to economist H. J. Dernburg, who was writing in 1954. It was that event, not the 1953 agreement, that provided the most dramatic reduction to German debt levels — but not without the extreme pain for anyone with any savings.
Wednesday, July 8, 2015
Piketty's argument about Greece's debt has 3 massive holes in it
By Mike Bird of Business Insider. Excerpts: