A German economist acknowledges their contribution to the crisis

In a post earlier this year I made the case that German efforts to suppress wage growth within Germany and achieve high net exports did severe damage to the Eurozone by essentially sucking up euros from fellow eurozone members. This is pure beggar-thy-neighbour mercentalism and in the past would have been considered an act of aggression because of the damage it does to net importers. They were left defenceless by EU rules that implicitly encouraged this behaviour by preventing any of the usual defenses against mercantilism from being deployed. When, eventually and inevitably, the surpluses became too great to be ignored it was the deficit countries that were required to do the adjusting, even though it is well known from history that this is effectively impossible without devaluation.

I received some criticism for making this point. I am pleased to see that a German economist has frankly admitted that their policy was indeed mistaken and that it is Germany that as a surplus country they should be doing most of the adjusting by increasing wages, boosting demand and recycling their surpluses.

The tragedy is that all this was known and understood 70 years ago, but the current generation of economists have become so infatuated with their beautiful but absurdly unrealistic macroeconomic models that they rewrote history and ignored reality so that they could justify continuing to use them.