One of the big issues surrounding the financial bailouts, something even Obama mentioned during his town hall debate with McCain, is that, in helping these poorly run/failing companies it would free up credit for Americans looking to buy a car or make everyday purchases on a credit card.
“Millions of Americans,” croaked the US Treasury secretary [Hank Paulson], were being denied credit or facing rising credit card rates, “making it more expensive for families to finance everyday purchases”. The notion that families should finance everyday purchases on credit, the [news] anchor [from Germany] commented, “suggests Washington has still to understand what brought us there in the first place”.
“Indeed, the defining feature of Germany’s relations with its western allies since Lehman Brothers vaporised two months ago is that nobody understands anyone any more.
“US, French and British officials puzzle over Germany’s refusal to tackle the recession head-on. German leaders, meanwhile, cannot see why their taxpayers’ money should go into encouraging precisely the kind of behaviour – reckless lending, careless borrowing and overconsumption – that precipitated the financial crisis.
“What is happening is a classic clash of cultures, and anyone puzzling to grasp Germany’s anaemic reaction to the financial crisis and its economic fallout could do worse than take a stroll through its inhabitants’ mental landscape. Much of the economic thinking taking place in German political circles is guided by what Otto Friedrich Bollnow, a mathematician-cum-philosopher, once described as “economic virtues” – frugality, diligence, industry and so on. One widespread notion is that one should not borrow without being in a position to pay back. This is not just a silly cliché about thrifty Germans. Consumer credits, for example, only started to become widely available five years ago. Banks have never offered 100 per cent financing on mortgages other than in exceptional circumstances. Since Germany never had a property bubble, remortgaging is unknown. Most restaurants, supermarkets and the two main consumer electronics chains do not take credit cards. Few people even own one and online purchases are typically done via bank transfers.”
Much of this philosphy is born out from Post-WWII Germany. And I tend to agree that you shouldn’t buy what you can’t afford. Strange that Americans would think of this notion as strange – not having credit cards to buy groceries or electronic products. Would America be in a better position if this were our mentality? It’s hard to say for sure. But what I do know is that I’ve denied myself an LCD television, a snazzy digital camera, a new iPod, etc. all because as tempting as it would be to put it on a credit card I’m in no position to pay any of that back immediately. The notion of buying what I cannot afford seem alien to me.
I get the sense that if these were German institutions that had failed they would not write a blanket check to bail them out. There would be tight regulations. There would be oversight. There would be accountability. I get the impression that Germany has not forgotten it’s history dating back to their Nazi-era past unlike America that seems to have cast aside “The Great Depression” as nothing more than a frivolous attempt to pat an entire generation of people on their backs.