He calls it the new third world because the region took a step backwards by falling into huge amounts of debt followed by riots and governmental collapse in places like Greece. There are many lessons the reader can learn from this book as long as the reader reads it with a grain Of salt and does get lost in the excessive use Of stereotypes and racial remarks that Lewis makes. Each statement he makes in the book is vital to make a correlation further on to show how culture relates to politics and economics. The most astounding cultural impact I noticed in the book hat led to bad economic decisions was that of Germany.
Lewis mentions on page 137 that the German people liked to be near sit but not in it. He relates this to the reader after mentioning his visit to the German red light district of Hamburg. Lewis asserts the claims that the German people are infatuated with dirt, filth, sit, and are open in their discussion on this topic. However when you look at Germany and its financial status it is fairly stable worldwide and is one of the strongest economies in Europe. It is the foundation for the European Union banking system since the Bundestag had the strongest uncial system.
Germany ended up being the nation that let others borrow money and Germany also houses the offices of the European Central Bank in Frankfurt. On page 145 Lewis mentions that the majority of Europe was indulging itself with loans in order to buy things that the people really didn’t need. On a side note, nations tend to pick up both good and bad qualities from each other and this quality of excessive spending in a time where you don’t need or have the financial means is a bad habit that Europe picked up from America.
However the German people did not indulge in eying things they could not afford even though they gave loans to others who used the German’s credit rating to buy expensive cars and real-estate as you saw in Iceland and Ireland. This goes back to the cultural obsession with filth; they were near the credit disaster but never partook in it personally. The credit boom never existed in Germany because of Germany’s past. Germany was a nation which fell into hyperinflation post world war two and during that period it cost millions to buy a loaf of bread.
With that past history in mind the German people has always been frugal with their money and expect the politicians to do the same. That is why any politician regardless to what party they are from will not get elected in Germany if they are not fiscally responsible. The German people will not vote for them because these values from their past have now been ingrained into their culture and have become part of their identity. That is different than over here in America where different parties have different approaches on government spending, investing and often end in stalemate or disagreement.
Yet in this instance the German people gave in to the temptation and allowed their gibbers to get dirty while they stood by and watched. The German bank gave money to Irish real-estate barons, to Icelandic banking tycoons, American supreme borrowers etc… The total losses that the German banks lost are still being added up but the book mentions that they lost 21 billion due to Iceland, 100 billion due to Ireland, 60 billion to American and billions more still needed to be totaled in Greek bonds. That means even though the German people tried to stay clean in the end the mess ended up in their laps.
So while other countries misbehaved with German money the German people thought their bankers where making sane choices by giving the money in the first place. They believed that they were going to make more money for Germany and further their nation towards prosperity but instead they furthered their nation in debt. At the end Of the financial disaster Germany ended being one of the most affected nations even though its citizens and politicians didn’t buy any luxurious items or invest in crazy schemes.
The fact that the Germans had the strongest financial system led to their downfall since they had to put in the largest amount of money onto the European Union Rescue Fund. The money they put in the fund would for example go to the Irish government who would give that money to Irish banks who would give it to right back to the German banks for defaulted loans and interest payments. So Germany was giving itself money in a cycle that was not alleviating the root of the problem and was further perpetuating a cycle of debt.
Sassy see currently in Greece with new austerity measures being debated on daily, the German people are sick of bailing out every nation for their mistakes. On the contrary if the German banks never gave those loans in the first place than places like Ireland and Iceland would have never defaulted. The fact that the German people gave money away in the first place started the problem. The more countries got loans the more other countries wanted to get in on a piece of the action.
So while Germany thought it was making smart decisions with safe returns it created a monster which was going to come back and be a burden for the very system which created it. Besides the cultural aspect of the whole situation the fact that Germany was a ember of the European union also led to its demise in regards to the economic aspect of the nation. This is because when the European Union was created it had certain benchmarks other nations would have to measure up to if they wanted to get accepted into the Union.
Many of these nations like Greece who had failing economies lied and falsified documents to inflate their Gap’s and interest rates. All this led to a false sense of security when nations got accepted because while politicians thought the Union was getting stronger it was in reality rotting from within. The old idiom says that you are only as strong as your weakest link and in this case the European Union had a few too many weak links. The politicians all put up facades and made their economies appear as ferocious lions when in reality they were just cowardly cats trying to milk the cash cow which is the German banks.
The only reason the German people agreed to all of this is because they still feel that they have to be accepted as a people and atone for the war crimes of their predecessors and past regimes. This act of kindness by the German nation as taken for granted and led them straight into a trap which decimated their financial security. The nations of Greece, Ireland, Iceland, Spain, and others became parasites who wanted more and more money expecting Germany to save them.
This parasite- host relation is one that the German people might have to consider cutting off and simply let the European Union fail and let nations and banks go into default. Being someone who prefers limited involvement in economics like Adam Smith’s invisible hand, it is time for Germany to put its invisibility cloak back on and disappear into the shadows. If Germany continues down the same path it is On and tries to appease all the nation of Europe by giving out money it will eventually see the filth that currently occupies the streets of the new third world seep over into German soil.
In this globalize world Germany needs to take a greater stand and do what’s best for its sovereignty. Germany needs to remove itself from the European Union and in doing so it will cause the collapse of many nations in the region so while this suggestion sounds harsh it is in the best interest for the German people. Yet if Germany wants to remain and be the savior for the EX. it has to take a greater charge and demand that its conditions be met since Germany is the one with the money.
Germany can fix the situation by trying to reduce the interest rates on the loans and try to get the borrowing nation to simply pay back the capital amount before them many any further investments in their own nation. This would lead to stagnation of many European nations because it will take them many years to pay back the billions they have lost. In doing this the GAP and growth rates of those actions will not move while Germany will be able to acquire money that belongs to it.
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