Two Ministers of Finance

On the 25th of March 2020 the Minister of Finance of the Federal Republic of Germany stood in front of the parliament and defended a supplementary budget of 156 billion euros and further aid of 1.4 trillion euros due to the corona crisis with these words: “We can afford this.” Three days later – on the 28th of March 2020 - a different German Minister of Finance – namely the one of the state of Hesse – committed suicide referring to the corona crisis in his suicide note. Two Ministers of Finance, experts in how a country is financed by taxes, whose reaction to the corona crisis could not be more contrary. It’s reason enough to have a closer look at whether Germany (and other countries who responded similarly) really can afford this new debt of historic proportions. Statistics show that even before the corona crisis most countries had an enormous public debt. The public debt in Germany before corona amounted to 1.9 trillion euros, more than 60% of the GDP. In the US the debt was more than 100% of the GDP, in Italy more than 130% and in Greece more than 180%. The idea that one can spend only the amount of money one has does not seem to count for the question of state funding in a long time. Countries can make new debts through their own central banks – in other words – print new money without having corresponding tax income beforehand. But it is obvious to everybody that this system of an ever-increasing public debt can’t continue forever. There comes a time when the trust of the financial market place in the liability of the state collapses, and hyperinflation burns up the value of money. Many countries, apparently, are moving inexorably towards this, since it is not evident how the current public debts could ever be paid back - at least not with the attitude by which crises are managed nowadays. The time intervals between crises “requiring” new debts are getting shorter and shorter: Already during the bank crisis of 2008, the Greece crisis and the refugee crisis – just to name a few – tremendous new public debts have been made to contain the crises. Yet, the corona crisis won’t be the last crisis where people will call for state aids. The question is more how many crises it takes until state bankruptcy. A more honest position that admits that one cannot afford things when there is no corresponding income would be more appropriate and would have avoided most likely the hopeless financial situation many countries have positioned themselves in. And in the end when the government is spending money that it doesn’t have, it’s not an act of charity but of evil.