Daily Archives: 2 August 2019

A Brief Question

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…briefly answered.  Greg Ip, in his column on a putative currency war inflicted on us by the EU asked it.  He opened his piece with this:

When Federal Reserve policy makers gather in Washington this week [a couple days ago] to weigh cutting interest rates, a big part of their decision will already have been made—in Frankfurt.

Then he asked

How should the US protect its economy against possible threats from European economies?

The answer renders his opener irrelevant.  We best protect our economy—against far more than merely “possible threats from European economies”—with lower/no business taxes, minimal regulation, and better products freely traded. These are what underpin a long-term, fundamentally sound economy. Anything else is just glorified yield chasing and short-term machinations that no government, however loosely it is central-plan oriented, can hope to manage.

The Fed has no role in this; it needs only to set its benchmark rates to levels historically consistent with 2% inflation (its target inflation rate) and then sit down and be quiet.

Germany…Dithers

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…on the matter of helping protect freedom of shipping through the Strait of Hormuz and, presumably, up into the Arabian Gulf.

Great Britain, in an effort that parallels the US’ efforts, is proposing a European naval mission to the region to protect European oil tankers.  Germany isn’t sure.  On the one hand, Norbert Röttgen, Bundestag Committee on Foreign Affairs Chairman, says

Our prosperity lives on free shipping.  And we have to make clear that we stand alongside our British friends, partners and allies who are affected. There must be joint European action.

But the US might be involved, so he dithers:

Unfortunately, there are fundamental differences in Iran policy with the US, which is why we can’t cooperate with the US just like that.

No, can’t have that.

The Social Democrats are more open about their reluctance to participate. Karl-Heinz Brunner, SPD member of the Bundestag Committee on Defense:

A German participation is currently neither necessary nor opportune. Of course, securing free trade routes is extremely important, but I am convinced that this would also be possible by diplomatic means. In the current situation, military options could contribute to further destabilization.

Yeah, Iran is open to diplomacy—so long as everyone does exactly what Iran diplomatically says.  Besides, if we took concrete action to defend German or European interests, we might angrify the pirates.

Can’t have that, either.

‘Course, Germany really doesn’t have a dog in this hunt, anyway—it gets most of its oil from Russia.

Update: Germany has decided not to join any coalition ensuring free sea navigation in the Strait of Hormuz or the Arabian Gulf.  Foreign Minister Heiko Maas:

“Germany will not take part in the sea mission presented and planned by the United States,” Maas told reporters during a trip to Poland.
The German government said it remains in close consultation with France and the UK over a European approach to the freedom of navigation crisis in the Persian Gulf.

Close consultation. Chit chat. I’ve already pointed out whence German oil comes.