Ewald Nowotny, the head of the Austrian Central Bank, has now broken the taboo by stating publicly that the austerity policy applied in the Great Depression of the thirties and the mass unemployment that resulted from this policy gave birth to the rise of national socialism. Since Nowotny is also member of the ECB board, this is a statement that is both courageous as extremely interesting.
Equally interesting (and no doubt also politically ‘incorrect’) is to refer to what happened in economic terms after the Nazi’s seized power. The following graph, taken from a presentation by Richard Koo from Nomura Research Institute needs little further clarification: While the deficit doubled to 10% of GDP by building the tanks and the roads to take the tanks to the rest of Europe, unemployment fell from 30% to almost zero.
The situation today is different in the sense that it’s not German unemployment that is going up (at least not for the time being), it’s the unemployment situation in the ‘deficit’ countries that is dramatic. The key message however remains: The European financial elite, now working in overdrive to establish new treaties and legal procedures that push through brutal austerity policies against the people, should do well to seriously consider these lessons from history.