The famously bearish Dylan Grice of SocGen took the cake last month when he warned that Germany was making the same mistake it made in the 1930s that led to the rise of the Nazis.
Not surprisingly this note angered a lot of readers. Today he responds in a note called: "Dylan Grice Is A Disgraceful Hypocrite."
"Clearly, this is a... er... … 'controversial' period in world history, and I received a commensurately above average number of complaints in the inbox. I try to reply to all emails, but on this occasion there were just too many to respond to directly."
The decision that led to the rise of the Nazis, according to Grice, was German insistence of deflationary policies, born from fears of hyperinflation, in an environment when everyone was inflating. There is a parallel here to the contemporary euro crisis:
"The purpose of the historical analysis, therefore, was not to reach conclusions about how adherence to hard money principles will linearly lead to resurgent fascism, or war on a par with that seen in the 1930s. Neither was it in any way a defence of Keynesian fiscal activism. It was to illustrate that adherence to even the best principles must come at a price, making a judgment on whether or not that price is prohibitive or not is unavoidable, and today Germany and the ECB have to make that judgment."
In 2011 Germany is holding back the ECB as a matter of principle. Sticking to principles probably won't lead to Nazis, but it will have consequences like the breakup of the euro.
It may sound like Grice is advocating money printing -- and here come the claims of hypocrisy -- but in fact he draws a different conclusion.
I think the ECB shouldn't get involved. I think it shouldn't sanction any ECB funding of the ESFS either. I think it should tell governments who made this mess that they can fix it. It should say, If you want a central bank that prints money when things get tough go and launch your own currency using your own central bank and print until your hearts are content. But then, I'm not emotionally attached to the euro, or Germany's popularity in Europe. And I think the ECB and Germany's politicians are.
That's right, Dylan Grice is calling for Germany to make the same decision that led to the rise of the Nazis.
Time for more hate mail?
Check out Morgan Stanley's guide to the next two years in Europe >
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