The Myth Of The Responsible Saver

Responding to Morgan Kelly's excellent rundown of the Irish situation, I think Kevin Drum goes way too far in accepting German framing of the issue:

It's easy to see why this is the case — why should thrifty Germans bail out spendthrift euro countries on the periphery? — but it's also easy to see that there's no way it can end well.

I think this conceptual scheme of saver = responsible, borrower = irresponsible needs to be challenged. It's true that German households were thrifty net savers. But a German household that saves isn't engaged in a self-sacrificing pursuit, it's getting paid interest. And the institutions paying the interest are doing it because they're expecting to make a profit by offering loans. And when they offer the loans, they're charging interest. The entire claim of people in this line of work is that they're good at making decisions about who to lend money to and what interest rate to charge them in light of default risk. When I got my mortgage it involved a phone call with a guy from Bank of America. The premise of the conversation was that of the two people on the call, one of us was a highly trained professional with expertise in mortgage lending and the other one was me. And it's just the same with Irish borrowers and German banks. In that transaction it's the Germans who are supposed to be the experts. When the whole thing goes sideways it's the Germans who failed to be responsible stewards of the Eurozone's capital.