The Debt Turn: The Missteps of Fiscal Policy

Is economics a science? My late son, who had studied economics at the HSG in St. Gallen, would have answered in the affirmative, arguing that Adam Smith had established economics as a science with his book "The Wealth of Nations". Andreas had not only read this seminal work but had actually studied it.

The book

Prof. Lars Feld’s lecture on “The Debt Turn, Missteps in Fiscal Policy” last Monday at the Museumsgesellschaft nearly convinced me, although, as in physics, calculations of future developments in an economic system - i.e., predictions - are impossible, particularly given the current global and economic situation.

Furthermore, much of what used to be part of the Standard Model of economics no longer applies. In the past, when inflation in an economy became too high, central banks countered it with higher interest rates.

However, rising prices amid the current oil and gas shortage cannot be offset by homeopathic increases in interest rates from, say, the Fed or the ECB.

As a physicist, I sit on the sidelines and can only watch the prevailing chaos. I will limit myself to reproducing some of the impressive slides Prof. Feld presented in his lecture and commenting on the graphs.

The chart above shows the national debt of various countries as a percentage of their GDP. Japan stands out, but this is a special case that will not be examined here.

Of the remaining countries, Italy has the highest national debt at 150%. Switzerland has the lowest, with hardly any change observed in time. The debt ratios of all other countries have been rising over the years, with the United States starting from a relatively high level. Germany is doing rather well. China’s rapidly rising debt is striking. The effect of the coronavirus epidemic on national debt is clearly visible.

This chart shows the national debt of individual EU countries. Greece had the greatest difficulty meeting the EU’s financial criteria, but was expected to join as the cradle of Europe. The Greek government has made every effort, and as a result, Greece is one of the few countries that has reduced its debt in recent years.

It is striking that the new EU members have lower debt ratios than the founding members, Italy and France. Germany ranks in the middle.

The creditworthiness of individual countries is reflected in their debt levels. As a result, yields on Greek government bonds are particularly high, and U.S. Treasury bonds also stand out. Germany, as a safe-haven issuer in Europe, has the lowest yields. It is interesting to note that most European countries follow the German yield curve, albeit at a higher level. Well, it's all in euros. 

Debt must be serviced, and the higher a country’s debt, the greater the interest burden.

The United States stands out in this regard due to its high national debt, with 18% of its budget going to meet interest payments. In Germany, debt service has increased slightly in recent years due to new borrowing.

It will increase dramatically in the coming years if our government follows through with its financial planning. Given rising government spending and lower tax revenues due to Germany's economic stagnation, is there any other option?

 

The holy grail for escaping this predicament is economic growth. But the forecasts are bleak. As a layperson, Red Baron has always believed that with resources dwindling and thus becoming more expensive, there will be no more growth.

So the only easy way to balance lower revenues against higher expenditures is by increasing government debt.

But then the borrowed money should be used for investments, as these boost productivity, benefit the economy, and generate higher tax revenues. Yet public investment in Germany has been stagnating at a low level for years.

The hardest way to get government spending under control is through budget cuts. Every government struggles with this.

The chart shows, for simplicity’s sake, four main categories of spending: 

 - social programs (government subsidies for Germany's deficit-ridden insurance schemes such as pensions, healthcare, and long-term care) 

- defense (currently with no budget cap due to the war in Ukraine: “It takes what it takes”)

-  debt service (according to Prof. Feld, the amount will rise from 20 to 40 billion euros in the coming years). 

- others.

Budget consolidation for the coming years envisages cuts in "others", with the key words being "Abbau der Bürokratie" (cutting red tape).

As already mentioned, particular attention is being paid to the defense budget. While Europe felt secure under the United States' nuclear umbrella in recent decades and allowed military spending to decline, NATO countries are now rallying in the face of the Russian threat to meet the 5% defense spending target in the (distant ?) future. The Trump administration’s urgent and ultimatum-like warnings contributed significantly to this turnaround. 

Will the government-financed-on-credit spending on defense stimulate the German economy? Prof. Feld expressed his strong doubts.

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Coffee. I Need Coffee

As the Red Baron was out on his daily walk around noon this Sunday afternoon, he passed by St. Peter's Church in his neighborhood. I looked over the announcements and saw that there would be a baroque music concert with a cake buffet at 3:00 p.m.

   

The photo is misleading. The other year at "Cake with Bach,"
they performed Bach's Concerto for four harpsichords in A minor, BWV 1065, at Petruskirche.

So I returned to the venue around 2:30 p.m., and lo and behold, there were still tickets available. Since I arrived at the church early, I managed to snag a seat in the second row.

This concert is part of a concert series called "With Bach Through the Region." It began with Johann Sebastian Bach's Orchestral Suite No. 2 in B minor, BWV 1067. Some scholars claim that this suite belongs to the entertainment music Bach wrote for the Zimmermannisches Caffe-Hauß in Leipzig.

Henry Purcell's "The Old Bachelor," Op. 607, impressed with its folk-inspired sounds and musicality.

The musicians thanked the audience for the deserved applause. From left to right: Traverse flutist: Karl Kaiser, concertmaster and first violin: Gottfried von der Goltz, conductor and harpsichord: Lars Schwarze. Note the listeners on the side waiting for Kaffee und Kuchen, which was served in the following pause. 

The highlight and conclusion of the afternoon concert was Bach's Kaffeekantate BWV 211.

Liesgen: Wenn ich des Tages nicht dreimal mein Schälchen Kaffee trinken darf ... Well, Red Baron needs at least three pots a day.

Liesgen, her father, and the narrator sang the final chorus together:

Cats do not give up mousing,
Girls remain coffee-sisters.
The mother adores her coffee habit,
And grandma also drank it,
So who can blame the daughters!

During the final applause for the orchestra and the singers, Liesgen wore cat accessories, while her father and the narrator wore mouse ears.

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I, Donald, King, and Jesus

Red Baron mangled the title of his blog along the lines of Robert Graves' novel "I, Claudius, Claudius the God," which in German reads "Ich Claudius, Kaiser und Gott." POTUS's narcissism plays into both directions.

The White House featured him as a king. 

He saw himself on Truth Social as a Jesus substitute, giving his blessing to buddy Jeffrey Epstein?

Recently, a real king paid a state visit to the United States. The British monarch paid tribute to the democratic institutions of his former colonies. When Charles addressed both houses of Congress, stating that executive power is subject to checks and balances and forms the basis of the rule of law, the assembled representatives gave the king a standing ovation. Even J.D. Vance stood and applauded.

However, when Charles turned to his favorite topic, environmental protection, the vice president remained ostentatiously seated and did not move a finger. In contrast, the Speaker of the House, Mike Johnson, followed the lead of most representatives and clapped in a standing ovation.

Here is a German view of the two kings.

@realDonaldTrump on Truth Social, presenting the final draft 

Red Baron reported on Trump's ballroom and mentioned the Trump Arch.

Draft design of a $1 coin

The Circulating Collectible Coin Redesign Act of 2020 authorizes the US Treasury to mint special $1 coins for the Semiquincentennial (250th anniversary).

The US will soon begin issuing passports featuring an image of President Trump inside. It appears to be the most prominent use of Trump's likeness in items tied to the 250th anniversary of America's independence.

Congresswoman Anna Paulina Luna introduced a bill in 2025 to add Donald Trump's face to Mount Rushmore.

Work has already started.

Stay calm, my friends! This photo is a fake. Experts say it is geologically and structurally impossible, as there is no suitable rock left to carve.

But just how far will POTUS's narcissism go? 

Today's Badischer Zeitung, PAP:

The greatest golfer ever?

This is not a Golden Calf, as the MAGA evangelical Pastor Mark Burns knows, who presided over the dedication of the monument:

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Spielfeld

Red Baron was invited to the vernissage of an exhibition at Freiburg's Museum für Neue Kunst titled Spielfeld.

The Spielfeld shown on the poster at the entrance to "Sport and Art" is clearly a playing field where the Germans celebrate their Fußball. The British call the sacred lawn a pitch on which they play football, a ball game that the Americans name soccer.

Sports are a mass phenomenon that connects people and fosters community. The exhibition "Spielfeld" explores sports from an artistic perspective. In their works, international artists examine the social, cultural, and societal dimensions of sports.

Table tennis with obstacles (©MNK)

The museum becomes the playing field where visitors are not condemned to spectators on the sidelines but are invited to be players.

Playing chess only with white pieces

What happens when you change the rules or rethink them entirely? 

Pommelling the horse underwater (©MNK)

... when you alter the function and form of sports equipment?

Let us overcome barriers and restrictions on active participation. This is also the idea of an accompanying external program.

Throughout its duration, the exhibition is accompanied by events such as family programs, special tours, workshops, and introductory classes on capoeira, Tabata, Pilates, aerobics, yoga, line dancing, fitness boxing, balance and coordination, full-body workouts, and Nordic walking.

Red Baron is particularly interested in the panel discussion “Theology and Art,” where theologian Detlef Lienau and MNK Director Christine Litz will discuss rules and their reinterpretation, sports without a focus on performance, and barriers and how to overcome them.

Stay tuned.

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Grenzen erleben

The theme of the Freiburg Saturday University for the spring semester of 2026 is "Nachbar Frankreich."

At the opening of the Studium Generale for the 2026 summer semester, its director, Prof. Werner Frick, pointed out that the 250th anniversary of the United States would have been the natural choice for the Saturday lectures. For obvious reasons, that idea was set aside. Instead, the committee opted for the topic "Neighbor France."

Dr. Claire Demesmay opened the lecture series with "Experiencing Borders - Between Openness and Delimitation."

Claire delivered her talk with verve and charm, what else?

In the European Union, border regions hold particular significance, as they cover 40% of the territory and are home to 30% of the population. They account for roughly one-third of the EU's gross domestic product. The strategic role of border regions is becoming increasingly apparent. It is there that the strengths and weaknesses of European integration come to light.

Since the Peace of Westphalia, sovereign nations in Europe have developed, drawing borders to strengthen national cohesion. These legally defined lines served to stabilize the balance of power.

The result of this nation-state system was bloody wars in Europe, almost always intended to shift borders.

After World War II, far-sighted European statesmen such as Robert Schuman, Alcide De Gasperi, and Konrad Adenauer concluded that enough is enough. They underlined what a high-ranking Brandenburg official had noted after the devastating Thirty Years' War, "We found the entire country [i.e., Europe] in such a pitiful state that one must feel greater compassion for the innocent people everywhere than can be adequately expressed in writing." Or, to put it more bluntly, using an analogy from farming, "Die Karre ist tief in den Koth geschoben (The cart has been pushed deep into the shit)."

Already in 1667, Prussia's Great Elector Frederick William drew his conclusion in his political testament: Der Friede ernährt, der Krieg aber verzehrt (Peace nourishes, but war consumes).

The Treaties of Rome, signed on March 25, 1957, by France, West Germany, Italy, and the Benelux countries, established the European Economic Community. They marked the shift from cooperation to integration.

As a result, national borders came to be seen as places of encounter and cross-border cooperation, and border regions became key players in European integration.

The Schengen Agreement of 1985, initially signed by Germany, France, and the Benelux states, marked the beginning of the dismantling of border controls and the creation of a common European space. With the abolition of internal borders, the external borders became, in the wake of migrant flows, the line of defense for the European space.

But, right-wing parties are questioning the system of external borders and, caught in the tension between security and mobility, are calling for the reintroduction of internal border controls, thereby following a logic of separation that contradicts the desire for cooperation and togetherness.

In fact, there are still obstacles to mobility, particularly between France and Germany, which are largely due to differences in wages and purchasing power on the other side of the non-existent "border". On the French side, pressure on the real estate market from German neighbors is becoming noticeable.

Recruiting qualified workers is also becoming difficult because proficiency in the other country's language is declining.

In a policy of small steps, Strasbourg MEP Brigitte Klinkert has presented concrete recommendations to strengthen cross-border cooperation.

- This includes mutual recognition of environmental stickers. 

- Educational partnerships are to be intensified. 

- Cross-border companies are to receive special status within the framework of European inter-programs. 

- The population on both sides of the border is to be involved in shaping their "shared living space" through local events.

Then Claire presented her study, in which she closely accompanied 12 families from the Saar-Mosel region between October 2024 and May 2025 and interviewed them about their situation in the border region.

The results presented were interesting, but not conclusive, for they can hardly be applied to the situation along the Rhine between Baden and Alsace. While Germans in the Saar region cross the border to France almost daily, the French limit their border crossings to twice a week. 

One interviewee said, "So the point is, there are no borders." You go left and right- sometimes you're in Germany, sometimes in France; Dad is French, Mom is German. What I mean is, this is completely normal; for us, I think it's perfectly natural. When you cross the street, you immediately come to this side, and on the other side is simply France.

As a "bone of contention" between France and Germany, the Saar region has a history similar to that of Alsace, though with the opposite outcome and a shorter duration.

In 1919, following World War I, the Saar region was separated from Germany under the Treaty of Versailles and placed under League of Nations administration for 15 years, while France gained control of the coal mines.

Following the "occupation period," the people of the Saarland voted in a 1935 plebiscite to rejoin Germany, with an overwhelming 90% majority.

After World War II, a similar procedure took place. The Saar region, occupied by France, became the Saar Protectorate in 1947. The Saar was politically separated from Germany and economically tied to France. The people of the Saarland had their own citizenship and even their own Olympic team. 

Konrad Adenauer, the fox, saw the Saar as a stumbling block in Franco-German relations and pushed for a referendum on the Saar Statute. The key points were:

- The Saar would not return to Germany immediately
- It would become a "European territory" under the authority of the Western European Union
- It would be politically autonomous but economically linked to France

The people of the Saar went to the polls on October 23, 1955. 

Commentators viewed the acceptance of the Saar Statute as a cementing of the status quo under French influence. A "no," on the other hand, was widely understood as a desire to join West Germany. 

The referendum result was clear: 67% voted "no."

 

After brief negotiations, the Saar became a new state of the Federal Republic of Germany on January 1, 1957. 

One of the biggest differences between the Saar and Baden is not the width of the Rhine River separating France and Germany, compared with the small Saar being the border river between France and Germany at only a few points. Traditionally, in the Saarland, French is the first foreign language taught in many high schools, followed by English. In contrast, in Southern Baden, the standard German model applies: English is almost always the mandatory first foreign language starting in the 5th grade. French usually comes as the second foreign language starting in 6th grade or later.
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Alter

is translated as "Old Age," and was the title of an exhibition at the Graphic Arts Collection of Freiburg's Augustinermuseum. This was last year, but Red Baron only reports today.

Was I hesitating? In the meantime, I became 90 and surely experienced the aging process.

The stages of a man's life

While visiting the exhibitions at the Graphics Art Gallery, I took many photos. The works I feature in this blog are of high artistic quality or have personally impressed me. Interestingly, both criteria often apply.

Johann Heinrich Lipps's four portraits of the English poet John Milton, 1779

John Milton, through the ages, is another example of the stages in a man's life. This print first appeared in 1781 in Johann Kasper's Fragments on Lavater's Physiognomy, in which the author instructs readers to attribute particular character traits to specific facial features and body shapes.

Here is a print from 1498, the late Middle Ages, when people were deeply rooted in their faith. Life is a pilgrimage, rosary in his right hand. Barefoot and looking toward heaven, the frail old man, leaning on a walking stick, moves forward cautiously.

Albrecht Dürer, Paul the Apostle, 1514

The master created a copperplate engraving depicting the apostle as a wise old man...

©Immanuel Giel/Wikipedia

... and here is Dürer's 1526 oil painting showing St. Mark and St. Paul holding the Bible. It looks like Mark still doesn't trust that Saul had changed into Paul. In Acts 15, 36-41, their relation is highly compromised: "36 Some time later, Paul said to [his longtime confidant] Barnabas, "Let us go back and visit the believers in all the towns where we preached the word of the Lord and see how they are doing." 37 Barnabas wanted to take John, also called Mark, with them, 38 but Paul did not think it wise to take him, because he had deserted them in Pamphylia and had not continued with them in the work. 39 They had such a sharp disagreement that they parted company. Barnabas took Mark and sailed for Cyprus, 40, but Paul chose Silas and left, commended by the believers to the grace of the Lord. 41 He went through Syria and Cilicia, strengthening the churches."

Engraving after Holbein by an unknown artist, 1521

It is a common stereotype that some old men are wise, but all are frail and obstinate, which certainly applies to Erasmus of Rotterdam, and he was quarrelsome, too, a real grouch.

Johann Wilhelm Baur, Old Age, around 1670

Skulls, hourglasses, and fading flowers symbolize life's impermanence: Memento mori.

You, good old man, the grave is already open here and longs for you.

The hourglass of your time has nearly run out. 

Just put your house in order and send yourself to death. 

It will soon be over for you.

Old age is joyless, full of listlessness and ailments.

To young children, it is a source of mockery and a burden upon the earth.

In this second stage of childhood, indeed, everything in the world is consumed by old age:
trees, houses, buildings, and paintings.

Crispyn de Passe, Susanna in the Bath, and the two Old Men around 1600

If they are frail, non obstat, that they are still lechers.

Behold Susanna, thrice fortunate, blessed with offspring,
she who is no less mindful of her pure chastity,
suffers the schemes of shameful old men who desire her,
while she believes she is washing her limbs in the flowing water

Benjamin Vautier, Deaf, but smart, before 1884

Two men converse by a tiled stove. The older, nearly toothless man has made himself comfortable in a wingback chair and leans forward to better hear the younger man, who has moved closer, apparently seeking the older man's advice.

Hans Thoma, Old Mountain Man, 1892

This engraving was part of a Hans Thoma Exhibition at the Augustinermuseum in 2025. No, this is not Saint Paul, but the baldness of the figure suggests a learned, wise old man

Albert Welti, The Ages of Man, 1901

This picture is based on Welti's painting, The House of Dreams. It depicts people of different generations who are focused on themselves rather than communicating with one another. How modern. Even without the Internet and Social Media, this family lives together but doesn't communicate with each other. The mountain panorama reveals that Welti is Swiss.

Käthe Kollwitz, Self-portrait, 1924

Käthe Kollwitz is known for her somber, at times disturbingly realistic works that situate her between Realism and Expressionism. Based on her personal circumstances and experiences, she developed her distinctive artistic style. Her most famous self-portrait reflects a period of personal crisis in which she was acutely aware of her aging and her waning physical strength. In 1924, Kollwitz drew herself with shadowed, pronounced bags under her eyes, appearing tired and exhausted, grappling with the death of her son.

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