Look for ‘Maastricht 2: Judgment Day’
Anybody puzzled by the crazed events in the world’s currency markets might turn to Hollywood for an explanation. At the center of last week’s financial wreckage stands the Terminator: Helmut Schlesinger, president of Germany’s Bundesbank. Like the cyborg played by Arnold Schwarzenegger--whose name, spoken quickly, sounds suspiciously similar--Schlesinger has only one mission: to seek out and destroy “inflation,” an alien that has somehow sneaked into Germany. Instead of a pump-action shotgun and a Harley, he relies on the deutsche mark and high German interest rates.
Audiences--even U.S. Presidents--are thrilled by a character as single-minded as the cinematic Terminator. Similarly, economists’ spines stiffen agreeably whenever Schlesinger is mentioned. Unlike other craven central banks, which give in to emotion and let interest rates slip, the Bundesbank seems to revel in its adherence to its monetary mission. Show the Bundesbank an East German unemployment line, and no tears appear. Show it an unpopular German politician, and it gives a surly metallic smirk.
All to the good--as years of German prosperity prove. But the problem with the economic Terminator is that, like his cinematic equivalent, he is a little rough on innocent bystanders. Schlesinger blew away several last week: the pound sterling, which made the mistake of trying to fight; the Italian lira, which, admittedly, was asking for it by running an enormous budget deficit; the Spanish peseta, which only seemed to wander into the room by accident; and the wretched Swedish krona--how much more innocent a bystander can you get than a currency that most people think is a type of butter?
Both economists who get a kick out of this and fund managers who make fortunes by betting on Helmut’s next victim, are hoping for more. With a bit of luck, Schlesinger might just spot a quivering figure in the corner and let off a few rounds at the French franc, as it waits for the result of today’s referendum on the Maastricht treaty.
And, of course, there is always that model of fiscal irresponsibility, the dollar, trying to crawl back up the stairs, following its economic knee-capping by the Bundesbank earlier this year.
Such apparently indiscriminate violence tends to give Schlesinger a bad name, when, like every good screen villain, all he really reflects are the weaknesses of others. If George Bush or Bill Clinton had a credible plan to reduce the budget deficit, they might be a little less vulnerable.
Moreover, as the smoke clears, the brave new world created by Schlesinger may be more comfortable than his victims admit: A weaker pound, for example, should help Britain boost its exports and pull out of recession. And for those eager to slow down the move toward European union, these events couldn’t come at a better time. By the time you read this, Helmut’s next picture: “Maastricht 2: Judgment Day” may be playing to packed theaters in France. Hasta la vista, baby.
