Magic square justified economic balance.
Art. 109 II Basic Law are federal and state before, "in their budget management to meet the needs of macroeconomic balance bill". The Stability Act provides to an interpretation aid. Especially in economically critical times like today, the Stability Law is more relevant than ever.
Stability Act assures economic balance
After Stability Act federal and state governments need to follow the macroeconomic balance and take the necessary measures so that they simultaneously 1. reach within the market target a stable price level, 2. a high level of employment is, 3 a in their economic and financial policies achieved trade balance and 4. a steady and adequate economic growth is made the target.
Tensions generated a magic square
- Thus, the overall economic equilibrium presupposes a state in which the objectives set out four possible are largely realized. Since these four objectives are often in tension with each other, the use of a particular agent to eliminate interference of a target leads to collision with other objects. Because of the difficulty to fully realize all goals simultaneously, what it appears to require the art of a magician, one speaks of a magic square is.
- The equality of the objectives is therefore interpreted that should be monitored most emphatically from the overall economic situation, the most vulnerable target of economic policy. The measures have to be always selected and metered so that the deterioration of the remaining objectives remains minimal. This results in a magic square.
Law follows the economics Keynes
- The stability law is largely based on the concept of Keynesian economics. Keynes considered the father of fiscal stimulus control. According to him, an economy tends not automatically lead to a state of full employment.
- but full employment is a basic precondition for a functioning market economy. As very high unemployment creates political instability and radical political tendencies opens the way, the Great Depression of the twenties has shown.
Difficult times promote criticism
- At this point, increasingly the ghosts. The stability law will not be considered sufficient.
- The different interpretation of a fiscal stimulus control is reflected in the economic policies of the United States (Economic Development through cheap money) and Germany (securing macroeconomic stability through savings).