"The State as the Body of a Ship" describes in an abstract way how Germany has dealt with the aftermath of the 2008ff financial crisis. Using the allegory of the Titanic, this section of the book claims that "the damage below the water line" is only understood by a very small number of experts; it is either completely ignored or misinterpreted (sometimes deliberately) by Germany's elite. Germany's collective wisdom failed to steer clear of the origins of the crisis and failed to deal with the aftermath, preferring to exploit events for all sorts of political reasons. The essence of this section can be summarized as follows: A modern German democracy, coupled with its super debt-financed welfare state, declining population and at the beginning of a new interest rate cycle cannot survive in the long run. Greece, sticking with the Titanic allegory, is one compartment of the hull of the ship that is now filled with water. Digressing somewhat, the Titanic would have survived four flooded bulkheads; however five were damaged.

The second section, "The State as Organism", is even more abstract. In short it claims that Germany's public sector has morphed into an overarching organism that is autochthonously geared to growth and absorption at the expense of the German taxpayer. Contraction is an unfamiliar concept to the organism. The organism designs "laws" and nurtures "sub-ideologies" that provide the organism with multiple tasks to justify its existence. All the while the citizen persistently runs the risk of violating these laws or failing to conform with the sub-ideologies. The more the German welfare state and the public sector organism are over-stretched financially, the less tolerant the German state becomes in dealing with taxation and tax-related matters. In essence the ever growing organism will eventually undermine the ability and the willingness of the citizens to finance the organism and the state.

Finally, the "Outlook" to the introduction candidly states that a new inflationary cycle is required to remove the risk of structural collapse. Should more rapid price inflation follow (central banks always err towards inflation, all the more so after witnessing the Bank of Japan's battle in vain against deflation), the structure of the German state will not be in danger. The consequence, however, will be the "silent expropriation" of its citizens' purchasing power. The idea that any central bank is capable of "managing" a period of higher inflation is dubious and a period of hyperinflation is a risk that cannot easily be ignored. Conversely, should a lengthy deflationary period prevail (similar to Japan's fate over the last two decades), the structure of the state would crumble owing to the German state's inability to meet its financial obligations. Insofar, Germany would be "beyond repair".

David Fuller's view Mrs Fuller and I had the pleasure of dining with Erwin Grandinger and his wife Rosslynne (also an economist) in Berlin last Saturday evening. We share a love of music but Europe's sovereign debt crisis was also discussed.

Everyone interested in this subject knew that the EU and its single currency would be tested by the first serious recession. However commentators have usually said that 'a solution' would be political union. The Grandingers confirmed my longstanding view that there never has been any groundswell of public opinion within the EU in favour political union.

A more entrepreneurial economic system would seem a better solution but modern Europe did not have this in the decade before the single currency was introduced. Europe has an enviable health service, educational system and social safety net, but these have to be paid for. The GDP growth to finance entitlements is not there and a weak Euro increases the risk of capital flight.

Hopefully, any significant flight of capital is only temporary. This could be a possibility because a weaker Euro is mostly good news for Euroland's exporters, as I have previously mentioned, particularly if another round of deflationary fears reins in commodity prices. Meanwhile, the ECB is more likely to reduce rather than raise short-term interest rates currently at 1%. More importantly, I assume that further quantitative easing is inevitable while this crisis persists.