EU may have to 'print' money to survive global crisis

Run_to_da_hills

EU may have to 'print' money to survive global crisis. This can be very dangerous as it can only lead to too much worthless devalued cash in circulation which will inevitably lead to hyperinflation. Have the EU not heard from history?

http://www.independent.ie/business/european/eu-may-have-to-print-money-to-survive-global-crisis-1668237.html

CHD

I have learned to take anything you say with a pinch of salt and then throw that salt on the ground stand on it and laugh and say ha puny salt i have defeated you.

Duiske

Run_to_da_hills wrote: »

EU may have to 'print' money to survive global crisis. This can be very dangerous as it can only lead to too much worthless devalued cash in circulation which will inevitably lead to hyperinflation. Have the EU not heard from history?

http://www.independent.ie/business/european/eu-may-have-to-print-money-to-survive-global-crisis-1668237.html

The most telling part of that story is the last paragraph.

"No one should be in any doubt about the seriousness of the global economic situation, which is not easing, and the seriousness of our own difficulties," he(Mr Hurley) said. We cannot continue to pay ourselves more than our European neighbours, warned the civil servant who is himself paid €368,000a year.

Économiste Monétaire

Well, that piece should also note that the central bank is a profit making institution; so his salary is only relevant in a context of comparing him to other members of the Governing Council. The ECB accounts show a surplus of €2.661 trillion this year, with a net result of ~€1.3 trillion. They should really focus on things like: the Governor doesn't have a clue what he's talking about, yet he was reappointed in January of this year; the board of directors of the central bank includes such people as David Begg of the ICTU (clearly a man with vast knowledge of macroeconomics) and; the sad excuse of a financial stability department.

Private Joker

Most of the money/debt in our economy is tied up in property commmercial and residential, this has taken about a drop of anywhere up to 50% , we also have negative inflation, if we print more money we'll just offset the problem?

please correct me, any economist out there.

Sea Sharp

England are doing it, hopefully EU will do it. If the US does it as well everything will be OK. (Or not as bad as it would have been ). If all the major economies/currencies do it, it's gonna work.

Run_to_da_hills

We will know soon enough how well it will work out when we see an abundance of €500 and larger bills in circulation.

Sea Sharp

If all the major currencies print money there'll be no hyper inflation.

Reason: If your economy gets into trouble and decide to print money while at the same time every economy around you is OK. What happens is all other economies will say "WTF, I'm not buying your currency for that price!!!". Which causes a chain reaction which leads to hyper-inflation.

If all economies are equally as bad, then if one prints money to clear debt, it won't matter because all other economies are doing the same thing. It all cancels out, relatively speaking.

Disease Ridden

Printing more money, of course!! My 10 year old brother had the right idea! :pac:

Économiste Monétaire

GaNjaHaN wrote: »

England are doing it, hopefully EU will do it. If the US does it as well everything will be OK. (Or not as bad as it would have been ). If all the major economies/currencies do it, it's gonna work.

GaNjaHaN wrote: »

If all the major currencies print money there'll be no hyper inflation.

Reason: If your economy gets into trouble and decide to print money while at the same time every economy around you is OK. What happens is all other economies will say "WTF, I'm not buying your currency for that price!!!". Which causes a chain reaction which leads to hyper-inflation.

If all economies are equally as bad, then if one prints money to clear debt, it won't matter because all other economies are doing the same thing. It all cancels out, relatively speaking.

Are these posts a joke? Or, do you really believe what you've written is true?

Sea Sharp

Are these posts a joke? Or, do you really believe what you've written is true?

Well, I don't think printing money is a quick fix solution to the global recession, but I reckon the pros of printing money, with certain conditions, heavily outweigh the cons.

Économiste Monétaire

I'm fascinated: what are you basing this opinion on? Where have you read such delusional ideas as to glorify hyperinflation? That's what will occur.

thebman

Économiste Monétaire wrote: »

I'm fascinated: what are you basing this opinion on? Where have you read such delusional ideas as to glorify hyperinflation? That's what will occur.

So do you think that is what will happen to Britain and the US?

They have been at the printing presses.

And what are the consequences for the Euro if they do have hyperinflation?

Surely there is a situation in which you print money and hyperinflation does not occur (i.e. an exception to the rule).

Flamed Diving

thebman wrote: »

So do you think that is what will happen to Britain and the US?

They have been at the printing presses.

And what are the consequences for the Euro if they do have hyperinflation?

Surely there is a situation in which you print money and hyperinflation does not occur (i.e. an exception to the rule).

Printing a bit of money (for example, 3-5% of GDP) is not going to lead to hyperinflation. We will not be walking around with €500 notes.

Lets look at the BoE, they recently created £75bn. The UK's total GDP is approx £1.5tn. So the money they created represents about 5% of the total GDP of the UK. Given that the economy is likely to deflate, along with prices over the next 2-3 years, this increase in money should (theoretically) cushion this fall. No hyperinflation.

Any conspiracy theorist who pulls out the ZMMM* is getting a punch in the stomach.








*Zeitgeist Magical Money Multiplier

Économiste Monétaire

I'm referring to this: "If all the major currencies print money there'll be no hyper inflation." That's quite clearly confusing whether domestic prices will rise and whether the real exchange rate will remain constant. The idea that if I start printing currency its domestic price level effects, and the costs of inflation, will be negated by my neighbour makes no sense.

The situation which is the exception to the rule is when real money demand increases, the exact opposite of the dynamics of hyperinflation, i.e. when you print money and inflation overshoots leading to self propagating forces. We've had an increased demand for cash over, say, equities for the last year and that has been reflected in U.S. Treasuries (which are about the most liquid asset next to cash). The British and U.S. approaches to this are quite different. In my opinion, the British approach is an odd one, because it's a self-defeating exercise to purchase government debt from banks who won't lend money because they're under capitalised or just won't lend to Joe Broke. The Fed is targeting specific spreads, something which Bernanke refers to as credit easing, which is distinct from quantitative easing. Don't just increase your central bank liabilities, consider what assets you're buying. The BoE seems likely to focus on 7 year Gilts, at least from what I've read.

Flamed Diving pointed to the money multiplier. It's pretty relevant in that you need banks to lend otherwise your monetary base stimulus is meaningless; I linked a MULT graph before which illustrates the point pretty well. I doubt that what they're currently doing will lead to hyperinflation, but the idea that if we all just start printing currency, and that it will be OK because we're collectively doing so, won't lead to hyperinflation is wrong. That's not going to stop domestic price inflation from money being less scarce.

Sea Sharp

Printing money devaluates a currency, yes. If the printed money goes straight towards paying the bad debts, what will happen is that everything priced in that currency will lose value, or deflate. In a way, printing money and putting it straight towards the debts is redistributing the wealth contained within that currency.

Inflation is ultimately caused by supply and demand, if the extra printed money is just being used to keep our head above water then it will never reach circulation so as to cause inflation.
My understanding is that a significant contribution to hyper-inflation is caused by a drastic increase in the cost of imports, (which are priced in other currencies). But if everyone is printing money, then everyone is on the same boat and this factor loses significance.


I've bitten off more than I can chew here :rolleyes:.

cavedave

Flamed Diving

Lets look at the BoE, they recently created £75bn. The UK's total GDP is approx £1.5tn. So the money they created represents a 5% of the total GDP of the UK. Given that the economy is likely to deflate, along with prices over the next 2-3 years, this increase in money should (theoretically) cushion this fall. No hyperinflation.

What is the money being used for? If it is only 75bn that might not be a problem. If its being used in some grand conspiracy where its given to banks to replace the trillion thats been removed from their deposits in the hopes that it stops a slow bank run that might not be enough

Speaking of conspiracies if the money is given to banks to buy government debt (which is used to pay for services) and that government debt is used as assets by the bank you have a classic pyramid shaped business scheme

Mervin King seems to be saying he is printing money in order to help savers

"But what I would say to savers is that in order to get back to conditions as soon as possible where interest rates can return to normal levels on savings, it is most important that we increase the supply of money in the economy in order to see the economy start to recover.

So hes helping you by making your money worth less so in the future you will earn more interest on it...

This is an interesting blog that examines quantitative easing in the UK in depth

Économiste Monétaire

Money (Euros, Dollars, Pounds Sterling) is essentially a good like any other, to have a value it needs to be scarce. Say every country did engage in printing currency, you still have the same quantity of goods and services being produced. There's now more money chasing the same level of goods and services, you can't increase production of, say, cars as quickly as you can print a sheet of paper. All you've done is to wipe out anyone with savings. Inflation can lead to transfer of wealth from creditors to debtors, yes, but it also leads to a transfer from employees to employers. The price of their goods increases throughout a time period, but my employment contract, i.e. my wage, is fixed for a period of time and that fixed wage buys me less. I then build this price increase into my expectations for the next time period, as does a creditor by raising the nominal interest rate on borrowings to restore a previous real interest rate.

That's why people say, in the long-run money is neutral because real economic variables don't change. You haven't changed anything, just a price index. Whether the ECB's actions of doubling their balance sheet to €2 trillion in the last two years, and the Fed nearly tripling its balance sheet, will cause hyperinflation will depend on whether they can pull the excess reserves out of banks as hastily as they the lent money. It's pretty much guesswork and faith in their intelligence whether any of this will happen. I fall on the side of hyperinflation won't happen.

nesf

Économiste Monétaire wrote: »

That's why people say, in the long-run money is neutral because real economic variables don't change.

In the short run though there's a lot more up for debate. What exact effect (ceterus paribus) will expanding the money supply and then contracting the money supply back to it's original level have on economy given sticky wages and prices?

Économiste Monétaire

nesf wrote: »

In the short run though there's a lot more up for debate. What exact effect (ceterus paribus) will expanding the money supply and then contracting the money supply back to it's original level have on economy given sticky wages and prices?

Exactly, another facet of the debate, and obviously a more complicated issue than my simple model for illustration. In our case, the short-run cause of our deflation is falling effective demand with firms trying to unload built up stocks. The medium- to long-run effects may be due to a contraction in the money supply from a wrecked banking system. I have not got a clue how that will work out, I only assume that they (the Fed) will pull out their lending facilities as money markets become fully operational again. The point you're making ties in with Bernanke being increasingly more vocal about inflation targets; something which the Fed has always been averse to discuss explicitly.

We're going through what you're describing right now, and you just have to look around at the dismay that wages can go down as well as up. The ECB had a special article on wage and price rigidity in its recent monthly bulletin (link).

P. Breathnach

Some first thoughts, not fully worked out:
1. Money supply has contracted: that's at the heart of the credit crunch. The chances of bank money spontaneously increasing seem remote. "Quantitative easing" is an effort to counter that. [But once people create new euphemisms for old tricks, I become distrustful.]
2. Economic activity has contracted, and is continuing to contract. But it seems not to have contracted as much as the money supply. That might justify some increase in the money supply, but it would have to be prudently modest.
3. It appears that wages and prices have become less sticky. Especially wages. It's not so clear with prices, because fire sales tend to be one-offs, and many of the bargains now to be got are unrepeatable.
4. If we have an increase in M0, and some degree of economic recovery follows (that would be the hope), then bank money might tend to grow spontaneously. This could be inflationary. So quantitative easing would have to be accompanied by a vigilant and forceful monetary policy.

The advantage of a forum like this is that I will have all my errors and oversights pointed out to me!

nesf

Économiste Monétaire wrote: »

Exactly, another facet of the debate, and obviously a more complicated issue than my simple model for illustration. In our case, the short-run cause of our deflation is falling effective demand with firms trying to unload built up stocks. The medium- to long-run effects may be due to a contraction in the money supply from a wrecked banking system. I have not got a clue how that will work out, I only assume that they (the Fed) will pull out their lending facilities as money markets become fully operational again. The point you're making ties in with Bernanke being increasingly more vocal about inflation targets; something which the Fed has always been averse to discuss explicitly.

We're going through what you're describing right now, and you just have to look around at the dismay that wages can go down as well as up. The ECB had a special article on wage and price rigidity in its recent monthly bulletin (link).

My issues with it are this.

a) Pumping in money into the system to counteract the contraction of the supply is all well and good but is useless if you don't correct the reasons for the contraction in the first place. The analogy that springs to mind is from medicine of a physician inadvertently treating the symptoms and not the disease.

b) What is the effect on incentives? Will such action make the financial markets more inclined to take risks that could lead to a contraction in the money supply because the good ol' State will bail them out?

c) The contraction in the money supply hasn't fed properly into prices or wages yet. It'll take time to happen and the problem is will the inertia of this cause wages and prices to drop even if the money supply is expanded?

d) Could quantitative easing prevent necessary corrections in the markets that need to fall back from levels that were buoyed up by unrealistic gearing levels?

nesf

I'll take a stab at answering these but with the caveat that I'm not an expert in the area.

P. Breathnach wrote: »

1. Money supply has contracted: that's at the heart of the credit crunch. The chances of bank money spontaneously increasing seem remote. "Quantitative easing" is an effort to counter that. [But once people create new euphemisms for old tricks, I become distrustful.]

See my point a) above. The contraction of the money supply might be better viewed as a symptom of the problem rather than the problem in itself.

P. Breathnach wrote: »

2. Economic activity has contracted, and is continuing to contract. But it seems not to have contracted as much as the money supply. That might justify some increase in the money supply, but it would have to be prudently modest.

It'll take time for contractions in the money supply to feed into economic activity. Wages and prices are sticky and don't change quickly or frequently for a variety of reasons so one wouldn't expect contractions in the money supply to immediately impact economic activity to the same degree.

P. Breathnach wrote: »

3. It appears that wages and prices have become less sticky. Especially wages. It's not so clear with prices, because fire sales tend to be one-offs, and many of the bargains now to be got are unrepeatable.

Have they? I don't think we'll be able to tell for a year or two.

P. Breathnach wrote: »

4. If we have an increase in M0, and some degree of economic recovery follows (that would be the hope), then bank money might tend to grow spontaneously. This could be inflationary. So quantitative easing would have to be accompanied by a vigilant and forceful monetary policy.

Buy bonds from banks now, sell bonds to banks later is the idea. In theory you can control the money supply quite easily. In reality it's hard to stop money flowing in from abroad and countries aren't closed economic systems.

Sea Sharp

Money (Euros, Dollars, Pounds Sterling) is essentially a good like any other, to have a value it needs to be scarce. Say every country did engage in printing currency, you still have the same quantity of goods and services being produced. There's now more money chasing the same level of goods and services, you can't increase production of, say, cars as quickly as you can print a sheet of paper.

The recession, on a fundamental level, is very much so to do with the fact that money has become scarce. In my opinion a major contribution to this scarcity is the transfer of wealth from western countries to the booming Asian economies e.g. China / India.
The money that was lent out by the banks that are now in debt still exists. it's just not in circulation in the economy of origin anymore.

Printing money provides a method to carry out a redistribution of wealth. Even if it's just a way to accept the redistribution of wealth that has all ready taken place.

thebman

Économiste Monétaire wrote: »

Money (Euros, Dollars, Pounds Sterling) is essentially a good like any other, to have a value it needs to be scarce. Say every country did engage in printing currency, you still have the same quantity of goods and services being produced. There's now more money chasing the same level of goods and services, you can't increase production of, say, cars as quickly as you can print a sheet of paper. All you've done is to wipe out anyone with savings. Inflation can lead to transfer of wealth from creditors to debtors, yes, but it also leads to a transfer from employees to employers. The price of their goods increases throughout a time period, but my employment contract, i.e. my wage, is fixed for a period of time and that fixed wage buys me less. I then build this price increase into my expectations for the next time period, as does a creditor by raising the nominal interest rate on borrowings to restore a previous real interest rate.

That's why people say, in the long-run money is neutral because real economic variables don't change. You haven't changed anything, just a price index. Whether the ECB's actions of doubling their balance sheet to €2 trillion in the last two years, and the Fed nearly tripling its balance sheet, will cause hyperinflation will depend on whether they can pull the excess reserves out of banks as hastily as they the lent money. It's pretty much guesswork and faith in their intelligence whether any of this will happen. I fall on the side of hyperinflation won't happen.

Yes I understand that but isn't reducing the cost of things here what we are trying to do anyway? Don't we want to decrease everyones wages so we are in line with our neighbours?

If the ECB did print Euro's then wouldn't it benefit Ireland if every other country increased their wages to counteract it over time and we didn't to fall back in line. Then it becomes a corrective measure for us without reducing our wages so people can still afford their mortgages which they may have trouble doing if more Euro's aren't printed and we just expect everyone to take a cut in wages then they probably won't be able to keep up payments on their mortgages.

Économiste Monétaire

GaNjaHaN wrote: »

The recession, on a fundamental level, is very much so to do with the fact that money has become scarce. In my opinion a major contribution to this scarcity is the transfer of wealth from western countries to the booming Asian economies e.g. China / India.
The money that was lent out by the banks that are now in debt still exists. it's just not in circulation in the economy of origin anymore.

Printing money provides a method to carry out a redistribution of wealth. Even if it's just a way to accept the redistribution of wealth that has all ready taken place.

Irish M3 increased by nearly a third in a year over 2006, private sector credit increased by nearly 28% every year for three years. Money, i.e. credit, was not scarce and we had carry trades from Japan. Quite the inverse occurred to what you're saying, we borrowed on a perceived level of wealth which is unsustainable when you have an asset price collapse. Money is now scarce because that's how the Eurosystem operates, our correction mechanism for an over priced economy is not to devalue a nominal currency but to reduce domestic prices from wage and general cost reductions. Our money supply will contract, to an extent, anyway. You want to redistribute wealth by means of hyperinflation? If you're looking for wealth redistribution, try Marxism, not helicopter Ben. What proportion of Irish total bank assets are accounted for by foreign held assets in Asia?

thebman wrote: »

Yes I understand that but isn't reducing the cost of things here what we are trying to do anyway? Don't we want to decrease everyones wages so we are in line with our neighbours?

If the ECB did print Euro's then wouldn't it benefit Ireland if every other country increased their wages to counteract it over time and we didn't to fall back in line. Then it becomes a corrective measure for us without reducing our wages so people can still afford their mortgages which they may have trouble doing if more Euro's aren't printed and we just expect everyone to take a cut in wages then they probably won't be able to keep up payments on their mortgages.

Well cost base reduction would be the outcome most economists are looking for, competitiveness indicators show an over priced economy of between 10-20% to our Euro neighbours. High wages are a choice which doesn't fit with a model of being an export based economy. If the ECB printed high powered money to that extent, I'm fairly certain the Eurosystem would collapse. Wiping out citizens' savings so that Ireland can become competitive again wouldn't go down well in places like Germany where they've spent years trying to reduce their cost base. Our debt levels are an obvious impediment to achieving price reversion, inflation would assist here by eroding the real burden of that debt. Rock and a hard place :pac:

thebman

Économiste Monétaire wrote: »

Well cost base reduction would be the outcome most economists are looking for, competitiveness indicators show an over priced economy of between 10-20% to our Euro neighbours. High wages are a choice which doesn't fit with a model of being an export based economy. If the ECB printed high powered money to that extent, I'm fairly certain the Eurosystem would collapse. Wiping out citizens' savings so that Ireland can become competitive again wouldn't go down well in places like Germany where they've spent years trying to reduce their cost base. Our debt levels are an obvious impediment to achieving price reversion, inflation would assist here by eroding the real burden of that debt. Rock and a hard place :pac:

Yes but Germany isn't entirely unaffected by this. It would probably benefit them to print some money. I'm not suggesting it would be a solution to our problems but a combination of both might reduce our pain so we should at least try to persuade them to do it.

Économiste Monétaire

We can't persuade the Governing Council to do anything, no politician is permitted to even attempt to communicate what the ECB should do (obviously something Sarkozy was never informed of). The problem for the ECB is that the Euro area expanded too quickly, and BoE and Fed policies are based on areas with very synchronised business cycles, labour markets, et cetera. That's not the case for Euroland. This is the first time we've had a monetary union in Europe based on a fiat currency, the third monetary union in total. The effects of quantitative/credit easing are essentially unknown, to a greater extent than for the BoE/Fed, so that makes forecasting these policies a lot more difficult. I'd support some stimulus, but I understand why Trichet is erring on the side of caution. German HICP is taking a hit, but large scale monetary stimulus may hit a nerve with the hawks of monetary aggregates. They'll point to their policies that helped them escape the great inflation of the '70s. I understand your point though, and maybe I'm overstating how much stimulus you're talking about.

thebman

Économiste Monétaire wrote: »

We can't persuade the Governing Council to do anything, no politician is permitted to even attempt to communicate what the ECB should do (obviously something Sarkozy was never informed of). The problem for the ECB is that the Euro area expanded too quickly, and BoE and Fed policies are based on areas with very synchronised business cycles, labour markets, et cetera. That's not the case for Euroland. This is the first time we've had a monetary union in Europe based on a fiat currency, the third monetary union in total. The effects of quantitative/credit easing are essentially unknown, to a greater extent than for the BoE/Fed, so that makes forecasting these policies a lot more difficult. I'd support some stimulus, but I understand why Trichet is erring on the side of caution. German HICP is taking a hit, but large scale monetary stimulus may hit a nerve with the hawks of monetary aggregates. They'll point to their policies that helped them escape the great inflation of the '70s. I understand your point though, and maybe I'm overstating how much stimulus you're talking about.

Yes I'm talking about trying to get the countries like Germany back on track. I don't think we (or rather the ECB) can justify using quantitative easing to get countries like Ireland out of this mess. We seem to be in too deep.

It might aid our recovery and maybe there's but hey I don't know all the variables in play for other countries economies so I guess its up to the ECB.

I think they will do it because I think the consequences of not doing it are probably going to be pretty high for countries like Ireland and we will end up going to Germany for help. If they turn us down and other countries in a similar position to us, it risks the EU itself and the stability of the Euro IMO so I think there are risks to not having quantitative easing too.

I wouldn't like to be the guy making the decisions, I'll put it like that

Flamed Diving

cavedave wrote: »

What is the money being used for? If it is only 75bn that might not be a problem. If its being used in some grand conspiracy where its given to banks to replace the trillion thats been removed from their deposits in the hopes that it stops a slow bank run that might not be enough

Speaking of conspiracies if the money is given to banks to buy government debt (which is used to pay for services) and that government debt is used as assets by the bank you have a classic pyramid shaped business scheme

Mervin King seems to be saying he is printing money in order to help savers


So hes helping you by making your money worth less so in the future you will earn more interest on it...

This is an interesting blog that examines quantitative easing in the UK in depth

I'm about to hit the hay, but you are completely misinterpreting what Mervyn King is saying there. In fact, it seems to me that you are simply looking for what you already believe in your head, and working backwards. In that article he says:

Mr King said he had sympathy for savers who through "no fault of their own" were now "suffering through low interest rates".

I saw that interview and he, in no uncertain terms, apologised to savers for what he was doing. He never implied that he was helping them. Not once. Therefore:

King seems to be saying he is printing money in order to help savers

is total and utter nonsense.

Flamed Diving

nesf wrote: »

My issues with it are this.

a) Pumping in money into the system to counteract the contraction of the supply is all well and good but is useless if you don't correct the reasons for the contraction in the first place. The analogy that springs to mind is from medicine of a physician inadvertently treating the symptoms and not the disease.

b) What is the effect on incentives? Will such action make the financial markets more inclined to take risks that could lead to a contraction in the money supply because the good ol' State will bail them out?

c) The contraction in the money supply hasn't fed properly into prices or wages yet. It'll take time to happen and the problem is will the inertia of this cause wages and prices to drop even if the money supply is expanded?

d) Could quantitative easing prevent necessary corrections in the markets that need to fall back from levels that were buoyed up by unrealistic gearing levels?

a) All governments have indicated that financial systems will be subject to much tougher regulations after this.

b) See a)

c) It's really not possible to tell, is it? But according to my crude calculations, a 5% increase (vs the decrease) seems about right, for this year.

d) Yes. But can the powers that be afford to allow the elastic to snap back? Does their mandate even allow them to do this?

nesf

cavedave wrote: »

Mervin King seems to be saying he is printing money in order to help savers


So hes helping you by making your money worth less so in the future you will earn more interest on it...

No, he's apologising for what he has to do to support the broader economy. Increasing the money supply hurts savers. He's saying "sorry, but unfortunately in order to get interest rates back to normal we need to increase economic activity and to do that we'll need to increase the money supply which will hurt you".

nesf

Flamed Diving wrote: »

a) All governments have indicated that financial systems will be subject to much tougher regulations after this.

Sure, but what if the governments after them relax those regulations again? The Glass-Steagall act springs to mind.

Flamed Diving wrote: »

d) Yes. But can the powers that be afford to allow the elastic to snap back? Does their mandate even allow them to do this?

Indeed.

Flamed Diving

nesf wrote: »

Sure, but what if the governments after them relax those regulations again? The Glass-Steagall act springs to mind.

That took fifty years to repeal.

nesf

Flamed Diving wrote: »

That took fifty years to repeal.

It depends how you look at it. Banks only started seriously lobbying for its repeal in the 80s after the securities market had gotten large enough to start drawing a lot of custom away from them.

Flamed Diving

nesf wrote: »

It depends how you look at it. Banks only started seriously lobbying for its repeal in the 80s after the securities market had gotten large enough to start drawing a lot of custom away from them.

Yeah, but we are entering a new era of neo-neo-keynesianism. They wont stand a chance this time.

nesf

Flamed Diving wrote: »

Yeah, but we are entering a new era of neo-neo-keynesianism. They wont stand a chance this time.

Hah, when we're middle aged and balding I'll remind you of this conversation.

Flamed Diving

nesf wrote: »

Hah, when we're middle aged and balding I'll remind you of this conversation.

I will be a neo-neo-neo-neo-keynesianist.

Économiste Monétaire

thebman wrote: »

Yes I'm talking about trying to get the countries like Germany back on track. I don't think we (or rather the ECB) can justify using quantitative easing to get countries like Ireland out of this mess. We seem to be in too deep.

It might aid our recovery and maybe there's but hey I don't know all the variables in play for other countries economies so I guess its up to the ECB.

I think they will do it because I think the consequences of not doing it are probably going to be pretty high for countries like Ireland and we will end up going to Germany for help. If they turn us down and other countries in a similar position to us, it risks the EU itself and the stability of the Euro IMO so I think there are risks to not having quantitative easing too.

I wouldn't like to be the guy making the decisions, I'll put it like that

It would be great if they purchased a chunk of our debt to reduce the spread with the Bund, which would have few inflationary issues, but a problem with moral hazard. The price of borrowing is an expedient to our fiscal correction. The pressure within the Governing Council has been building over the last two months, first from the Greek and Belgian governors, and remember every decision is unanimous , so I'm expecting some form of organised outright purchase program--under whatever guise that might come through. The mechanics of that will be complicated, and where the excess credit is allocated will be a long-run issue. I doubt the community would turn their back if we came to them under a pending default situation.

Policy makers do not have enviable tasks, for sure. The doom and gloom aside, this economic war, as it's being described, will hopefully provide some conducive debate for the economics field, and we'll see the effects of large scale U.S. fiscal and monetary policy.

Économiste Monétaire

We're entering a period of the new-Keynesianist battling against the General Theory Keynesianist. Or should that be the Hicksian interpretation of what is a General Theory Keynesianist? Are there any (new-)Classical economists left in the current debate?

nesf

Économiste Monétaire wrote: »

Are there any (new-)Classical economists left in the current debate?

In this thread or in the rooms deciding on policy?

cavedave

Flamed Diving

I saw that interview and he, in no uncertain terms, apologised to savers for what he was doing. He never implied that he was helping them. Not once.

I took him to imply that he was helping them in the long term.

nesf

So hes helping you by making your money worth less so in the future you will earn more interest on it...
No, he's apologising for what he has to do to support the broader economy. Increasing the money supply hurts savers. He's saying "sorry, but unfortunately in order to get interest rates back to normal we need to increase economic activity and to do that we'll need to increase the money supply which will hurt you".

and that after this hurting you'll be back to earning normal levels of interest. It is the bitter pill but its medicine sale.

Économiste Monétaire

nesf wrote: »

In this thread or in the rooms deciding on policy?

In policy making, or just giving their view to the general debate on fiscal stimulus and such. I've seen some pieces by Barro and Lucas, but it's been pretty quiet from that group.

nesf

Économiste Monétaire wrote: »

In policy making, or just giving their view to the general debate on fiscal stimulus and such. I've seen some pieces by Barro and Lucas, but it's been pretty quiet from that group.

I remember some rants from Barro about the stimulus package. Obama obviously favours some brand of Keynesianism so that might be part of it. He hasn't exactly opened it up for ideas and debate.

In the broader scheme of things in countries that can't simply borrow half their normal spending for a stimulus it's a bit tougher to be a Keynesian.

Flamed Diving

cavedave wrote: »

I took him to imply that he was helping them in the long term.

Ah, well that was the spin, I guess. But he is right, in that respect. He must do something to restore the economy, in the long-run. This is in his mandate.

Run_to_da_hills

Inflation fire

snubbleste

Peer Steinbrück, told Germany’s parliament that the country, as a member of the EU, had a “massive interest” in the credibility of the stability and growth pact, which was not taken seriously by some. “If it is not taken seriously, I am telling you, the euro will have trouble one day in terms of its own credibility and stability,” he said.

The euro fell as a result of his remarks
Is he referring to Ireland?