David Frum, former economic speechwriter for President George W. Bush, writes:
The German currency was twice wrecked by inflationary war finance. In both world wars, the German central bank became the main buyer of government bonds, creating huge oceans of cash that drove down the purchasing power of the mark.
Combine those two monetary disasters with a third, the Great Inflation of 1923, it’s no wonder that Germans get phobic on the inflation subject. In their folk memory, inflation = Hitler = having your cities bombed to pieces.
But it’s worth understanding that this remembrance is a folk memory, and neither an exactly accurate account of the past nor a reliable guide to all possible future contingencies.
Frum then uses his "folk memory" platform, for you guessed it, a call for money printing:
But the ECB is the issuer of the Euro, the one and only entity in all Europe with the power to create cash. If it is not the lender of last resort, there is no lender of last resort. Which is a walking invitation to disaster.One wonders if Frum has any inkling what it is like to live under serious price inflation. It destroys savings, fuels rampant speculation, destroys the middle class, ruins those on fixed incomes. Does Frum have any idea how many euro would need to be printed by the ECB to bailout the eurozone?
Frum tells us that "A central bank that cannot lend in an emergency is a central bank that cannot do its job: preserve monetary stability." Is he serious? Does he really think central bank money printing brings monetary stability? Is that what he thinks happened in Germany during the great inflations, monetary stability?
There is no need to bring Hitler into the inflation debate. Inflation can stand on its own as an evil. Yet, when you think about it, Frum is arguing inflation isn't Hitler, so let's print money.
Using the same argument you could argue, "Hey, Stalin isn't a nuclear warhead, so lets nuke someone."
" "A central bank that cannot lend in an emergency is a central bank that cannot do its job: preserve monetary stability."
ReplyDeleteThis is the same as saying this: If we don't shoot this man he will die nevertheless.
"If it is not the lender of last resort, there is no lender of last resort. Which is a walking invitation to disaster."
ReplyDeleteAu contraire, Mr Frum, it is precisely the inception of "lenders of last resort" that have created walking invitations to disaster.
Leverage up, everybody!
More like moral hazard of last resort.
ReplyDeleteFrum is yet another waste of oxygen.
ReplyDeleteCan anybody say 'Godwin's Law'?
ReplyDeletePeople are absolutely stupid to work for their counterfeit money and pay taxes...Frum basically states this.
ReplyDeleteOf course. I think it was the Frankfurt School guys who first came up with it.
ReplyDeleteWe can either have a One World Socialist Democracy With Central Bank, or Hitler 2.0.
You're not a Nazi now, are you?