Sunday, November 20, 2011

Krugman Calls for ECB Money Printing

To a Keynesian there are only two answers to any problem, government spending and central bank money printing. Since the EZ has spent itself into a huge crisis, mad man Krugman wants to see inflation added to the mix. He's calling for European Central Bank money printing via a lender of last resort role:
....Europe desperately needs the ECB to act as lender of last resort, and short-circuit the vicious circles.
Krugman's support for this mad policy:
Right now, the ECB has too much credibility on the inflation front; the spread between German nominal and real interest rates, which is an implicit forecast of the inflation rate, is pointing to disastrously low medium-term inflation.
Got that, he is concerned that inflation is too low? Second, does he not realize that German rates are low, not because of an "implicit inflation forecast," but because Keynesian spending programs are crashing most of the EZ and that Germany is seen as one of the few safe haven countries in the EZ for money?


  1. Such backwards thinking.

    Even if the ECB decides to print, it's not going to "save" anything, as the Keynesians I read seem to think.

    It will only create a bigger problem for a future date, just as the Fed has done here.

  2. The EU has two options to kick the can further down the road:
    1-Print Money
    2-Announce that a deal has been reached to create a Unified Europe and that all sovereign debt will be rolled under this Entity (This is really the only way the European project has any chance to survive).

    Since option 2 is totally impossible and requires a believability factor not even the best European liar's in government, academia and business could pull off, the only option left is to print money.

    If they do not print money its game over. There is already a liquidity freeze taking place among the banks. We are right back on the same doorstep we were on in 2008 only this time we all know the script so the same b/s and lies are not going to work. That means that the pols will let the house of cards fall since neither left nor right wingers can stomach more bailouts. There will be no knight in shining Armour to rescue the banks this time. I hope your readers are prepared.

    There is I guess one other kick the can for a short time option and that would be for the IMF to intervene with some kind of spv, but that will ultimately force a massive liquidation of all Euro-debt by the banks and if Ben thinks the public hates him now, participating in a multi-trillion bailout would get him a place on the wall at the post office. So in the end all this would do is kick the can down the road far enough to let us enjoy one last decent Christmas until everyone wised up to the impossibility of an IMF solution.

    BTW, IMO the collapse will be massively deflationary at first as the world tries to soak up every dollar and US treasury on the planet (that is why I would not buy any more gold right now) to keep commerce flowing. When this happens you can bet that the FED goes nuclear in exploding the money supply to counter act the deflation. When this starts to happen, is when I plan to have most of my wealth in metals and commodities and very few dollars.

  3. Amen, Chris. These fools think printing digits on paper creates (or preserves) wealth. Their folly is destroying the world.