The relentless march of market monetarism toward world domination continues:
The Bundesbank and political leaders in Berlin, amid mounting anti-German sentiment in the eurozone, conceded what was once unthinkable, allowing Europe’s biggest economy to risk inflation in order to pull the rest of the contracting continent back from the brink.
I guess when all the other alternatives (fiscal union, eurozone breakup, etc) are completely unthinkable, then the “highly undesirable” starts to look pretty good. Trichet bragged upon leaving office that the ECB’s “stellar counter-inflation record” was “far better than that achieved by the Bundesbank.” Perhaps the leaders of the Bundesbank have realized that going back to the levels of inflation that they tolerated in the 1990s is not quite as bad as “eurogeddon.”
I suppose Kantoos would know how to spell market monetarism in German. He has a new post pointing out that the “inflation rate” being targeted by the ECB is just as much of a statistical absurdity as our CPI, indeed even more so. Read it and weep—the world economy’s fate is being determined by fools.
PS. For the first year or two of the Great Depression, Austrian economics was quite popular—Hayek was a rival to Keynes. After all, it looked like a morality tale where speculative excesses in the late 1920s had led to the inevitable hangover in the 1930s. But as the Depression worsened people lost interest in both austerity and Austrian economics, and looked for pragmatic solutions to the suffering of millions of unemployed workers. One of those solutions was monetary stimulus. It looks like the austerity backlash is arriving right on schedule. It doesn’t take a rocket scientist to understand that one doesn’t solve debt problems by pushing 25% of the workforce into ranks of the jobless.