Timmy elsewhere

At the ASI.

Merkozy and the ECB are playing a game of chicken.

4 thoughts on “Timmy elsewhere”

  1. Still advocating collectivist policies. Questions/comments:
    1. What is the ECB legally allowed to do under the terms of the current EU treaties? If it is not allowed to do what you advocate, we will have to wait for the politicians (and ideally the people directly via referendums) to change the treaties.
    2. Can we be sure that this intervention will not help create the next, even bigger crisis, as the interventions of Greenspan et al did 10 years ago?
    3. What accountability is there for the central bankers and the politicians if (when) they do mess up? What punishment will be exacted against them? We now have even Delors saying that the Euro was flawed from beginning, yet there is a distinct lack of people falling on their swords (where is the Operative from Serenity when we really need him?).
    4. Our societies have been living beyond our means for decades, in the process borrowing far too much money. Would we not expect aggregate demand to fall as we solve these problems? As for money supply in Southern Europe, falls are to be expected as fewer foreigners invest their money there and more of the locals move their savings to banks elsewhere. Seems to me that at the micro level people are now making perfectly sensible choices.

  2. The ECB printing money and buying up bonds would solve the immediate liquidity problem, but it would not solve the solvency problem that several Eurozone states have. Nor would it do anything about the balance of payments problems within the Eurozone or its weak and undercapitalized banking system. ECB printing would therefore simply be a very large sticking plaster. Would it be enough to stop the haemorrhage and stabilise the patient enough to allow essential surgery to take place? Maybe – but if it is too effective in the short-term it just might encourage the surgical team to conclude that surgery isn’t necessary. If this happens then the patient is still doomed.

  3. Greece is insolvent. Italy is using the wrong currency. Many banks are full to the gunwales of dud debt based on US subprime mortgages. The fundamental problems ain’t illiquidity.

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