Mr Schauble told Washington to mind its own businesss after President Barack Obama rebuked EU leaders for failing to recapitalise banks and allowing the debt crisis to escalate to the point where it is \”scaring the world\”.
\”It\’s always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the US government,\” he said.
Because of course when you\’re giving economic advice to others you don\’t have to worry about the politics.
Geithner doesn\’t have to consider being lynched in the streets of Berlin if the Germans have to pay for everyone else.
Motes and beams all round.
Someone on Marginal Revolution suggested giving control of the Euro to the Federal Reserve in the US. I like this idea. Perhaps we can combine some degree of democracy with currency control by swapping control of everyone’s Central Banks. You know, once the Euro collapses. So the German Central Bank can be controlled by the French and the Slovaks. The Spanish by the Germans. And so on.
It would be interesting for two reasons – one is that it really would isolate the banks from local political pressures. The other is that it would be an interesting exercise in what fiscal policies are sensible. A teaching moment. Does Greece benefit from high inflation in Germany? No. So why would anyone think they do in Greece?
Greece would benefit from high inflation in Germany, since it would erode the value of Greece’s euro-denominated debt. Debtors, in general, benefit from high inflation (in the sense of stably-high-not-leading-to-hyperinflation).
Tim adds: Depends on the average maturity of the debt. If you owe on 30 year bonds that you’ve already issued, inflation is your friend. If your stock is 6 month T bills that you’ve got to roll over, inflation is a danger. Greece is toward the latter end of the spectrum.