Blame the ECB

Opening paras of my latest at The National Interest

As the euro zone stumbles towards a seemingly inevitable collapse, it is easy to blame the politicians involved or the whole idea of a common currency. The outcomes of the latest top-level meeting, including a pledge to create a single euro-zone banking supervisor and a relaxation in conditions for lending to Spain, are welcome enough but seem, yet again, to be too little, too late to save the common currency.

In reality, the real problem is not with the euro but with the institution set up to manage it, the European Central Bank. The idea behind its creation—a central bank completely independent from government control—is detached from economic reality.

The ECB’s disconnectedness was evident in the decisions by President Jean-Claude Trichet to raise interest rates twice during the course of 2011, at a time when the danger of complete collapse was already evident. Although these decisions were subsequently reversed, they killed any chance that Europe would grow its way out of the debt crisis.

46 thoughts on “Blame the ECB

  1. Blame the loss of currency sovereignty. A nation state needs to retain currency sovereignty to retain full control over its own monetary and fiscal policy. Once a nation (like Greece) cedes currency sovereignty to a foreign or extra-national body (outside national jurisdiction) then that nation is essentially operating with a foreign currency. Its government debts are denominated in a foreign currency and the ability to use the full gamut of powers available to an issuer of fiat currency are gone.

    Such a government loses the ability to respond to domestic, democratic demand for adequate counter-cyclical deficits to boost aggregate demand in recessions. If the foreign currency power (effectively the ECB in this case under pressure from and even the control of international financiers) chooses to impose austerity, the national government in question is effectively powerless to run its own economy in any proper sense with a view to maintaining the economic and social health of the nation.

    It is clear that the push to move fiat currency control and thus effective economic control out of the reach of democratic nation states is an attempt to de-democratise Europe (in this case) and eventually to de-democratise the world. Power to rule is removed from the people to the financial capitalists. It was and is a brilliant plan and it is working to make the plutocrats richer and more powerful… for a while.

    The end result, if it is pushed too far will be depression, revolution and war. The czars of finance may then suffer the fate of the Russian Czardom.

  2. The Euro’s inevitable collapse will, if it does occur, will occur for political reasons. It is of course, not inevitable, but may happen as a self-fulfilled prophecy. There is no reason for the euro to collapse and most of what has been talked about the ‘pending’ collapse is just so much bunk.

    That said, the ECB is putting in a credible entry in the worst post-GFC economic management competition. However, the ECB is facing stiff competition from the US Fed, the US government amongst others.

  3. A healthy dose of inflation would inflate the debts away combined with increases in tax on the rich and job creation programs and you could kickstart some growth again – but then that’s not what they want. The principal goal in economics appears to be widening the gap between rich and poor and it’s coming along nicely.

  4. Exactly right, concerning inflation. Two problems though. First,the Germans absurd fear of inflation and, second, how to create the inflation.

    QE doesn’t appear to have worked and we have yet to obtain the data on what happens when the created liquidity eventually starts to move. Maybe the way to do it would be to ‘sprint’s some money and give it to those living hand to mouth who would spend it.

    The stimulus was splendidly done, in Australia, but fortunately it was done quickly, before the post-GFC fear had set in. Once that fear has set in, as it now seems to have in Australia stimulus probably becomes many times more difficult because fear and uncertainty depress willingness to spend, invest, lend or take risks of any kind.

  5. The Higgs Boson is big news today, so after a little search I found this

    explanation for what it is all about. A highly simplified summary might be “the ether has been discovered to consist of “bisons” as described by Higgs”. At least that is my first read conslusion.

    The point of the comment is, though, that I wonder if ther is not a similar property to be discovered for economics.

    I have an opening theory which I put forward on John Humphrys blog site, a comment which curiously did not pass moderation, as a perspective on Libertarianism, which suggests that the limits to freedom are determined by the density of overlapping interests. Not exactly new or rocket science, it is even obvious if you stop to think about it. The take away thought here is that just as Higgs Bosons act as a viscous medium to provide a terminal speed limit for subatomic particles, perhaps economic entities are similarly restrained.

  6. “bosons not “bisons”

    The universe will never be the same without those shaggy beasts cruising the spaceways.

  7. Interesting why an ether was thought necessary for Newtonian physics. They seem to have got something although still a lot of work to establish it as a higgs boson.

    Interestingly, on the euro, a prize has just been handed out to one of five finalists on how to break up the euro zone.. The Wolfsonprize prize. Of the finalists only one idea was original and had merit but didn’t get the prize. Instead it went to a rather unoriginal and vacuous proposal submitted by a regular media commentator.

    All quite disappointing. As the prize had been touted as second only to the Nobel. I doubt Mr Bootle, the recipient will be following the triumph up with the bank of Sweden prize though. Of course, the prize has been awarded by one of those dodgy faux ‘think tanks’, this one set up by a conservative life peer. A self made man who started at the bottom of a company and by age 33 had worked his way to the top being managing director and chairman of the board, as well as holding 40 percent of the stock. Nevertheless, those typically snide and jealous types that inhabit the lower classes, do like to slight his remarkable accomplishment by pointing out that his father did found and and own the company.

  8. Another remarkable thing about the competition was that everyone who made the finalist shortlist seemed to live in and around London, and the eventual winner, Mr Bootle, was of course, British.

    Clearly, the United Kingdom is a remarkable country, holding, as it does, almost all of the world’s economic talent. Or at least that is what one must conclude as the Wolfsonprize was open to all, yet no Americans and none from the colonies, Asia and so on, managed to make the finalist.

    One wonders how they ever lost the empire?

  9. @BilB


    Given the context, I assumed you were punning. Over at ALP-right site “PollBludger”, “BISONs” refers to Wayne Swan’s “beautiful inspiring set of numbers”.

    In other Higgs-Boson news …

    Apparently the original nickname for the H-B was not “the God particle” (a term said to be hated by physicists, including Peter Higgs himself, who is ostensibly a non-believer) but the Goddamn particle. The trouble was that this was a bridge to far for the then popular press in the US.

    Someone on twitter called it the Higgs-Bosom particle: probably a typo, but I rather like it.

  10. Another campaigner against central bank independence is Richard Werner, who wrote “Princes of the Yen”, a best-seller in Japan and a great read in English. Werner also describes an independent central bank hell-bent on its own agenda, though quite a different agenda to that of the ECB. I’d be interested to hear peoples opinions on Werner’s ideas and their relevance/contrast to Europe, although perhaps that belongs in a sandpit.

  11. The duarchy of executive government and central banks during the 1970s generated stagflation and capital flight from a number of vulnerable economies.

    These problems drove many countries, including Australia, to grant more independence to their central banks. Was the cure worse than the disease? It depends on circumstance of individual economies. It is therefore incautious to assert that the re-establishment of executive control over central banks is necessarily beneficial.

  12. EU’s major flaw was that it didn’t have a central body to determine how to implement fiscal measures of the common currency area. A common currency area with only one body (ECB) having economic (and political) influence is not much different to of dictatorship with democratic states (sound strange?). The fact that the ECB directly influence politics so much in the EU area already undemines the democratic process of the EU “nations”.

    I don’t believe Paul Krugman’s advocated solution (for the EU to act like a single country) will ever be possible in the reality, I do think it can work. However, IF EU can actually get through this crisis, it needs to seriously think about creating a council with voting process and the power to print money to plan the fiscal coordination of the EU, to limit the power of the ECB, and to give each EU “nation” (or they should be called state in a common currency area) a proper voice to enforce the democratic process.

  13. The problem is not independence, but one of stupidity. Central bank policies which are stupid or stupidity carried out, are stupid regardless of whether they are being directed by a government or an independent authority. Independent authorities, properly set up with the right objectives and good staff can work well. The ECB was not set up properly, has the wrong objective and seems to have had an inflexible person running it at a critical time.

  14. @Tom
    I thought the 4 Corners report on the Euro crisis recently was particularly excellent. I got the impression from that, that much of the crisis with regards to the “Euro” would have been avoided if they had of followed their own rules in the construction of the Euro to begin with.

  15. @Troy Prideaux

    The current structure of EU is particularly flawed. Even if they’re never going to set up a central council they should at least ensure the ECB is actually independant and democratic itself. Having the ECB controling money supply it will have major power over economics policies of the EU zone (now it have major political power as well in election influence). If the ECB has a voting process itself with economists from all sides, then arguably it is independant. Right now, the ECB is full of neo-liberals with only 1 policy direction (austerity), how can that ever be considered as independant if it only has members who consist of a particular political and economic viewpoint with no voting process? Pardon me but it looks no difference to dictatorship to me.

  16. C’mon, Europe’s problems have little to do with the currency or the central bank.

    The primary causes are in the standardised social welfare structure applied across a diverse range of states but without the balancing attitude to production and national income, the GFC, and the slow bleed effect of Asian market access.

    Europe’s southern states ( I am going to postulate here that the annual harsh winter of the northern states ingrains a natural determination for independence and survival) could cope with any one of those very devastating economic impacts, but not all three at the same time.

    And then there is the other always forgotten factor in all of this, and that is that we are on a one way, never been done before process of population rise, resource exploitation, and environmental change. The only precursor for Europe’s state amalgamation is in the creation of the United States of America. but that occurred at a time or relative resource abundance. Not a real parallel.

    Europe’s situation is unique and they will get through it, and…be much stronger for the so doing.

  17. A nice playful essay there, Fran. It is a shame that we seem to have lost the power of real wit and candour in our parliament.

  18. @BilB

    With due respect, your comment shows you don’t really understand what a nation using foreign currency really means. With regards to social welfare, please take a minute to look at Denmark, Sweden, even Germany has one of the highest social expenditure as a % of GDP compared to the rest of Europe.

  19. Thanks for the respect, Tom, and with equally due respect, I believe that you are considering the European situation one dimensionally. The situation is not that simple.

    A high cost social welfare system is not a problem if a country has a functioning taxation regime and a stable economy to support it. In fact a comprehensive social welfare system is highly desireable in countries where the options for flexibility of lifestyle have been severely reduced, as is the case in Northern Europe.

    The European Central Bank may very well have failures within its functioning, but it is not the problem here in the current situation. The problem is more to do with a failure of sharing opportunities and or the failure to mentor weaker partner states.

    “All for one and one for all” as the saying goes……or else.

  20. @BilB

    I partially agree with your comment, it is stupid to think that the ECB is the only problem the EU have. However, I don’t think Professor Quiggin or my comment have stated “it is the only problem”. The Thread is critcising the ECB because it can have a major influence to the EU’s economic condition, as well as the common currency is one of the reasons why some countries face export demand deficiency.

    “A high cost social welfare system is not a problem if a country has a functioning taxation regime and a stable economy to support it.”

    This is true, but welfare itself is also an automatic stabiliser that helps to stable the income (thus demand and production) of the economy when recession hits. A problem associated with EU at the moment is that while welfare stabilise the income of the economy, export fails to lead recovery quick enough due to there is no domestic currency to depreciate in recession like the AUD or Swedish Krona. So the welfare payment will have to act as automatic stabiliser until internal devaluation makes export competitive enough (which is not happening quick enough in EU).

    “The problem is more to do with a failure of sharing opportunities and or the failure to mentor weaker partner states.”

    I don’t understand what exactly this means.

  21. There are other mechanisms, Tom.

    For instances most of Asia manages its trade in US dollars. The GIPSI countries could do the same keeping their internal economy operating in Euro.

    Another mechanism is to apply a time limited global (national) levy (3 or 4 %) to all non European and non primary resource imports of goods and services. This would apply a small bias towards local manufacture and fund industry restart programmes.

    A Europe wide stabilising programme would be to recognose that Europe Future requires many times more renewable energy generation capacity, and rather than hand out billions of dollars to pay out debt, apply those same hundreds of billions of dollars for contracts to build energy infrastructure in the GIPSI countries. It is amazing how quickly the lights come back on when there some real business to do.

    This last point goes to explaining the earlier last point. There needs to be a littles less national competition and a little more cooperation within Europe, as it is in everybodies interests to do so.

    But the most important understanding to have is that Asian trade white ants an economy over a long period of time. This undermining steadily reduces the options for people at the bottom tier of the economy progressively overloading the welfare system. So where a goverment has opted for free trade policies, they have to be mindful of the cost and provide a solution. Europe used to be famous for its tinkers, taylors and shoe makers. Now Asia is.

  22. The McKinsey & co report on Greece from March highlighted many of their challenges and many of those challenges highlighted are (or at least were) shared by some of their neighbours.

  23. Since 2000, the Euro has appreciated 45% against the $US. Clearly the German economy has accommodated itself well to this challenge to international competitiveness but few other Eurozone economies can boast the same success.

    If Eurozone monetary policy were aimed at enhancing the international competitiveness of Eurozone economies then it would be geared toward undermining the exchange value of the Euro. If this were a policy, then the ECB has failed miserably.

    But qui bono? As noted above, the German export sector has thrived. Germany is notoriously dependent on importation of energy. A high Euro eases that cost burden. Moreover, a high Euro assists acquisition of foreign assets. Have German firms gone on a buying spree outside the Eurozone?

  24. @BilB

    What you are saying are proposed solutions not problems, the thread was initially about the problems of Europe not proposed solutions.

    “Another mechanism is to apply a time limited global (national) levy (3 or 4 %) to all non European and non primary resource imports of goods and services. This would apply a small bias towards local manufacture and fund industry restart programmes.”

    This will only have very small effect for some of the EU nation’s recovery. EU nations trades mainly within the EU area itself, e.g. the country in the biggest trouble, Greece, major import partners (2009) consist of the following:

    •Germany 12.1%

    •Italy 11.7%

    •Russia 7.4%

    •China 5.6%

    •France 5.1%

    •Netherlands 4.7%

    In which only China and Russia are not EU nations with combined import only 1% higher than from Germany. Not only so, Euro to RUB (although higher than prior 2009 exchange rate) has been on a declined since 2009 after the initial spike in 2009. Euro to CNY has fallen very significantly from around 11:1 in 2008 to recently about 8:1.

    A proper Europe stabilising program will be great if it can actually be proposed and agreed to, as well as getting the ECB to supply the money supply. IF the ECB is and was willing to do so, so many Keynesians won’t be crying everywhere about the ECB. If the Euro was so co-operative to each other to agree to a stabilising program that requires hundreds of billions, some countries won’t be crying for stimulus measures instead of EU wide austerity in the first place.

    Don’t you get it? A lot of the things your saying are all already proposed and said by a lot of Keynesian economists all over the world in the past few years. It’s problem is not there is no solution but they won’t co-operate. Like I already said, this thread wasn’t about proposing solutions, it’s about the problems EU face.

  25. “Europe’s situation is unique and they will get through it, and…be much stronger for the so doing.”

    My sentiments exactly.

    And, considering Greece has the most polluting coal power plant in the Euro zone and a lot of sunshine and a huge coastal line, there are obvious projects for EU funds and employment. But this will not happen over night.

    In contrast to the FED, the ECB was created by elected governments. The ECB can only ‘dictate’ to governments as long as the rules, created by elected governments, allow. The rules of the ECB can be changed by the Euro member governments, subject to their respective constitutions.

    President Holland of France announced taxation changes (including 75% income tax on incomes > 1.0Euro). Clearly, being a Euro-zone member is not a constraining factor.

    Germany’s once famously generous welfare system is but a shadow of its former past (since unification, brought about by the CDU-CSU Kohl government and paid for by West German taxpayers under the SPD Schroeder government). There are proverbial millions of ‘working families’ in Germany who would like to spend a holiday in Greece but for their tight budget constraint they fly to Turkey (approximately equal air pollution). There are proverbial millions of retired Germans who won’t be able to go to Greece or Spain on holiday because their savings and pension funds have shrunk (nevermind the export sector of ‘the country’) as a consequence of the GFC.

    ‘Inflating the debt problem away’ is a nice solution in a one period macro-model (with one individual!) but it doesn’t necessarily solve the so-called ‘European debt problem’ (= a bad debt problem in a few countries, related to a US style housing boom and bust (CDOs, rating agencies, proverbial Wall Street banks) and to a creative accounting problem in another) because, unless the rules of the financial market game is changed, new debt problems will grow (and more inflation).

    As pointed out by Freelander, recommending ‘inflating the debt problem away’ isn’t the same thing as achieving inflation (see UK).

    Writting off debt is an alternative. As long as new debt problems grow, the same logic applies as for the inflating debt away. The common currency is not the constraining factor but the international financial system is.

    Writing off debt has different consequences for real life people in the USA and in the EU. While in both regions banks write off debt (if they have enough equity), only in the USA is housing debt recourse. In most if not all EU countries, people who can’t pay their housing loans lose their house but the debt remains. The USA system appears more humane but is it? Is it humane to create a new financial security (CDO) to confuse debt with equity? It was and still is profitable for some, that’s for sure.

    How would fiscal and monetary policy union, in the image of the USA, preserve any notion of cultural sovereignty (surely an important element of ‘national sovereignty’) in the EU?

    Europe’s situation is unique but, despite their common currency, the Euro-member countries are not independent of the USA and the rest of the world. Europe will muddle through, I believe, and in the meantime we blame the ECB.

  26. A good response, Tom. Yes, a personal failing of mine is that I only think in terms of solutions, not problems.

    Greece imports twice as much as it exports (I wonder how long they can keep that up). The 4% levy on 13 % of imports would yield 224 million euro. not a huge amount but not an insignificant stimulous if applied intelligently to promote import substitution. And that is an annual collection meaning a billion euros over 4 years.

    More importantly Europe has signed up to a 600 billion dollar commitment for the Desertec renewable energy system. Accelerating that programme with a healthy share of the contracts exercised in the GIPSI countries could very well improve Europe’s Climate Change Action position while providing a significant profit in the course solving a vexing economic problem.

    Furthermore, in Greece’s case, defaulting taxpayer accruals can be converted to assets if there is the political will to do so.

    Guilty. I see more solutions than problems. I’m watching the Tour de France. What a beautiful country Europe is, even with all of this economic drama.

  27. Here we go again, “Three Central Banks Move to Stimulate More Borrowing” :

    … so that banks can make profit to repay their loans from the central banks.

    But who among the many retirees in ‘the North’ would be stimulated to borrow money to finance a holiday on the Costa del Sol in Spain, parts of Italy and larger parts of Greece that rely on tourism?

    Who among the net savers in ‘the North’ would be stimulated to borrow money to finance a holiday in the above mentioned locations?

    Who within the building industry in the Costa del Sol region would be stimulated to brorrow money to build houses and generate ‘jobs’ (hire unemployed bricklayers, carpenters, ..)) given an enormous excess supply of various types of real estate?

  28. @Ernestine Gross

    I agree with the sentiment that Europe should get through it. The euro has been talked down since its inception by both the Americans and the British. If their arguments against the claimed unworkability were taken seriously then the US itself would have several rather than one currency. The benefits from the greater market with one currency massively outweigh the hypothesised benefits of breaking the zone up. Clearly a massive strain has been placed on economies as a result of the American’s flicking a lot of bad paper around the world certified as AAA+ when it was junk, and the mess made to the financial system when counter parties could no longer assess each others credit worthiness has increased risk premia and restricted willingness to lend. Since reality dawned there have been plenty of policy missteps. Things are grim but a decision to break up the zone would simply be the worst decision. The weaker countries are being protected from even more extreme capital flight simply because they are in the euro. Remember not so long ago the libertarian paradise, Iceland, turned to the euro and Europe because their own currency was not worth having. The nirvana of leaving the euro and all would be right with a floating currency is the sort of nirvana nonsense like the suggestion that all would be right if the gold standard or ‘free banking’ were introduced into banking. Like the South Sea opportunities the South Sea bubble was based on, and any myriad of imagined counterfactuals, it is easy to make claims about what is not. On that basis I make the claim that if only the world turned to a decimal time system all would be well. 24 hours, 60 minutes, seconds, the months, days of the year and so on they are the source of all our problems and if time was simply decimalised all would be right in the world.

    Anyway, given all the problems the western world is facing, it would take great wisdom to identify the problem most pressing. That the western world could create such headaches in the space of less than a couple of decades is truly remarkable. Although we do have form. The mess made during the couple of decades after the war to end all wars was surely evidence that collective madness did not end with the so called enlightenment.

  29. What policy makers in Europe need to remember is that however bad things may seem at the moment, it is well within their power to make them considerably worse. Lets hope they don’t, however inadvertently, exercise that power.

  30. It is worth reading this article titled “Robert Mundell, evil genius of the Euro”.

    I am astonished that so few people realise that loss of currency sovereignty is the key financial economic problem for countries in the Euro zone. I put the basic arguments at comment one so I won’t repeat them here. There are also real economic problems like the increasing scarcity and cost of energy and other resources. This latter problem is beginning to affect the whole globe.

    There are ways that a single currency could be implemented effectively and equitably IF (and it’s a big “IF”) the zone in question was indeed an “optimum currency area” OCA. Incidentally, Robert Mundell is credited with the OCA concept but he used the concept disingenuously for the advantage of financial capitalist.

    It is clear Europe is not an OCA while it has different national governments. The first test for an OCA would be an effective democratic Federal government (like Australia) encompassing the entire area. In that way Federal (and democratic) transfers like Australia’s transfers to small and/or decentralised states and territories can be effected. Attempting to make an OCA out of a set of independent nations is flawed from the start. Placing the currency issuer (the ECB in the case under argument) effectively in the hands of financial capital is a recipe for exploitation and impoverishment of the bulk of the people.

    I also suspect that on OCA (optimal currency area) has upper limits, upper area extents. The more economically, politically and demographically homogenous an area is the larger the OCA could be. The less economically etc. homogenous, the smaller the OCA could be. From some of the problems that the USA and Australia face we can see (IMO again) that they must be near the upper limit of an OCA.

    As a side-light, it is interesting that of the anciently civilized (meaning “city-ised”), settled areas only India and China have managed to create unified states over a large area and population. The partition of India/Pakistan/Bangladesh even calls into question India’s qualification for this achievement.

  31. People don’t recognize it because it isn’t true. When currencies were linked to gold countries didn’t have currency sovereignty anyway. And even then the absence of currency soveriegnty wasn’t the problem.

    I think the real problem is that is that people in Europe don’t have three arms. If they had three arms productivity would be at least fifty percent higher and everything would be fine. I am surprised that no one had identified that as the euro’s real design flaw!

  32. Let’s face it. There are no barriers to entry in the let’s talk nonsense about the euro game!

  33. Freelander,

    Which currency do you think that NSW state should adopt in order to cope with the conflicting influences between massive minerals exploitation and employment generating manufacturing?

  34. They could adopt the Wran. Canberra needs their own currency too because their economy is quite different again, based as it is on electoral cycles. Their currency could be called the Waffle.

  35. The optimal currency stuff is just the type of bunk that gives economics a bad name. Model building and theorising without a shred of empirical support,acknowledgement of the importance and magnitude of the impacts of what has been left out,and totally devoid of common sense. If the OCA stuff were to be taken seriously,why stop at countries? Why not different currencies for households or for individuals based on their differing economies. The benefits of a shared currency are great. Of course, the policies within any currency zone, can be bad or awful, regardless of the zones size, but that is a problem totally separate to the question of the advantages or disadvantages of the shared currency. The most important skill one learns from studying economics is the ability to talk BS. A much underrated ability considering its place in the world and the huge rewards to those who display fluency.

  36. When religion ruled the world that was largely as a result of their facility to spout BS. However, that power waned as their BS became cliched. Economics has now cornered and monopolizingd that market with a new infinitely flexible form useable for any occasion. Hence the dominance of economics in policy and elsewhere despite overwhelming evidence of its failures. Nothing beats a good story. Certainly not facts or other forms of evidence.

  37. I don’t think that I agree with you primary notion, Freelander. The common currency is not the core problem. A common currency can be inconvenient at times, but it simply represents an operating level or standard. Having ones own currency does not necessarily represent having control over that currency, and it can have its own peculiar inconveniences.

    Greece, apart from its many internal problems, probably suffered for an insufficient level of European integration. For instance if Europe had a common defence force then Greece would not have felt the need to over invest in military equipment or personel to counter an imaginary threat from Turkey. They would still have had to contribute to the common fund but that would have been a small percentage of what they did spend.

    All of those issues are now spilt milk. Greece and the other at risk countries now have to work their way out of their difficulties.

  38. Greece has problems of its own creation. Sure, they made their problems worse by the fraudulent way they entered the euro. Also,the euro as one of its benefits provided Greece and others with access to cheap finance on which they pigged out.

    None of those problems were due to the currency. They were due to the incompetent governments involved. Putting the blame elsewhere has an illustrious history. But there is no need to buy into it.

  39. Like a person who douses himself with petrol and sets fire to himself. Silly to blame the match because it worked as designed.

  40. I find this an interesting statement in the original article by John.

    “Such measures are always unpopular, at least with borrowers, who are almost invariably more vocal and politically potent than savers.”

    Do you have any data on that? Any theories as to why that might be?

  41. I might also add my insider views from Berlin on the German psyche.

    With interest rates at an all time low and fears of inflation racing through the country like an Aussie wildfire, the Germans have embarked on one mother of a spending spree. A building boom is well underway. Excess of 10% annual growth in property values in the major cities over the last year or two. Even Frau Merkel is perplexed at how the consumer sentiment can remain so high in the face of falling exports and business sentiments. It appears to me that the Germans are keen to extract the most out of their position in Europe at the moment, before their savings and loan portfolios are inflated away. They do not seem to mind that other parts of the world economy are suffering because of Europe’s problems because if they can take a big part of the European pie, then they will be doing pretty well. The only problem will be if the other countries hate them so much that they have nowhere to go for their holidays.

  42. Well, the fate of Greece has been decided. Recently elected world’s greatest economist (or at least some in Britain think so) Mr Roger Bootle has announced that Greece will exit the euro “in a matter of months”. Reasons why or evidence why, not available.

  43. I can’t seem to find posts about the current economic excitement in Queensland, despite 2000-3000 contract jobs having just been slashed, with apparently more to come in September.

    I guess I have to look harder…

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s