Confirming suspicions of what’s been happening somewhat behind the scenes.
They may even understand that as long as ECB support does not add to spending there is no inflationary effect.
ECB’s Weber Says Emergency Support Must Be Tied to Conditions
By Simone Meier and Rainer Buergin
October 15 (Bloomberg) — “A temporary financial support for member states should remain an option at best used only if there’s a clear, considerable contagion risk for the rest of the currency union and if, secondly, the use is tied to strict and painful conditions,” ECB Governing Council member Axel Weber said. Funds should be raised by individual member nations rather than through a joint measure such as Eurobonds, he said. “Measures for crisis management need to be tailored in a way that entails as little as possible distortion of incentives” for member states, Weber said. “That’s why it’s indispensable to credibly anchor the no-bailout principle.” Weber, who is also head of Germany’s Bundesbank, called for a system of “automatic sanctions” for countries breaching the region’s budget rules. It’s important not only to monitor countries’ shortfalls but also their debt, he said.
Hi Warren
Over time, as the tax receipts reduce due to the fiscal measures in europe, would this not cause currency depreciation. That over time, the $ euro would go to par. Enjoy your work
it’s possible the austerity eventually leads to higher deficits but best to wait and see before making currency bets on that type of thing!
Okay..so your thought process is that the authorities would be forced to take higher deficits due to the conditions. My thoughts were that due to the lower tax receipts, the demand for currency would fall as the authorities would not be actively removing supply of currency. I guess in either case you are probably right – best to wait. Thanks.
for now at least the deficits will go down as long as growth stays positive, etc. it’s only when the austerity causes growth to fall and drive deficits higher does the question arise.
so at least for now we don’t have to burn any brain cells over that one
🙂
Back here in the U.S., if you look at potential GDP, federal deficits just don’t seem that large. Especially when state government budgets are taken into account.
http://krugman.blogs.nytimes.com/
especially when you count bodies in the unemployment line
Playing with deflation?
Warren, I keep writing to Obama and my Congresspeople, directing them to 7 Deadly Innocent Frauds — at least one Email a day. Let’s say there is a 1% chance they actually will read it, and a 1% chance the reader will understand it, that means I only have to send 10,000 Emails to make progress.
The longest journey begins with the first Email.
Rodger Malcolm Mitchell
reminds me of the bird hunters who came back empty handed. figured they weren’t throwing the dogs up high enough…
point is if you don’t keep throwing them up you’ll never get a bird.
feels like i’ve been throwing dogs at birds for a long time- keep fighting the good fight!