ECB’s Draghi fights bogus “dangerous deflationary trends”

Re: Draghi says ECB needs “safety net” against deflation, by Ambrose Evans-Pritchard

saleAmbrose Evans-Pritchard is worth reading not because he understands economics but because he does a good job of parroting the misinformed opinions of Europe’s monetary authorities.  AEP’s latest column contains all the old, discredited worries about “deflation”; i.e., falling prices.  Supposedly, once the monetary authorities have inflated a giant credit bubble, market forces to deflate the bubble in order to restore equilibrium must be fought with every coercive monetary tool available.  Yes, countries that went on a borrowing spree, funded by the ECB’s interventions to drive down the interest rate, will find it difficult to pay back their debts in money of equal purchasing power. But their policy errors should not be justification for robbing all citizens using the euro via monetary debasement.  This reminds me of the old Brezhnev Doctrine, that any country could become communist and fall under the orbit of the Soviet Union, but no country could throw off the communist yoke.  Any attempt to do so would result in an invasion by Russia.  Gee, I wonder what happened to that doctrine?  Patrick Barron

This entry was posted in News/ Lessons. Bookmark the permalink.

Leave a Reply

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

WordPress.com Logo

You are commenting using your WordPress.com 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 )

Google+ photo

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

Connecting to %s