Draghi espouses the old “excess savings” nonsense

From today’s Open Europe news summary:

Draghi rebukes ECB German critics

In a speech on Monday, the President of the European Central Bank, Mario Draghi, delivered a blunt rebuke to German criticism of the ECB’s low interest rate policy saying “There is a temptation to conclude that…very low rates…are the problem… But they are not the problem. They are the symptom of an underlying problem.” The real problem, Draghi argued, was the excessive amount of global savings a significant part of which was caused by Germany’s large current account surplus.  In what was seen as a thinly veiled attack on Germany’s finance minister, who has argued for an end to ECB stimulus, Draghi also noted that “Those advocating a lesser role for monetary policy or a shorter period of monetary expansion necessarily imply a larger role for fiscal policy.”

Source: The FT The Wall Street Journal

It is time for ECB president Mario Draghi to go home. He has run out of ideas and excuses. To wit, the above criticism of German bankers who, he says, do not understand that the real cause of low interest rates is not the ECB’s massive interventions into the bond market, but that the world saves too much and the Germans produce too much of what the rest of the world wants to buy.

Let’s get one thing very clear–there is no such thing as saving too much, just as there is no such thing as too much capital accumulation.  Capital accumulation is the foundation of all economic progress. Without capital accumulation there can be no further division of labor and no further increases in the productivity of labor. Savings–real savings, not fiat money creation–are required for capital accumulation; i.e., postponing consumption today in order to enjoy a higher standard of living tomorrow. In a free market the level of saving is determined by the purposeful desires of billions of individuals.

It is time (it is PAST TIME!) for Germany to leave the Eurozone and reinstate the deutsche mark before Draghi succeeds in destroying its economy.

Patrick Barron

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