ECB Quantitative Easing?

ashleey

I know this probably against the forum rules, but please see this through.

Ex IMF directors are no positing that years of austerity will do nothing to cure the problems of our and thus the European debt hangover, and thus as phase 3 of the ongoing currency war they are proposing that the ECB gets involved in quantitative easing. I wonder what people think?

For a good explanation of QE see this you tube clip:

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded:rolleyes:

Highly Salami

It would be good for Ireland, Greece and other countries with lots of debt, by effectively shrinking our debt.
It would also make exports from the eurozone cheaper by weakening the euro, hence boosting the economies of all eurozone countries (regardless of whether they are in much debt or not).
Needs to be done for eurozone countries to remain competitive, imho.

cavedave

The Germans are quite scared of hyperinflation. They are very wary of QE. They might have to do it but i do not think it is an option they will take lightly.

ardmacha

The Germans are quite scared of hyperinflation. They are very wary of QE.

Firstly there is a time when events 80 years ago become less important as a model for current action. Secondly the Germans have a selfish motivation in this.

fricatus

cavedave wrote: »

The Germans are quite scared of hyperinflation. They are very wary of QE. They might have to do it but i do not think it is an option they will take lightly.

While I take your point, that picture was actually taken in Hungary I believe (since the language on the posters is Hungarian!)

QE doesn't necessarily have to be inflationary though, if current inflation is below the trend line. It can have the opposite effect, in that it can provide a motivation for producers to keep excess capacity open (keeping inflation down in the long run) whereas not doing so could cause excess capacity to be removed (leading to inflationary pressures when growth does get going again).

Adam Posen of the MPC gave an interesting speech on this topic.

P. Breathnach

ardmacha wrote: »

Firstly there is a time when events 80 years ago become less important as a model for current action.

Yes and no. Some things change, and other things don't. That said, I think the German fear of hyper-inflation might go a bit past reasonable fear, and be more like a phobia.

Secondly the Germans have a selfish motivation in this.

Nothing wrong with that. We have selfish interests, too. What is needed in international arrangements is some fair-minded balancing of the selfish interests of different member-states.

cavedave

ardmacha

Firstly there is a time when events 80 years ago become less important as a model for current action. Secondly the Germans have a selfish motivation in this.

There should be. We still have two civil war parties so we cannot lecture the Germans on moving on though. The germans may well be better off with a small amount of QE. Whether it is politically possible for them remains to be seen.

fricatus I believe it is hungry. There are plenty of similar German photos. There are some good arguments for some QE.

I believe so much debt has been built up worldwide that eventually there will be an attempt to inflate our way out of it. I am not saying that current QE attempts are trying to do this yet though.

silverharp

its difficult for a western style economy to hyper-inflate debt away. In the examples in the 1930's the countires did not have bond markets. Paper currency was shoveled out the door, end of story. Today a country's bonds will "deflate" faster then the authorities can try to issue "digital credit". They can get away with it up to a point, but interest rates will rise and bond prices will fall which means asset prices start going down

Scofflaw

ardmacha wrote: »

Firstly there is a time when events 80 years ago become less important as a model for current action. Secondly the Germans have a selfish motivation in this.

Everything I've seen suggests that the Germans really do have a very deep obsession with financial stability - the narrative seems to be that the Weimar-era inflation led to Nazism, which led in turn to certain events they're not allowed to forget, as well as their catastrophic defeat and the partition of their country.

That's why the cases taken in the German constitutional courts are often based on the fiscal implications of government actions.

cordially,
Scofflaw