Sunday, November 24, 2013
ECB's Draghi fights the bogus "dangerous deflationary trend"
Re: Draghi says ECB needs "safety net" against deflation, by Ambrose Evans-Pritchard
Ambrose 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?