Keynes was a failure in Japan – No need to embrace him in Europe

Tokyo's Ginza on Sunday  (photo by Groink)

Draghi’s volte-face two weeks ago has emboldened the Keynesian majority in the media and in economic research departments. It has injected new life into their relentless campaign for yet more state intervention in the Eurozone economy. It wasn’t anything the ECB actually did (or announced) that initiated this new euphoria. As usual, the measures fell short of what the tireless advocates of “stimulus” demanded. To the true Keynesian, no interest rate is ever low enough, no “quantitative easing” program ever ambitious enough, … [Read more...]

ECB under pressure to abandon superior policy stance

Balls of euro banknotes

The European Central Bank is under pressure. Inflation in the eurozone is at 0.7 percent but as Ben Bernanke supposedly stated, we are never sure if we measure these things correctly. So by all we know, the eurozone may already be in mild deflation. This should come as no surprise. The eurozone has practically had zero money growth and zero growth in lending for some time. As reported today, growth in the M3 money aggregate fell to a snail’s pace of 0.8 percent year-over-year in April. Loans to the private sector are 1.8 … [Read more...]

Keynesian madness: central banks waging war on price stability, savers

Eurotower In Frankfurt

There is apparently a new economic danger out there. It is called “very low inflation” and the eurozone is evidently at great risk of succumbing to this menace. “A long period of low inflation – or outright deflation, when prices fall persistently – alarms central bankers”, explains The Wall Street Journal, “because it [low inflation, DS] can cripple growth and make it harder for governments, businesses and consumers to service their debts.” Official inflation readings at the ECB are at 0.7 percent, still positive so no … [Read more...]

Martin Wolf: Only the ignorant live in fear of hyperinflation

Martin Wolf, FT

Since the financial crisis broke in 2008, the Financial Times’ resident economic expert and leading commentator, Martin Wolf, has decidedly veered to the left. Having rediscovered the Keynesian faith and having apparently terminated his long public love affair with “free market economics” loosely defined, he has become a reliable cheerleader for fiscal and monetary ‘stimulus’ of all kind. His disdain for those still attached to free market principles and fearful of the consequences of endless debt accumulation, interest rate … [Read more...]

No end to central bank meddling as ECB embraces ‘quantitative easing’, faulty logic

Mario Draghi, ECB (photo by IMF/Stephen Jaffe)

“Who can print money, will print money” is how my friend Patrick Barron put it succinctly the other day. This adage is worth remembering particularly for those periods when central bankers occasionally take the foot off the gas, either because they genuinely believe they solved the problem, or because they want to make a show of appearing careful and measured. The US Federal Reserve is a case in point. Last year the Fed announced that it was beginning to ‘taper’, that is, carefully reduce its debt monetization program … [Read more...]

Central banks: Running out of ideas, road

Eurotower In Frankfurt

On page two of today's Wall Street Journal Europe you will find the result of a readers' poll from last Friday: Question: Will the ECB's rate cut help restore confidence in the bloc's economy? Answer: 81 percent of readers say no, 19 percent yes. Last week's round of global monetary easing - another ECB rate cut, another round of debt monetization from the BoE, another rate cut from the People's Printing Press of China - is, of course, more of the same old same old. It has a discernible touch of desperation about it and … [Read more...]

Thoughts on the Greek crisis and the politicization of economics

Mosaic of Plato's Academy

 Should the Greeks have a referendum on whether they want to stay in the euro? Are the upcoming elections such a referendum? Would it be better for the Greeks if they left the euro? - Are you, like me, sick and tired of hearing these questions and then the answers based on the same stale and superficial logic? Most commentators assume that it was a mistake of 'the Greeks' to enter European Monetary Union and that they would do better outside of it. I suspect some undue generalization behind such verdicts. For who do these … [Read more...]

Gold “bubble” bursting? – I don’t think so


In today's Financial Times Mark Williams argues that the recent correction in gold means the gold "bubble" is finally bursting. Unfortunately, he does not provide a single reason for why the 10-year bull market in the precious metal constitutes a "bubble", nor why this rally must end now. According to the narrative of this article, investing in gold must have always been quite an irrational endeavour. Such folly was simply made easier with the advent of liquid ETFs (exchange-traded funds), which made the gold market more … [Read more...]

Faster, Pussycat! Print! Print!

Money printing press

It is a beautiful autumn day in London, unseasonably warm and sunny, the city looking its very best, and I am trying to find a hook for this blog. I should write about the European debt crisis, the sharp drop in equity markets last week after "Operation Twist" was announced, and the washout in commodity markets, not least in gold. I will cover all these topics but what should my hook be? A good place to start is always the mainstream media, first and foremost the Financial Times, that most mainstream of mainstream organs, … [Read more...]

The bureaucracy versus you

dollar notes falling from sky

The global finance bureaucracy is clueless. Its policies are failing. Yet, the bureaucracy is not giving up. The same tired and idiotic explanations for what is wrong with the economy and what the economy needs are regurgitated with numbness-inducing persistency: The economy is in need of more, wait for it, "demand". Not necessarily your demand or my demand. In fact, any demand will do. And since you and me are obviously failing to produce the demand that the economy demands the required demand has to come from the state. It … [Read more...]