"(3) Q: How Should Greece Balance Its Spending on Imports and Its Exports Going Forward?If Germany actually went for fiscal expansion (or even monetary) and more demand for goods and services, including a few Greek ones (more olive oil, and a few more sunny vacations) it would not lead to inflation. Unless somebody thinks Germany is close to full capacity and growing fast. Why Keynesians have accepted the inflation expectations fairy is beyond me!
A: Borrowing to cover the gap between imports and exports that exists at current exchange rates and price and wage levels is not going to happen, so Greece has a choice between (a) deep prolonged depression to make Greeks too poor to afford imports, (b) Grexit, devaluation, and a subsequent export boom, and (c ) Germans opening up the monetary spigots to produce higher inflation in northern Europe and meanwhile giving Greece an additional fortune to keep the pain in Greece low enough for adjustment to take place within the Eurozone framework (emphasis added)."
Thursday, June 21, 2012
Can we stop talking about inflation when we mean output growth?
Brad DeLong has a nice post on the euro crisis. Q&A session with himself (and yes he throws himself some soft balls, but hey those are relevant questions!). However, he says on the third question:
Short interview for an Argentinean radio show, in Spanish.
Fields, David (Forthcoming), “Classical Dichotomy,” Edward Elgar Encyclopedia on Central Banking , edited by L.P. Rochon et...
So besides the coup in Brazil (which was all but confirmed by the last revelations , if you had any doubts), and the electoral victory of M...
Central planning (Socialism?) in democratic societies There is a lot being written on the causes and cures for the economic consequenc...