Re:Cypriot Bailout Sends Shivers Throughout the Euro Zone
by Symmetry on Sunday March 17, 2013 @06:13PM
(#5391310)
>But why is the Euro up 16% against the USD and 23.3% against the UK pound over the last 10 years?
Because the Euro is stupid. You don't want your money to be as valuable as possible! Deflation, when not accompanied by fast growth in real GDP, is bad! There's no excuse for the European Central Bank to be running such a tight policy when aggregate demand in the European periphery is so depressed.
But of course nobody trusts the banking system in the periphery, so all the money from there is rushing into the center causing deflation in the periphery and inflation in Germany. And then the ECB sets policy to accommodate Germany, and threatens to screw the peripheral countries even harder if they don't make the supply side changes it wants.
Because the Euro is stupid. You don't want your money to be as valuable as possible! Deflation, when not accompanied by fast growth in real GDP, is bad! There's no excuse for the European Central Bank to be running such a tight policy when aggregate demand in the European periphery is so depressed.
But of course nobody trusts the banking system in the periphery, so all the money from there is rushing into the center causing deflation in the periphery and inflation in Germany. And then the ECB sets policy to accommodate Germany, and threatens to screw the peripheral countries even harder if they don't make the supply side changes it wants.