If just David Glasner was ECB chief…

The all-knowing David Glasner has a fantastic post on his blog uneasymoney.com putting the euro crisis into historical perspective. Glasner – as do I – see very strong parallels between the European crisis of the 1930s and the present crisis and it the same “gold standard mentality” which is at the heart of the crisis. Too tight monetary policy and not overly loose fiscal policy is really the main cause for the European crisis.

Here is Glasner deep insight:

“If the European central bank does not soon – and I mean really soon – grasp that there is no exit from the debt crisis without a reversal of monetary policy sufficient to enable nominal incomes in all the economies in the Eurozone to grow more rapidly than does their indebtedness, the downward spiral will overtake even the stronger European economies. (I pointed out three months ago that the European crisis is a NGDP crisis not a debt crisis.) As the weakest countries choose to ditch the euro and revert back to their own national currencies, the euro is likely to start to appreciate as it comes to resemble ever more closely the old deutschmark. At some point the deflationary pressures of a rising euro will cause even the Germans, like the French in 1935, to relent. But one shudders at the economic damage that will be inflicted until the Germans come to their senses. Only then will we be able to assess the full economic consequences of Mrs. Merkel.”

If just Glasner was ECB chief the world would be so much different…

Leave a comment


  1. Niels-Henrik Bjørn

     /  November 10, 2011

    this is a great blog with the right answers, Lars. Thx for setting it up. The overly tight German monetary policy view is killing Europe (even rational German monetary economists can see that money supply is too low) . There are only 3 potential options going forward, and only one will work in practice. 1) Countries succeed in gigantic fiscal austerity, and this seems unlikely in an environment of stagnant economies. 2) 100% fiscal union, which due to the fairly sound public finances, external balances in the entire euro zone would end the crisis. However, not politically viable and as with 1. will take a long time to implement. 3) Centralbank as a lender of last resort. Why don’t the Germans get it? Print some money, loosen monetary policy as appropriate and at least the liquidity part of the crisis will be over tomorrow. Implement a few structural reforms and Europe should be okay… It does not look that bad, and public finances in countries like Italy and Spain are by many measures more sustainable than in countries like Japan, UK, and USA where bond yields are very low.

  2. Thanks Niels-Henrik, the reason the German’s don’t get it is that they believe in Calvinist economics: We have to suffer for our sins. See my post on Calvinist economics here: https://marketmonetarist.com/2011/10/20/calvinist-economics-the-sin-of-our-times/

    And you are right public finances in for example Spain has been BETTER than in Germany over the past decade. This is a monetary crisis and not a fiscal crisis.

  3. Lars, Thanks so much for the shout out. But really, all-knowing? You are much too kind and way over the top. And besides I don’t want to live in Brussels or wherever the ECB is located.

  4. David, the ECB is located in Frankfurt, but you can stay in the US just as long as you tell the markets that you trust the “Chuck Norris Effect” to take care of things and give a reference to my latest post – then everything will be just fine and the ECB will not even have to increase the money base…


  5. Benjamin Cole

     /  November 10, 2011

    Kudos to Glaner and Lars.


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