My colleague Arne Rasmussen put it well in a comment on Facebook today:
”…you have Godwin’s law and then you have Lars’s law…sooner or later he will blame it (everything) on the ECB…”
Arne is of course right. I just have to admit it – I do tend to blame the ECB for everything bad in this world.
—–
PS if you forgot what Godwin’s law then this what Wikipedia is tellng us: “As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1”
Chris Mahoney
/ July 28, 2014I agree with Lars Law. I think that if the eurozone were experiencing 6% nominal growth, you would not see the same degree of support for fringe parties that we are seeing now. Ultimately, depressions lead to adverse political consequences.
Lars Christensen
/ July 28, 2014Chris, I completely agree. And then think about the tightening of Chinese/EM monetary policy since 2010 and the worsening of global geopolitics in recent years.
jamesxinxlondon
/ July 28, 2014Spain seems to be a counter-example at the moment. Lots of pain through high unemployment, but decent structural reform efforts and an internal devaluation, and yet no significant fringe parties. And now a growing economic rebound. It’s taken time but it is arriving. Ireland, too, seems a similar story.
Still time for things to go wrong for Ireland and Spain, of course, but they do support the ECB hard liners, in some sense. I agree they could and should have done reform without the stick of a nominal crash, but they are pulling through.
Chris Mahoney
/ July 29, 2014James,
You are engaging in inductive reasoning, whereas I am expounding a deductive formula in which I believe. Spain has had an interesting history, which makes them feel good about being modern and European. It will take more pain for the Right and the Left to declare war once again–which they will. Ireland, of course, is a civilized anglophone country, the New Zealand of Europe. They were once abysmally poor and they can take what comes. No one challenges the fundaments of liberal democracy,and there is no Left besides the IRA. There are still plenty of communists and falangists in Spain. Ditto France.
james in london
/ July 29, 2014Chris. Deductive or inductive? Evidence still matters.
Just as Adam Smith said about there being “a great deal of ruin in a nation”, so it seems that some Eurozone countries can take a remarkable amount of pain, too. The UK is outside the Eurozone, in a recovery, apparently above the previous high of RGDP, yet has a much, much bigger fringe party (UKIP) than either Spain or Ireland.
The world is messy, even if we agree that NGDP level targeting is the best monetary policy. Many reputable, well-meaning Spanish (and Italians) believe that a bad recession is worth the risk to “force” polticians and “the people” to accept structural reforms. I believe that having the right ideas is best, but economic circumstance plays a part too.
Benjamin Cole
/ July 31, 2014Lars needs to increase the range and depth of his obsession. I also blame the Fed and the BoJ for global slow growth. I am very broad-minded.
The Reserve Bank of Australia (IT band of between 2 percent and 3 percent) and the People’s Bank of China (4 percent inflation target) are overseeing handsome growth.
James in London: Yes, but..ooof. The price was brutal. Really? Wipe out property markets and 25 percent unemployment to get some structural reforms? How about nominal GDP growth and incremental reforms?