Comments on: Lack of quantative easing is central to the Eurozone crisis 2012/02/08/lack-of-quantative-easing-is-central-to-the-eurozone-crisis/ London MEP European Parliament Tue, 01 Mar 2016 16:58:21 +0000 hourly 1 http://wordpress.com/ By: Joe Blow 2012/02/08/lack-of-quantative-easing-is-central-to-the-eurozone-crisis/#comment-5799 Wed, 08 Feb 2012 15:24:39 +0000 ?p=16598#comment-5799 The Eurozone problems are structural and until there a dose of reality and these are addressed then there is no way that Cameron should do anything other than “rush to the exit”. The Eurozone problems are unique. The problems are not just about excessive government and private debt but more importantly massive differences in efficiencies of northern and southern economies leading to huge and persistent trade imbalances, If the Eurozone is insistent that all should remain within the eurozone, massive and perpetual capital transfers will be required from the rich north to the weak south. There is no indication that this will be acceptable to the Germans, Dutch, etc. As these imbalances remain, the southern economies will be constantly indebted to their northern neighbours, governed by strict austerity measures imposed upon them from outside. Unlike with freely traded currencies, within the euro there is no way that Greece, Spain, etc can adjust their economies to make them competitive and there is no incentive for outside investment. The adoption (or not) of QE under these circumstances is irrelevant as this will only change the value of the euro vs the USD or JPY. It does not change the relative value of assets within the Eurozone and therefore the relative attractiveness of one country versus another. The proposed policies of tax harmonization and budget controls just makes the position even worse. Until and unless the Eurozone address the central unique problems that they face then Cameron is quite right not to participate. The value of sterling has fallen and may fall further but at some point it will reach a level which both restricts imports and promotes inward investment.

Lindsay Thomas article by focusing on QE misses the key issues

]]> By: Martin 2012/02/08/lack-of-quantative-easing-is-central-to-the-eurozone-crisis/#comment-5795 Wed, 08 Feb 2012 13:15:15 +0000 ?p=16598#comment-5795 I think some very important points have been made here.

Merkel has in fact learnt the wrong lessons: often Germans are terrified of QE because it accompanies their own hyper-inflation: but the real lesson is that hyper-inflation, at least when it became non-sustainable, was the result of trying to force the Germans to pay up unrealistc reparations, compare the way the Germans are trying to make the Greeks pay up unrealistic debts from wrongly joining the Euro.

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