April 04, 2012
A major Washington Post article reporting on the situation of depressed areas of former West Germany implied that Germans would have to sacrifice more in order to finance a larger bailout of Greece, Spain and other heavily indebted countries. This is not true.
The major problem facing the euro zone countries right now is a lack of demand, not a lack of supply. In other words, increased resources for the indebted countries do not have to come at the expense of Germany’s living standard. The European Central Bank (ECB) can simply support increased demand, as it is now doing to some extent with its $1 trillion special lending facility. This would actually leave the people in the depressed regions of western Germany better off, not worse off.
Unfortunately, rather than trying to boost demand enough to restore full employment, the ECB is producing silly propaganda cartoons about the “inflation monster,” which tries to scare viewers into believing that there is a realistic fear of hyper-inflation in Europe. Of course the real problem facing Europe right now is the depression monster, which is leaving millions of people out of work, but the folks running the ECB lack the competence to recognize this fact.
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