ECB and Inflation

[Richard Hakluyt]

Germany will never leave the Euro.

Never is a long time in politics.

I think the Euro is basically the deutschmark at this stage.

Yes, back in the 90s I was in favour of the single currency. Then, some time before the actual launch I realised it was probably going to be effectively the Dm.......which would have buggered up the UK totally, so I turned against it.

Future generations will remember Gordon Brown with gratitude for that, Blair would have had us in it.

[Iormlund]

I think the Euro is basically the deutschmark at this stage.

Isn't this WAD?

[The Brain]

The DM is always right.

[The Minsky Moment]

It really is not the DM.
People seem to have forgotten this, but the DM was kept somewhat undervalued for much of its existence as a matter of policy.

[Zanza]

It really is not the DM.
People seem to have forgotten this, but the DM was kept somewhat undervalued for much of its existence as a matter of policy.

It's still undervalued for Germany. 

[Richard Hakluyt]

We used to get 12Dm for a £ back when I was a kid in Germany, it is now 1.25 euro for a £ which is equivalent to 2.50Dm; persistently higher inflation in the UK  that has led to a very different approach to borrowing in the citizens of the two countries.

[Sheilbh]

We used to get 12Dm for a £ back when I was a kid in Germany, it is now 1.25 euro for a £ which is equivalent to 2.50Dm; persistently higher inflation in the UK  that has led to a very different approach to borrowing in the citizens of the two countries.

Why are we the worst big economy for inflation?

It makes sense when we didn't have inflation targeting of any kind and interest rates were set by the Chancellor but apparently we're still the worst over the last 20 years or so

[MadImmortalMan]

Your central bank printed money the fastest?

[Gups]

I don't think that's true Shelf. Our inflation was  lower than most big counties for the first half of the last decade

[Zanza]

We used to get 12Dm for a £ back when I was a kid in Germany, it is now 1.25 euro for a £ which is equivalent to 2.50Dm; persistently higher inflation in the UK  that has led to a very different approach to borrowing in the citizens of the two countries.

I think the DM won value against every big currency, except perhaps the SFR. The exchange rate was 4.20 DM to 1 $ under Bretton Woods, nowadays it would be about a third of that.

[Sheilbh]

That explains it then

[Zanza]

Interesting statistic on the German wiki site on the Deutsche Mark. In 1977, the DM had about 44% of the domestic purchasing power it had in 1950. The USD and SFR had about 40% and 42%. The Franc had 21%, the Yen 19% and the worst was the pound which had just 18% of the value it had in 1950.

[The Minsky Moment]

Incredibly, the Eurozone is *still* way below the inflation target, and the ECB is *still* expected to do nothing at the next meeting.

We already have enough perspective on 2008-14 that I think it is quite plausible to say that the Eurozone's collective management of the crisis and recovery will be a classic case study for future economist on how not to manage policy.  Particularly on the monetary side although the whole bizarre process whereby Eurozone policy makers and pundits somehow turned a classic financial crisis/cyclical downturn into a governmental solvency crisis is part of the story.

It's funny - the CNBC crowd tends to think of Euros as "socialists" - the reality is that Eurozone economic policy over the last 5-6 years has been a horrifying experiment in applying the tenets of Austrian economic theory to the world's second largest economic bloc.  I can't fathom how these ideas have taken root, or why they are politically viable, except perhaps that it does seem to feed into the seductive narrative of dividing the zone into "good" and "bad" (PIIGish) students.

[Admiral Yi]

Particularly on the monetary side although the whole bizarre process whereby Eurozone policy makers and pundits somehow turned a classic financial crisis/cyclical downturn into a governmental solvency crisis is part of the story.

Come again?

[The Minsky Moment]

Euro fiscal policy = bad.