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May 11, 2010

Comments

Luis Enrique

how much difference does it make that reflation in the North punishes all savers doesn't it, not just those foolish enough to lend to a PIG?

I'm a bit nervous about your mechanism. Maybe reflation in the North doesn't do that much for piggy GDP growth (because the North doesn't important that much from the South) meanwhile the North's reduced demand for bonds means the South has to offer higher yields, meaning the cost of rolling over its debt eats more GDP? Or something. (this last bit is prob one of those comments I wish to rescind about 5 min after hitting post)

Left Outside

But Luis, the PIIGS need relative deflation to regain competitiveness. Actual deflation is pretty horrific, especially with the debt burden they suffer. But if they can have modest inflation or price stability coupled with higher inflation in the north then they get that relative deflation without actual deflation.

The ECB seem dead set against more QE and from I understand what they've done appears to be more fiscal than monetary. They need to fire up the printing press, but I think a more likely outcome is that the south are going to be crucified on a cross of inflation targeting.

ortega

"I am most often irritated by those who attack the bishop but somehow fall for the securities analyst."
Nassim Taleb, The Black Swan

Luis Enrique

LO,

sure, I appreciate the benefits of a scenario where the North inflates faster than the South, I merely meant to say that when talking about the ECB wanting to protect savers from inflation, it's bigger set of savers than "the virtuous savers, those who hold PIIGS debt" (whom one might say deserve some punishment for lending to PIIGS).

chris

@ Luis - German imported €29bn of goods and services from Spain last year, which is about 2.8% of Spain's GDP. So a percentage point rise in German spending generally would add just under 0.3% to Spain's GDP. It's not a vast sum, but nor is it insignificant - hence my use of the qualifier "in part."
@ Ortega - you've never heard my opinion of securities analysts.

Luis Enrique

thanks Chris

suvie

The ECB seem dead set against more QE and from I understand what they've done appears
to be more fiscal than monetary. They need to fire up the printing press,
but I think a more likely outcome is that the south are going to
be crucified on a cross of inflation targeting.

Paul Sagar

"For a project that is supposedly secular, this desire to pursue virtue and punish sinners, irrespective of consequences, seems rather Calvinist."

That's what you get when the bloody Germans run the show.

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