Economics, Monetary Policy, Pethokoukis

Why, exactly, does the GOP want the Fed to be more like the ECB?

Credit: MKM Partners

Credit: MKM Partners

Is the European Central Bank a model for what the Federal Reserve should become? Some Republicans think so. Maybe they should read this really great piece on monetary policy from Barry Eichengreen:

There is exactly zero evidence in Europe today that inflation is just around the corner. And, if current European governments are not committed to austerity and fiscal consolidation, then which governments are?

When I consider the European economy, the ECB’s failure to provide more monetary support for economic growth appears to be directly analogous to Europe’s disastrous monetary policies in the 1930’s. The political consequences could be similarly devastating. Europeans should ponder why the inflationary 1920’s, rather than the politically catastrophic 1930’s, have become the historical lodestar for current monetary policy.

One thought on “Why, exactly, does the GOP want the Fed to be more like the ECB?

  1. This chart shows what happens when a common currency with a central bank is used to combine countries with supposedly common interests when, in fact, intra-country budgetary practices, affected by local sociological bents, make these combinations impractical and dangerously unstable.

    Britain, France and Germany are now up-to-their-eyeballs in PIIGS debt.

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