The ECB And Rate Reductions

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Bloombergs Mathew Lynn on why we need a rate cut regardless of fluctuations in the value of the euro. (Also see the Liquidity Trap post on Afoe yesterday, I, like Lynn, don’t agree we have reached the point where monetary policy is useless, at least not yet we haven’t).

“The ECB appears to have little comprehension of the task it faces right now. With the rejection of the European Union constitution by the French and Dutch electorates, and with Italian politicians openly calling for the return of the lira, the future of the single currency is no longer assured.”

“This isn’t the moment for small-minded technical arguments about how far exchange-rate changes boost or depress an economy. It is the moment for bold action. At some point, people will tire of permanently low growth. If the euro area can’t perform better in the next five years, there may not be a euro for the ECB to defend”.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".