Mark Thoma did a Q&A on the
latest development note that while this move can ease financial market conditions, it does nothing to address the underlying problems creating those conditions. So this is no substitute for the difficult decisions that Europe must make to overcome its troubles.
The Kouk is similarly
unmoved This may fix the global ills but it seems more likely that the move, while a good one, is just another desperate attempt from desperate policy makers helping out desperate bankers in desperate times.
Austan Goolsbee
explains why
Germany’s productivity has gone way up. Normally, that would mean their currency appreciates, which lessens the advantage that gives their economy [in exports]. But unlike virtually every other advanced country in the world, the manufacturing share of output in Germany has risen over the last 20 years. And part of the explanation is that, just as in China, Germany has an export-oriented growth strategy fueled by a currency that’s undervalued. But that undervalued currency has been at the expense of Southern Europe. And the main point of the piece is that there’s no obvious way for Southern Europe to grow, and if they can’t grow, they can’t balance their budgets no matter how much austerity they engage in.
...Europe has two-and-a-half crises it’s facing. The first is an immediate banking crisis very much like our crisis in 2008. A large number of their financial institutions are viewed as being insolvent. That run has already begun. It’s slow, but it’s there. In my opinion, they will have to recapitalize their banks, one way or the other. Second crisis, which is related but distinct, is the fiscal crisis. There’s sort of a run on the public issuance of new debt.
