Ben Bernankes Gets Historical

This is kind of cool, I guess Ben Bernanke is giving a series of speeches on the history of the Federal Reserve, starting with the history of the gold standard. This is an area I have studied before; the lessons of the gold standard have particular relevence to the eurozone crisis today because of the parallels between fixed-exchange rate systems. More on this later.

http://www.businessinsider.com/ben-bernanke-murders-the-gold-standard-2012-3

Eurozone inflation =low, Unemployment = high

I'm not making this stuff up. Check it out.

http://www.reuters.com/article/2012/03/01/eurozone-economy-idUSB5E7JV02K20120301

I just thought I ought to reiterate this, in case any eurozone policy makers have missed it. (They all frequent this blog, right?)

Scott Sumner explains "Market Monetarism"

Scott Sumner at themoneyillusion.com has a good explaination of "market monetarism," the approach outlined earlier that looks at the business cycle through changes in the real money supply and its income velocity. Check it out.

http://www.themoneyillusion.com/?p=13353

Draghi (unintentionally) Blunts his Own Lance

In the past week, I pointed out what I believed to be a high expansionary action on the part of the European Central Bank when I lauded their decision to "flood" the European banking system with up to a trillion in new open market operations. This kind of monetary expansion is just what Europe and especially the Periphery need in the face of sustained unemployment and low inflation, not to mention the collapsing confidence of the bond market.

But as if in an effort to stymie this achievement, Mario Draghi has gone and made it explicit that the ECB does not plan on taking any future action; the onus is once again the the debt-constrained and depressed economies of the Periphery. Awesome. Bondholders that may have taken the ECB's recent expansion as a signal that the ECB won't allow another recession and won't allow a debt-crisis are being told not to get too optimistic; the ECB might just back out yet. Check it out.

http://www.reuters.com/article/2012/03/05/us-ecb-rates-idUSTRE82418G20120305

Meet the New Cold War, Same as the Old Cold War

Taking a break from the macroeconomic implosion of Europe, I'd like to point out this interesting headline pertaining to the about-to-ensue civil war in Syria:

http://www.canada.com/news/China+Russia+slam+West+Syria+sanctions/6214711/story.html

Is seems Russia and China are drawing a hard line of distinction between their position and that of the United States and the European Union, who seem to be in lockstep with each other. This especially matters  given the very fluid situation in the Middle East since the Arab Spring last year.

Not to mention this:

http://www.reuters.com/article/2012/02/14/us-usa-iran-hormuz-idUSTRE81D1PE20120214

A world in which the United States and Europe are battling with Russia and China on issues pertaining to the Middle East will a volatile one. But certainly not an unfamiliar one.

Draghi Answers the Call

The other day the ECB ended its bond-buying program, and I was bearish on the future of the eurozone economy in light of it. But I am more than pleased to see this today:

http://www.guardian.co.uk/business/2012/feb/28/european-central-bank-euro-eurozone?newsfeed=true

Mario Draghi has committed the ECB to another round of aggressive bond-buying, or "quantitative easing." This is highly expansionary policy at work, and I could not be more pleased.

It seems the ECB may have a chairman who is committed to stabilizing Europes economy and understands the critical role monetary policy has to play in the soverign debt crisis of the periphery. Well done Draghi, and keep up the good work.

I've been saving this picture for a special occassion. This certainly qualifies.

Eurozone Economy on Verge of Second Recession

As predicted, the Eurozone economy seems poised for another contraction. Check it out.


http://www.reuters.com/article/2012/02/22/us-economy-europe-idUSTRE81L0R020120222


France and Germany, the bloc's two biggest economies and drivers of growth, failed to grow at all last quarter; overall eurzone unemployment is at 10.4%, with core inflation running at 1.9%.


I especially like this quote: "The euro zone economy contracted 0.3 percent in the dying months of 2011 so a second quarter of contraction would meet the technical definition of recession."


Recession is looming and inflation is low; now it the textbook time for expansionary policies. The message everyone European should be sending to their policy makers is this: Expansionary Policies Now!

Mario Draghi, you're on deck.