Tag Archives: ECB

The EU Austerians Attack Each Other

By William K. Black

As things go from bad to worse in the eurozone the putative adults have begun to fight openly in front of the kids.  The putative adults, of course, have refused to act like adults for six years and instead have lived in a fantasy world in which austerity – bleeding the patient – is the optimal response to a recession.  As many of us have been warning for six years, this is a great way to create gratuitous recessions and even the Great Depression levels of unemployment in three nations of the periphery with 100 million citizens.

Italy has been forced by German demands for austerity into a third recession in six years, with France likely to experience the same fate.  Even Germany has stagnated and could fall into recession.  Instead of the four horsemen of the apocalypse, the three horses that make up a troika consist of the European Central Bank (ECB), the International Monetary Fund (IMF), and the European Commission (EC).  The troika combined to force the entire eurozone to inflict austerity in response to the Great Recession.

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Note to New York Times: EU Austerity is the Problem

By William K. Black

In the latest example of the New York Times’ reporters’ inability to read Paul Krugman, we have an article claiming that the “Growing Imbalance Between Germany and France Strains Their Relationship.”  The article begins with Merkel’s major myth accepted as if it were unquestionable reality.

“It was a clear illustration of the dysfunction of the French-German partnership, the axis that for decades kept Europe on a united and dynamic track.

In Berlin this month, Chancellor Angela Merkel, riding high after nine years in power, delivered a strident defense in Parliament of austerity, which she has been pushing on Europe ever since a debt crisis broke out in 2009.”

No, not true on multiple grounds.  First, the so-called “debt crisis” was a symptom rather than a cause.  The reader will note that the year 2008, when the Great Recession became terrifying, has somehow been removed from the narrative because it would expose the misapprehension in Merkel’s myth.  Prior to 2008, only Greece had debt levels given its abandonment of a sovereign currency that posed a material risk.  The EU nations had unusually low budgetary deficits leading into the Great Recession.  Indeed, that along with the extremely low budgetary deficits of the Clinton administration (the budget went into surplus near the end of his term) is likely one of the triggers for the Great Recession.

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The Troika Continues to Harm the Eurozone and the WSJ continues to Miss the Story

By William K. Black

The European Central Bank’s (ECB) written policy is to maintain the eurozone inflation rate at just under two percent.  The ECB has consistently failed to achieve that goal.  Indeed, its failure has been growing steadily.  The ECB’s failure tells us something enormously important about what is wrong with the eurozone’s economy and the troika’s bleeding of that economy through austerity.  The ECB’s increasing inability to even come close to its inflation target demonstrates that demand remains woefully inadequate in the Eurozone – making austerity an insanely self-destructive policy. The Wall Street Journal (WSJ) reported on the ECB’s latest failure in an article entitled “German Inflation Rate Plummets as Manufacturing Slows.”

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Heard (but not understood) On the Street: The WSJ and Deflation

By William K. Black

A brief update is in order after my three part series on how the troika (the ECB, EU, and the IMF) was acting contrary to its stated policies on deflation, Mario Draghi’s (the head of the ECB) confession that he favored deflation in the eurozone periphery because he wanted these nations to have lower prices and wages so that they could increase exports, and the disgraceful reporting of the subject in the New York Times and the Wall Street Journal.  The WSJ’s Heard on the Street” feature is out with an April 3, 20014 story on deflation that epitomizes each of these defects.  The title of the article foreshadows the analytical black hole that follows: “Inflation, Euro Test Draghi’s Resolve at ECB.”

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The New York Time’s Disgraceful Reporting about Deflation

By William K. Black

This is the third and final installment of a series of columns discussing the latest harmful policies and articles about eurozone deflation.  This column discusses the March 31, 2014 article in the New York Times entitled “Another Worrisome Drop in Euro Zone Inflation.”  I have already discussed the extraordinary sentence in the article in which the head of the European Central Bank (ECB), Mario Draghi, is cited as claiming that deflation is desirable for eurozone nations suffering Great Depression levels of unemployment.  Draghi claims that deflation will cause reductions in working class wages and prices that will lead to increased exports and economic recoveries.  I explained in prior columns that this is contrary to the ECB’s written policies and economic theories and the views of virtually all economists.  The NYT article does not report these facts.

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Dr. Draghi Prescribes a Dose of Deflation for Spain as his latest Quack Cure

By William K. Black

I posted an article earlier today on the demented memes about eurozone deflation U.S. financial journalists parrot after talking to Brussels’ troika-trolls.  That article used the latest AP story to illustrate my points.

I promised a second installment that used a New York Times article (not sourced to AP) that was posted last night to illustrate the meme.  The NYT article is simultaneously more complex and more alarmingly analytically awful than the AP piece. 

This morning brought two April Fools’ Day articles about France and Italy that are also about the gratuitous second Great Recession (in the core) and the second Great Depression (in Spain, Italy, and Greece) inflicted by the troika’s infamous austerity dogmas.  This article discusses one sentence from last night’s NYT piece that notes the position on deflation of the head of the European Central Bank (Mario Draghi).  The NYT article misses the significance of the passage.  I show how the passage, particularly when read in conjunction with quotations from Draghi’s fellow troika-trolls in the articles about France and Italy, reveals the troika’s fanatical devotion to failed dogmas and the clueless nature of U.S. financial journalists covering the eurozone who continue to treat the trolls like savants.

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Deflation Dementia

By William K. Black

There must be some café in Brussels where all the most inept U.S. financial journalists meet with the troika-trolls to get their take on eurozone deflation.  Regular readers know that I am a strong critic of much of what passes for financial journalism, but there are special qualities to the U.S. coverage of the topic of eurozone deflation.  It is so homogenous and its logic is so internally inconsistent that it is breathtaking that so many journalists can repeat the same demented “logic” no matter how many times we explain that it is facially nonsensical.

The latest example of this genre is an AP story that has already been reproduced by elite media without even a scintilla of scrutiny.  Here’s how the AP begins its tale.

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The Eurozone’s “Nascent” Recovery

By William K. Black

On January 19, 2014 I posted a column entitled “Deflation: The Failed Macroeconomic Paradigm Plumbs New Depths of Self-Parody” that discussed the insanity of the Eurozone’s approach to “the threat of deflation.”  The EU’s troika cannot understand that deflation is produced by inadequate demand and that the way to prevent it is to use fiscal policy to fill the gap in demand rather than waiting for deflation to hit and then trying to check it through “quantitative easing (QE).”

My January 25, 2014 column (“Spain Rains on Rehn’s Austerity Victory Parade: Unemployment Rises to 26%”) explained how a few weeks after the troika cited Spain as its success story proving the wisdom of austerity, unemployment in Spain – already above Great Depression levels – increased to 26%.

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Deflation: The Failed Macroeconomic Paradigm Plumbs New Depths of Self-Parody

By William K. Black

Patient bleeding out?  Don’t treat the bleed; keep the crash cart nearby

Imagine you were a doctor in the ER when a patient was brought in presenting symptoms indicating a likely internal bleed.  Here are the two critical questions you face.

  1. Would you (a) find and stop the bleed or (b) wheel the patient off to a “recovery” room with instructions to alert the crash cart to be ready to try to revive the patient should he go into cardiac arrest due to the continued, untreated bleed?
  2. If you chose option (b) in response to the first question, would you tell them to (a) use the crash cart that is known to be most effective, or (b) use the experimental prototype crash cart that has never been used successfully to revive a patient suffering from a cardiac arrest triggered by an untreated bleed and that most physicians think employs a methodology that is inherently incapable of reviving such patients?

If you picked option (b) in response to both questions, congratulations!  Your patient may have died and your career in medicine may be over but you have demonstrated that you are the very model of the modern chief economist of the IMF, OECD, and ECB.  Your initial salary in those positions may not dwarf your income as an incompetent physician, but the financial industry loves to make wealthy the “useful idiots” of the IMF, OECD, and the ECB and similar entities as soon as they leave what is termed “public service” (rather than “servicing the banksters”).

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Marshall Auerback Appears on BNN: ECB Bond Purchase Program

Marshall Auerback appeared on the September 6th episode of BNN’s Business Day discussing the ECB’s bond purchase plan. You can view it here.