Who would have thought: The ECB, flanked with its expansionary monetary policy on the real economy and is waving with the fence post. This was the dream of John M. Keynes.
An independent Central Bank, which feels only of money value stability be obliged, would be ignored in the current high levels of liquidity and the associated risk of inflation is always with a restrained monetary policy to the real economic problems. This was in the second half of the existence of the Bundesbank. And also the European Central Bank was in this objective, so far, reliable.
In times of crisis according to Keynes view that public institutions should compensate for demand gaps in the private sector through increased government activity in order to generate a recovery. This should be done by funding the public debt, which could be resulted in a boom phase again. A Central Problem is the danger that the increased demand for Capital of the state leads to higher interest rates and thus to higher financing costs for private companies. The further reduction in investment is called a Crowding-out effect, and it would be counterproductive for the economic objective.
The only economic policy player could mitigate this Dilemma: the Central Bank. You would can on a low-interest-rate policy, the money supply increase, then the conditions for a successful Deficit would be created Spending. Of which Keynes dreamed. And now, the European monetary authorities to keep the benchmark interest rate to 0.75 percent – a record low. Cheap money is available.
Only the Euro-governments other restrictions; the budget reform and consolidation. The ECB will, therefore, accepted the discipline task.
With the series “The greatest Economists,” is UTB only a compact paperback on the life and work of John M. Keynes, but also of Smith, Hayek, Schumpeter and Eucken released. More Information.