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I think a point in which some education is necessary is that, to quote you quoting Robert Parenteau
a country with a current account balance in deficit cannot run both a fiscal surplus and a private sector surplus as a simple matter of accounting definitions.
In other words, regardless of the interest rate policy run by the ECB, the Growth and Stability Pact constraints on public deficits, together with the "Lisbon Agenda" imperative for GDP growth, means increasing private debt in deficit countries. And in the presence of intra-EU balance of payment imbalances without a countervailing redistributive policy introducing a negative feedback loop on the size of the current account deficits (and surpluses), debt bubbles are pretty much guaranteed.

Trichet is ideologically unable to see this, and yet he will chair a Committee to watch out for asset bubbles.

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010

by Carrie (migeru at eurotrib dot com) on Wed Dec 8th, 2010 at 07:23:59 AM EST
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