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How interesting. If, after 1999, the periphery's private sectors hadn't borrowed heavily from the core private sectors in what amounts effectively to vendor finance, there would have been a Eurozone-wide recession on the order of the intra-Eurozone trade imbalances as a fraction of GDP.

Elsewhere you say

In any case, you continue to not address the issue of why the periphery should accept depression conditions rather than the core accepting some inflation.

I'm not arguing for any of those solutions, as I see both as unacceptable. I want to see widespread sovereign defaults, bank recapitalizations and the emergency funds of the ESFS spent on infrastructure spending in the periphery as a way of offsetting austerity.

So, how do you propose infrastructure spending in the periphery would have happened after 1999 in the absence of "credit card spending"? Let me remind you this happens in a putative free market environment where credit is intermediated by private banks and the public sector doesn't get (even prudentially) to tell the banking sector where it needs to direct credit other than by setting some crude ground rules or boundary conditions such as the Basel accords. Also see here.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Wed Dec 14th, 2011 at 08:59:45 AM EST
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