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Well, it's a currency union but not the fiscal union.

Which means that pretty soon it won't be.

Again, this should not be a terribly controversial point. We've had three or four currency unions blow up just in the last seventy years over precisely this flaw.

It's a good thing the BuBa's economists aren't running nuclear plants. With that sort of record, most of Europe would be a radioactive exclusion zone by now.

the problem is that Germany is so damn big, its development does carry. You can't see Greece in aggregate inflation data. That why Germany is a big chunk of 'core' while Greece is 'periphery'.

But Greek unemployment does show up in the aggregates. Greece has, what, 5 % of the Eurozone's population? With ten percent unemployment, that's half a percentage point in the aggregate. That's measurable.

Of course, if you believe that the Eurozone needs five percent unemployment, because you want to use unemployment to sweep structural inflation under the rug, then Greek unemployment can go clear to 50 % before the ECB feels compelled to act...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 19th, 2011 at 07:34:28 AM EST
[ Parent ]
The last time Fed was trying to achieve full employment in the teeth of mismeasured output gap (they didn't take rapidly changing demography into account), the Great Inflation was the result. You might not care. Many voters did and still do.

I don't 'need' 5% unemployment, I just think it couldn't be much lower consistently.

You can think whatever you wish about the fiscal union; currently, it's not there. It might be desirable, but definitely not politically feasible. I was trying to tell you what the current crop of policymakers is doing (IMHO), and why they are doing it. What's the use of saying that things could be different in a completely different institutional environment?

by Sargon on Sun Jun 19th, 2011 at 08:21:12 AM EST
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I don't 'need' 5% unemployment, I just think it couldn't be much lower consistently.

The Fordist political economy would like a word with you.

As for what the ECB is doing, I understand perfectly well what they are doing: They are protecting their bankster friends from their own stupidity, the purchasing power of lazy money from the risk of having to actually work for a living and their staff from having to use any higher brain functions than what you could get out of a reasonably sophisticated calculator.

But those are political decisions, not constitutional requirements.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 19th, 2011 at 08:36:25 AM EST
[ Parent ]
The last time Fed was trying to achieve full employment in the teeth of mismeasured output gap (they didn't take rapidly changing demography into account), the Great Inflation was the result.

Nonsense. The Great Inflation had nothing to do with full employment.

I expect you think two oil price shocks - you know, the ones that made everything a lot more expensive - and the costs of a pointless war in Vietnam had nothing to do with it.

You're basically just quoting Samuelson here with no evidence of any kind of critical thinking.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Jun 21st, 2011 at 03:33:05 PM EST
[ Parent ]

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