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Nobel laureate Krugman slams Bundesbank's Weber as risk to euro

AFP · 21 Jun 2010, 14:59

Published: 21 Jun 2010 14:59 GMT+02:00

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Krugman said that appointing Bundesbank boss Weber as head of the Frankfurt-based ECB would be "a risk for the euro" in an interview with German business daily Handelsblatt.

"Weber worries about inflation even when there is no inflation ... if you are looking for someone who targets zero inflation while unemployment rises to 13 percent, then Weber is definitely the right man," Krugman said.

The German is seen as the front-runner to replace Trichet when the latter's term runs out in late 2011 and is well known as a monetary policy "hawk," meaning he favours policies designed to keep inflation as low as possible.

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"I would rather see an ECB president who pays more attention to deflationary dangers and to the risk of a long period of stagnation," said the US economist, in comments published in German.

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Your comments about this article

19:33 June 21, 2010 by macroman1957
Krugman doesn't understand that inflation has to be fought even when there is no overt evidence of its existence. It's much more difficult to stop than it is to prevent. Much like the BP oil spill. The solution to the recession doesn't lie in inflationary policies, but in policies that will get the private sector back to work.

The only real effect of inflation is to repudiate government debt. But, dishonesty like this provides only short-term relief. Markets catch on and no one will hold the debt eventually.

There are simple solutions to the recession, but they take real courage to enact. Reducing government drag on the economy by reducing both spending and taxes. Reducing future liabilities by reforming contingent social contracts. Reforming regulation to encourage more production in the private sector. Finally, finding ways to increase the liberties of the average citizen.
20:27 June 21, 2010 by Prufrock2010
If FDR had subscribed to your neo-libertarian ideology, the United States would still be enmeshed in the Great Depression. You are confusing the word "reforming" with "repudiating," as in "repudiating contingent social contracts."

History has informed us that the only way to increase the liberties of the average citizen is to include the average citizen in the wealth. This is a concept that is anathema to the private sector.

We've recently seen time and again how well the unregulated private sector performs.
01:15 June 22, 2010 by cobalisk
"finding ways to increase the liberties of the average citizen"

That is what is known as a platitude, some kind of inherently meaningless statement artificially given weight by context.

An increase of liberty is meaningless and increase of purchasing power is value. How does one increase the purchasing power of the average citizen? By maintaining a well regulated and diverse economy which can employ the maximum numbers of average citizens. In other words, the opposite of an unregulated, out-sourced, niche sector 'competitive advantage' model which consolidates wealth at the expense of the average citizen.

I recognize that Krugman is talking about something far above my level, inflationary versus deflationary pressures and the role of large central banks in focusing fiscal policy.

However, I also recognize Friedman's bankrupt ideology when I see it parroted almost verbatim in the comments section. Free markets gravitate to monopolies as do poorly regulated markets. Monopolies strangle economies. Large, poorly regulated financial sector monopolies are at the core of the current recession so handing the regulatory reigns over to private enterprise is akin to decapitation as a cure for headache.
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