Sunday, July 26, 2009
This article makes some interesting points and argues that major economies have resorted to a defence against a devaluation policy pursued by the US, in particular the Euro appreciated 88% against the dollar between 2000 and 2008. This resulted in the asset bubble. Bernanke is blamed particularly for not realising the bed debt consequences of an easy money policy also " his theory, inflation was related only to the output gap. " . The output gap is criticised for being arbitary and meaningless in cases where " current account deficit is large, an economy has no slack resources " i.e.(presumably) were the output gap to be filled it would out of debt driven necessity be appropriated by government, Zimbabwe as example. Argues against zero interest rates.