By John Mauldin
For quite some time in this letter I have been making the case that for the eurozoneto survive, the European Central Bank would have to print more money than anyof us can now imagine. That the sentiment among European leaders was that they wereprepared for such a move was clear – except for Germany, which is hauntedby fears of a return to the days of the Weimar Republic and hyperinflation.
WhenGermany agreed to a fixed monetary union and a European Central Bank, it waswith the clear understanding that it would be run along the lines of the Germancentral bank, the Bundesbank. The members of the Bundesbank and the Germanmembers of the ECB were most outspoken about the need for a conservativemonetary policy that would keep a clamp on inflation.
However,as I have previously noted, the Bundesbank was a toothless tiger. Germany hastwo votes out of 23 on the ECB, and the loud drumbeat from most of Europe,which is experiencing the difficulty of austerity accompanied by too much debt,is for a far more accommodating ECB
- MAULDIN: Germany Has Waved The White Flag And Will Allow Printing And Inflation (businessinsider.com)
- Bundesbank boss tells Hollande to leave EU fiscal pact alone (dawn.com)
- Bundesbank chief warns Greece on rescue deal (seattletimes.nwsource.com)
- Breaking A German Taboo – Bundesbank Prepared To Accept Higher Inflation (freeinternetpress.com)
- An inflated sense of optimism (ftalphaville.ft.com)