notice spain has serious slack while germany is at the point where more demand would lead to ...WAGE INFLATION !!!!!
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"The current European strategy:
internal devaluation
Spain cuts money wages to restore competitiveness "
but cutting money wages is " resisted " strenuously
plus deflation in spain only increases the real weight of her debt load
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so pk best macro
"Aggressively expansionary monetary policy"
" this shifts the AD curves of both countries to the right. "
" raising output and employment in Spain,
and creating wage inflation in Germany "
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note this assumption :
"the ECB can determine nominal GDP for the euro area."
bogus eh
" Under liquidity-trap conditions, this is a very problematic assumption,
and I don’t mean to drop my skepticism for other purposes."
good
" For right now, however, it’s useful"
oh really ?
"as a proxy for the whole range of possible expansionary policies
the ECB might follow."
rather characteristically pk prefers to make things "happen" by assuming
the near impossible !
the ECB could no more kick off such a demand surge
that wages and prices spiral in germany while spain recovers zippidity zip
obviously this is a proxy for its opposite
not monetary policy but fiscal policy
as in
germany cuts savagely taxes on job class households
and guns up transfer payments
pk wants to avoid the real choice because he wants to avoid
the entailed fiscal deficit boom that suggests the idiotic retort
" but pk there's not enough debt space "
that hassle however is the only road forward out there
in the real market economies of europe
