Thursday
19Mar2009
Thursday, March 19, 2009 at 05:38PM We are all economists now
I'm no expert, but this is stupid:
Mounting public debt and excessive liquidity in the economy could tip the US into an inflationary spiral, a senior economic adviser to Angela Merkel, German chancellor, has warned.
A more-precise version creates a slight margin of probability:
"I see an inflationary risk in the US in the medium term because of the development of money supply there," Prof Schmidt told the FT in an interview. "There is a danger that [governments] could start considering inflation as a way to reduce the burden of public debt."
If you generously extend "medium term" to include the next 3 to 5 years, Prof Schmidt's statement becomes arguable.
But the most recently reliable US economists (e.g., Krugman, Galbraith, Roubini) worry that the government's actions aren't sufficient to pull the national economy out of a deflationary spiral, an event wildly more fearsome and more difficult to manage than inflation. Germany's economy will very likely contract far less than most in Europe or globally in 2009, however there is substantial concern that several Eurozone countries and the EUas a whole are going to be slow to emerge (if emergence in fact happens) from this de(e)pre(ce)ssion.
