Friday, September 5, 2014

The ECB Is Doing What It Should Have Done A Long Time Ago

Paul Krugman applauds the ECB for finally using monetary policy to reverse the deflationary vortex in Europe.  He argues, however, that it may be too little, too late.  The threat of inflation in Europe, and in the US as well,  along with a focus on deficit reduction, has limited the response to our real problems.  That is, a dramatic decline in aggregate demand and falling prices.  The imaginary problems, which are not supported by evidence or economic theory, have prevented governments from solving their more immediate real problems.

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