Today it was the turn of Economist Michael Burda to be interviewed by the Dutch financial daily. His statements are:
- Germany has a strong economy thanks to Gerhard Schröder and not thanks to Angela Merkel.
- Minimum wage is “tricky”, it is difficult to find the right optimum.
- ECB members need to be less bounded by home country politics.
The last statement seems very interesting as he puts forward the idea of regional central banks for Europe. Where Europe could be split-up in 5 regions (one for example Netherlands, Northern Germany, Denmark and Belgium), each with there own central bank. With this split-up he tries to minimize local political influence of ECB directors. He gives as example the marvelous FED in the US. We know that the FED in the US has more influence on Wallstreet than the president himself. The chairmen of the FED is not Democratically chosen.
A key question he does not answer or even put forward is “what is the benefit of a central bank”. And “what should be the task-set of the ECB / a central bank”. This year the FED celebrates the 100 year anniversary. The dollar, in the hand of the FED has lost 98% (5000% inflation) of its value in the past 100 years (4% inflation per annum). Compared to a 0,5% average inflation per annum (64% inflation) in the 100 years before the FED.
Key question is, “who benefited from the huge depreciation of the dollar during the past 100 years“? Without giving the answer to the questions above. I find it hard to take solutions from the the current order serious.
Dear readers, try to find answers to the below questions yourself, then look at economic policies of the last 100 years and decide for yourself.
- What would be wrong with 0% average inflation in the long run (e.g. when you can buy an apple with 50 cents and you decide not to buy the apple but save the 50 cents at t=0, that you can still buy the apple at t=40 for the same 50 cents)?
- Zero interest rate on your savings with 0% risk of losing your money combined with 0% long term inflation.
- Relative stable interest rates with banks. Limited requirements for interest rate swaps due to flat interest rate curves.
I’m looking forward to your answers and ideas!
