Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
1. You could either have a federal investment arm to create demand in times of need. This wouldn't be needed on a massive scale at all times, as liquidity traps are rare, and localized recessions caused by the "wrong" (ie Frankfurt-focused) interest rate, by their nature are localized.

Alternately or complementary, you could create a strong federal financial regulatory agency to fight debt buildups, including in the private sector. Current account imbalances will then have to be financed mainly by equity transfers while they are evened out, not debt issuance. This should create strong political and popular pressures to deal with current account balances. On top of this, remove the taboo of sovereign default.

2. A strong currency protects the purchasing power of consumers, making vital imports like gasoline, coffee, bananas (and foreign vacations!) cheaper, while imposing a powerful competitive pressure on the export industry, making it lean and constantly focused on improvement.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Mar 17th, 2012 at 04:09:34 PM EST
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