Lamfalussy was right: independence and interdependence in a monetary union

Speech by Benoit Coeure here.

5 replies on “Lamfalussy was right: independence and interdependence in a monetary union”

It would be really interesting to get the views of a trauma therapist or a poet on how the Germans deal with the debt issue and the ongoing EZ crisis.

Most of the guys at the Bundesbank re boomers and many of the thinkers that were behind the Euro were born either during the war or shortly after. All the memes were set by those who lived the trauma.

Tories and other financey Brits did not grow up in the same environment AT ALL.

The official spin on the war is that it was over in 1945 and that Germany embarked on the Wirtschaftswunder shortly after but recent research blows a hole in that theory

Germany went through a massive trauma until at least 1950, the infant years of a lot of these people.

From his father’s hands by Thomas Kinsella.

“I do not like this place
I do not think the people who lived here
were ever happy. It feels evil
Terrible things happened
I feel afraid here when I am on my own

The blood advancing
gorging vessel after vessel
and altering in them
one by one
Behold that gentleness already
modulated twice, in others:
to earnestness and iteration;
to an offhandedness, repressing various impulses”

And what trauma passed on to children does to them

“When we are not traumatised, we can live fluidly in the present, responding to situations as they arise. But when traumatised, people stick to strict rules and codes, as though living in emergency mode, and they are fearful of deviating from these. So when they see their children being very different from them, they panic. In their belief system, to deviate from the rule book is to be cast out. And to be cast out is to be unsafe, and possibly to die. ”

And of course the perennial chestnut, how to model this in Excel

BTW I think bond yields are at levels consistent with trauma

Merkel’s take on the ‘common currency area’ is that there is little inter-dependence and that screw-ups at the EZ system level are solely the responsibility of the .. er .. ‘independent members.

Bit like DOCM, she has abviously not taken Systems Theory 101 at undergraduate level.

Design flaws at a higher system level are rarely solved by dumping the problems at a lower level.

Austerity and Deflation in the EZ are abject failures of this ‘system error’.

I’m Greek at the mo!

@Gavin Kostick

Karl Whelan’s article is great, it veers deliciously close to an explicit criticism of the ECB for being the agent of creditor countries (“ECB in politicised mission creep while helping trigger a bank run”). We will soon have him acknowledging the non nonexistence of neoliberalism.

On the OP, Coeure’s speech looks like an impassioned cry for less national democracy, more elite consensus. Sadly it’s a must read.

Lots of stuff about the monetary dominance over fiscal policy that we all demanded in our youth (democratic fiscal policy must meet “independent” central bank requirements). There are too many right wing (and Buba) shibboleths in there to count but it is enough to know that Bernard wants us to know the Eurozone’s problems come from not enough – wait for it – structural reform, and not enough rules.

Horrifying stuff – and this is the ECB trying to be reasonable.

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