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Wrong about the Euro

May 27, 2012

Real-World Economics Review Blog

A trick question: who was wrong?

* Cees Maas, one of the architects of the Euro who still states (2012) that there is nothing wrong with the Euro and that Eurozone wide consumer price inflation is all that matters, even when house prices go through the roof and even when there are considerable differences in consumer price inflation between countries? And who still does not seem to know that Spain had sizeable government surpluses, before 2008.

* Or Paul de Grauwe, who in 1998 (!) made remarkable precise predictions about what would happen in a country called Spain and warned about asset price inflation, differences in inflation between countries, the risks of unregulated flows of capital and the dangers inherent in denying the importance of private debt?

The answer is of course that the former president of the ECB, Jean-Claude Trichet, and his ECB-economists were wrong. They should…

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