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April 19, 2013

Fed Watch: Accepting Failure

Tim Duy:
Accepting Failure, by Tim Duy: It is starting to look like European policymakers have given up trying. Bundesbank President Jens Weidmann, via the Wall Street Journal:
"Overcoming the crisis and the crisis effects will remain a challenge over the next decade," he said in an interview from his conference room at Bundesbank's headquarters overlooking Frankfurt's financial district, contrasting recent comments from European Commission President José Manuel Barroso that the worst of Europe's crisis is over.
Also from the Wall Street Journal:
An aging society and the time needed to work through its debt crisis will keep growth in Europe subdued for years to come, German Finance Minister Wolfgang Schaeuble said Friday.
“No one should expect that Europe will deliver high growth rates for years,” he said.
Apparently the new strategy is to keep expectations low. One has to imagine that given the current path of activity and the lack of fiscal support from European nations, the European Central Bank will find itself not only cutting rates but implementing its own version of quantitative easing by year end. The only other option would be to sit back and watch Europe slide from recession to depression And that does not seem like a credible policy path.

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