tag:blogger.com,1999:blog-2546602206734889307.post6433521420763036897..comments2024-03-19T08:41:43.759+00:00Comments on mainly macro: Government debt in Europe: some good and bad news.Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2546602206734889307.post-27137971382305317742012-02-29T12:48:47.034+00:002012-02-29T12:48:47.034+00:00Where fiscal committees are purely advisory, they ...Where fiscal committees are purely advisory, they obviously can’t do any harm. But the crucial question is whether they ought to have real powers. I suggest that fiscal committees and central banks in individual EZ countries should not have the power to effect stimulus (or deflation).<br /><br />Allowing individual countries in the EZ to effect stimulus is a bit like allowing English regions their own £20 note printing press. The temptation is to over print because the rest of the country picks up much of the bill. In the EZ, the “bill” will consist of the loss that core countries will make on the Greek bonds they have underwritten via the ECB.<br /><br />I.e. just one central EZ authority should decide whether the EZ as a whole needs stimulus, and that authority should also decide which EZ countries need more or less stimulus than average. In the same way, Westminster decides which British regions need extra regional development money.<br /><br />In contrast, fiscal committees with real powers in monetarily sovereign countries make much more sense. In such countries it’s simply a case of deciding which institution or committee does what. And there is much to be said for technocrats (i.e. fiscal committees / central banks) deciding on stimulus. That is firstly because decisions there are genuinely technically difficult, plus if we let politicians near the printing press, we all know what happens.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.com