At first it seemed as if the new President of the European Central Bank (ECB) Christine Lagarde would simply continue the loose monetary policy of her predecessor. But now she has announced a green policy shift. This marks the beginning of a whole new act in the euro drama.
Many economists, policymakers, and central banks are afraid of deflation. Generally speaking, they do not even distinguish between different causes of price deflation—i.e. between price deflation caused by growth and price deflation caused by contractions in credit. In this interview, the economist Phillipp Bagus says that these fears of deflation are misguided.
Capitalism and free markets are widely considered to be incompatible with Christian social ethics. At a closer look, however, market capitalism turns out to be the economic order most consistent with the basic principles of Christian ethics.
The euro has been a political project since its inception. That is why the independence of the European Central Bank was also in danger from the outset. In the end, it always came down to the alternative “Cambridge or Vienna” or, rather, “Keynes or Hayek.” The option for Keynes led to an increasing politicization of monetary policy in the European Monetary Union.
When contemplating the future, and trying to imagine possible developments, there is always a fine line between optimism and self-delusion. We generally overestimate our abilities to influence what lies ahead; and we tend to underestimate the power of external factors.
