I posted an article earlier this week on the demented memes about eurozone deflation U.S. financial journalists parrot after talking to Brussels’ troika-trolls. That article used the latest AP story to illustrate my points.
I promised a second installment that used a New York Times article (not sourced to AP) that was posted last night to illustrate the meme. The NYT article is simultaneously more complex and more alarmingly analytically awful than the AP piece.
This morning brought two April Fools’ Day articles about France and Italy that are also about the gratuitous second Great Recession (in the core) and the second Great Depression (in Spain, Italy, and Greece) inflicted by the troika’s infamous austerity dogmas. This article discusses one sentence from last night’s NYT piece that notes the position on deflation of the head of the European Central Bank (Mario Draghi). The NYT article misses the significance of the passage. I show how the passage, particularly when read in conjunction with quotations from Draghi’s fellow troika-trolls in the articles about France and Italy, reveals the troika’s fanatical devotion to failed dogmas and the clueless nature of U.S. financial journalists covering the eurozone who continue to treat the trolls like savants.
“Mr. Draghi has said low inflation is concentrated in crisis countries where falling prices are welcome and necessary to regain competitiveness on world export markets.”
The NYT article is so clueless that its response to Draghi’s statement is this non sequitur.
“But that argument becomes more difficult to make when countries like Germany, where unemployment is low and growth is solid, also have very low inflation.”
Draghi’s statement is nonsensical and the NYT response is not to point out any of the reasons it is nonsensical but instead to double-down on nonsense. It makes one cringe.
The obvious place to start, which the NYT never reached, is what the ECB claims its policy is with regard to deflation and the ECB’s rationales for that policy. I presented the policy and its rationales in my first installment. Here’s the link to the ECB site, which took literally 15 seconds to find with a search engine.
Here are the two extraordinary aspects of Draghi’s praise for deflation as the solution to Spain’s Great Depression level of unemployment. One, Draghi’s pro-deflation policy contradicts the ECB’s anti-deflation policy. That explains the strangest puzzle economists have had about the troika. The troika’s practices are insane under their own written policies. Under their stated policies they should have – over a year ago – adopted maximum monetary stimulus. Instead, they have been claiming that they are waiting to intervene until the eurozone is minutes from sinking into deflation. The troika has also been claiming that if this intervention comes a minute too late the results will be disastrous because the intervention will likely fail. I have written repeatedly to explain how internally inconsistent this “logic” is and how crazed it would be to wait to respond to the inadequate demand that is causing the eurozone’s problems, including deflation. If Draghi is telling the truth the troika’s policies all make (sick) sense. He actually wants Italy and Greece to join Spain in deflation because he thinks that deflation spurs growth. His problems are that (A) his predecessors adopted the opposite written policy, (B) his predecessors’ rationale was that deflation was disastrous for growth, and (C) economists overwhelmingly disagree with Draghi’s delight with deflation. Draghi’s answer is to let other troika-trolls bleat about deflation while he blocks any action to prevent it or attempt to end it now that it has descended on Spain.
