Thursday, July 14, 2011

ECB Could Just Print the Money

I admit I got this via Atrios, but he didn't really add much so I'll just cheekily link to the original post at CEPR pointing out that the European Central Bank can solve the debt crisis any time it wants to by creating money and granting it to member states to pay their bills.

The European Central Bank (ECB) can just print euros which can be used to address any potential default risk among its member countries. There would be little obvious economic downside to this policy since most European counties have large amounts of unemployment and excess capacity due to inadequate demand.

If this were done as a per capita grant to all Eurozone members, it wouldn't cause a race to the bottom - in fact it could be contingent upon following certain budgeting guidelines, if you're into that sort of thing.

There's no technical reason it can't happen, only political reasons.

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