Friday, December 9, 2011

My BBC Interview

As part of BBC Radio's coverage of the big Eurozone summit yesterday, I was interviewed by the BBC's Stephen Evans.  We talked about Germany's role in the crisis and what it and the ECB could do if they really wanted to save the Eurozone.  And yes, I was able to mention nominal GDP level targeting a few times on air (though I wish I had explained it better).  

My part starts around 8 minutues into the show, but there are other interesting segments on his show.  First, Stephen interviews some average Germans who all applaud Chancellor Angela Merkel's actions and seem blithely unaware that an economic disaster could be right around the corner for them too. He then interviews a consultant to Merkel whose advice is ignored and finally, plays the ECB's own online monetary policy game and learns that is rigged with a low-inflation-at-any-cost bias. 

Here is the link to the podcast of the show. [Update: The link is now directly connected to a permanent MP3 file.]

Update: One thing I mentioned in the interview is there is a lack of urgency for most Germans regarding the crisis  because they are in better economic shape, a point I have made before.  Now Floyd Norris makes a similar point n the  New York Times: 
For Germany and, to a lesser extent, the countries that some have speculated could join it in a new common currency if the euro zone collapses, recent years have been a time of relative prosperity. At the end of 2006, the unemployment rate in Germany was 9.6 percent and nearly four million people were out of work. Now the rate is down to 5.5 percent and just 2.3 million people are classified as out of work. 
In recent months, the euro crisis has led some depositors to move their euros to German banks out of fear that other countries might leave the zone and convert to a less valuable currency. That has helped to lower borrowing costs for German companies while raising them for foreign competitors, if they can borrow at all.


  1. Great interview!

    Egads, what does it take?

    There is just an unhealthy and even perverted fixation on inflation now, on both sides of the Atlantic.

    From 1982 to 2007, the USA did fine, with only small recessions, with inflation running in the 2 percent to nearly 6 percent range. That is the historical record.

    Now we hear anything more than 2 percent inflation, and we will enter into the Lower Depths of Immorality and Doom.

    Back to Europe, I now suspect no nation should ever give up the power of the printing press, as a matter of sovereign right and to assure sovereign bondholders they will in fact get paid, even in deflated currency.

    What is so sad about this whole situation, nationally and globally, is that there is no outside force pushing us down into recessions. This is all human-created chaos. Invisible blips on computer chips called "debt," and too-loose government spending.

    I could sympathize with a nation that suffered terrible natural calamities and then has a lower GDP.

    Somehow we are asphyxiating ourselves, and unnecessarily at that.

  2. I heard you David, and disagreed of course!

    I think you misrepresent the programme a bit here - the final item was actually an equally long interview with Michael Meister of the CDU, who is no fool judging by his resume, and who I thought put the case for Germany's caution about bailouts very well. I would also be surprised if the ECB game macro model is "rigged with a low-inflation-at-any-cost bias" - Stephen Evans did put in a short-term interest rate of zero to get warned about inflation!

    By the way, you and some readers may be aware that Hans Werner Sinn has argued completely the opposite from Floyd Norris - that German money market borrowers are actually disadvantaged by the way that capital flight is handled by the eurozone payment systems. And I think HWS has a point, as I explain at length here (warning: seriously central-bank-wonkish): (although economic weakness leads to lower short-term interest rates generally of course).

  3. David,
    If you'd like share the radio show in the future or keep if for your own archives, you have to download it and re-upload it somewhere - BBC only hosts their radio recordings for a very limited time (30 days for this particular show).

  4. Rebel,

    I will take a look. Good to know you keep coming back despite our disagreements.

  5. Kristjan,

    Thanks for the advice. My BBC link was already outdated so I made a permanent link.