Historical Precedence for German/ECB QE
The debate in Europe centers mostly around the unwillingness of the Germans (and Dutch, Finns and Austrians) to allow the European Central Bank to buy Spanish and Italian government bonds to lower the difference between interest rates on those government bonds and German government bonds (Bunds).
This is the near term fix for the Eurozone that, without it, nothing positive can happen (the longer-term problems for the Eurozone remain, but need to leave the state of permanent crisis to even get a hearing).
Anyway, you’d think that the Germans would always and everywhere oppose this type of government bond buying, but…
Oh, that’s the Bundesbank (the German Central Bank) with the caption translated by FT Alphaville as: “it is immensely amateurish to renounce this mechanism”. And what mechanism would that be? The FT Alphaville crew describe:
The “mechanism” is purchases of government bonds to bring down interest rates, after the standard central bank tools stopped working that year. Indeed the Bundesbank bought up bonds to the tune of 1 per cent of German GDP.
No wonder the history’s being used to attack the modern Bundesbank’s resistance to bond-buying, or even eventual quantitative easing, by the ECB in 2012.
So, there’s precedent for unconventional monetary policy in Germany just going back a few years in history
but don’t mention the war to earlier periods of economic troubles. At this point it is more of a question about whether the Northern European countries are committed enough to the single currency to pay the current bill by accepting temporarily higher inflation. I think they do, but they haven’t yet.