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Does Liquidity Solve the European Sovereign Debt Crisis?

Big Mike View Post
Weeeeeeeeeee Fed, ECB, Central Banks of Canada, England, Japan, and Switzerland Announce Joint Action to Boost Liquidity, Addressing Pressures in Global Money Markets (story developing)


Whenever there is a crisis, you need to print money. This is the belief of central bankers. Of course this is true, as a crisis has a negative impact on commercial bank lending, and the failure of the fractional reserve system to produce money needs to be compensated with central bank money.

But the medicine will not work any more after some time, if the liquidity is not reduced when the crisis is over. Printing money is politically correct nowerdays, although the same objective could be attained with budget discipline. The budget discipline would have avoided the crisis altogether.

What I wanted to say: The announcement has pushed the Euro up above the second standard deviation band. Does this mean that more liquidity solves the European sovereign debt crisis?

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