Monday, December 8, 2008
Trichet’s Economy Hits Friedman’s Bump, Defies Breakup Forecast
"The euro area has so far defied Milton Friedman’s forecast that it would splinter as soon as the “global economy hits a real bump.” As it marks its 10th birthday, it’s hitting the biggest bump yet."
Yeah, but Friedman probably never thought the Fed would lend hundreds of billions to the Europeans to keep that from happening. If those loans were not made, Friedman's prediction would have come true.
Very ironic how we hear screams of "moral hazard" when applied to the U.S. and domestic policy, however, the mother of all moral hazard has been the Fed's decision to backstop the Eurozone. This eliminates all need for political and structural reform. Europe can continue as is, without having a viable fiscal and monetary authority, because it now has that in the form of the Fed and U.S. taxpayers.