(1) On the World Landscape (a brief outlook on what’s happening around)
- Quantitative Easing and EU Bailouts
- Recall from macroeconomics 101 that GDP, which measures a country’s economic output is widely defined as GDP = C + I + G + X, where C = private consumption, I = Investment, G = government spending and X = net export.
- By engaging in QE, the US is basically exporting its inflation abroad, i.e. growing her X (net export). QE is basically printing more paper money and that means cheapening its currency relative to other nations’.
- Germany, on the other hand, has to lead in the various bailouts of PIIGS (Portugal, Ireland, Italy, Greek and Spain) and recently Cyprus for the same reason. A collapse in the EU economies will severely affect Germany’s own economy since it’s a net exporter within Europe. What Merkel did is in fact, in the best interest of Germany, something that apparently some Germans fail to grasp, I think, by harping on ‘no to using taxpayers’ money for bailouts’.
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