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the destruction of middle class wealth
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in parts of the Euro Zone under current
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economic policies has parallels with the
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pre-World War II era that ushered in
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economic collapse followed by extreme
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politics says Wharton Finance Professor
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Franklin Allen debt monetizing policies
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by the European Central Bank and the FED
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may also reduce competitiveness against
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China India and other emerging
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economies so of course one of the
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reasons that the Germans are
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against this kind of
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monetary intervention is the experience
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in 1923 with the
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hyperinflation now people veryy on this
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but many people argue that it was the
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destruction of middleclass households
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wealth which was mostly held in the form
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of bonds or Bank
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deposits that really allowed the rise of
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Hitler in the 1930s and then the second
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world war that followed and of course
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this
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is an important issue not just for
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Germany but for the world since the the
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entire world suffered very much from
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this terrible war that we had in the
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middle of the 20th century now hopefully
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it won't come to that anything like that
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in uh modern times but there is the risk
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that we will have
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substantial
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redistribution from across countries
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from the north to the South that's
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already effectively happening with this
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uh possibility of default that we've
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seen we saw Greece default already they
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may start defaulting on their official
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sector debt which will be a more
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straightforward uh redistribution from
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the north to the South but there are
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many other ways it can happen so
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inflation is a possibility I think we
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already see it in asset prices if you
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look at stock markets they're doing very
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well I think that's the first kind of
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inflation that we see Consumer Price
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inflation that's much more complicated I
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don't think we have a very good
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understanding of how these quantitative
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operations actually might lead to
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Consumer Price inflation what we've seen
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in Japan is that they did this kind of
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quantitive easing it never led to
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Consumer Price inflation in fact they
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have uh deflation what we saw in Japan
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was that this kind of low interest rate
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this kind of attempt at Monetary
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stimulus led to a grad ual loss of
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competitiveness of the industry in the
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country and they've gone from being
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arguably the most competitive country in
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the world in terms of their firms to
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ones where they're no longer at that
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level they're struggling to compete with
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Korean firms and they don't have the
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kind of dominance that they used to have
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and I think that's the real worry for
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our economies in Europe and the US from
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these kinds of monetary measures
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that we lose our competitiveness
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particular Visa China and India and the
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new upcoming emerging
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economies
