Reply #48: You are all wrong, printing money can halt Europe's crisis By Ambrose Evans-Pritchard

[Demeter]

http://blogs.telegraph.co.uk/finance/ambroseevans-pritc... /

..A near universal view has emerged that Europe's crisis can only be solved by governments and fiscal policy, with varying views over the proper dosage of pain.

I beg to differ. This is a monetary crisis, caused by a jejune central bank that aborted a fragile recovery by raising rates earlier this year, allowed the money supply to collapse at vertiginous rates in southern Europe, and caused a completely unnecessary recession — and a deep one judging by the collapse in the PMI new manufacturing orders in November.

Needless to say, drastic fiscal austerity is making matters a lot worse. You cannot push two-thirds of the eurozone into synchronized fiscal and monetary contraction without consequences.

Note that five-year break-even spreads have dropped below zero for Italy, meaning that markets are now pricing in outright deflation. For a country with public debt stock of 120pc of GDP, that is a death sentence...