(SUNDAY TELEGRAPH 12.4.09)
The Irish Central Bank would be a founder member of the "money printing" club, leading the way towards quantitative easing a l'outrance.
Irish bond yields would not be soaring into the stratosphere. The central bank would be crushing the yields with a sledge-hammer, just as the Fed and the Bank of England are crushing yields on US Treasuries and gilts.
It would not be tossing away its low-tax Celtic model to scrape together a few tax farthings - supposedly to stop the budget deficit exploding to 13pc of GDP this year, or 18pc says Barclays Capital. If the tax raises were designed to placate rating agencies, they made no difference. Fitch promptly booted
Depression buffs will note the parallel with Britain's infamous budget in September 1931, when Phillip Snowden cut the dole and child allowance to uphold the deflation orthodoxies of the Gold Standard - though in that case the flinty Pennine rather liked hair-shirts for their own sake.
Though few had any inkling at the time, Snowden's austerity drive would soon push British society over the edge. It set off a mutiny - a Royal Navy mutiny at Invergordon over pay cuts, in turn triggering a run on sterling. The pound was forced off Gold within days. Irish deliverance from EMU will not be so easy.
But what caught my ear was his throw-away comment that prices would fall 4pc, which is to admit that
This is torture for a debtors' economy. You can survive deflation; you can survive debt; but Irving Fisher taught us in his 1933 treatise "Debt Deflation causes of Great Depressions" that the two together will eat you alive.
Don't blame the victim.
It was betrayed again by the European Central Bank, which opened the monetary floodgates early this decade to nurse Germany through a slump, holding rates at 2pc until late 2005, despite flagrant breach of the ECB's own M3 money targets. Fast-growing
He borrowed the plan from
Without that sort of liberation,
Of course, it is not the job of the ECB to set policy for
Simon Johnson, the IMF's former chief economist, said the ECB is pursuing a "ruinous policy" by disregarding the clear and present danger of deflation. "If they wait until deflation is 'fully in the data', it will be too late," he said.
If the ECB continues to serve as the instrument of German tastes, keeping German inflation near zero, then Club Med and