Jörg Bibow on Draghi's negative rate of interest
letter (subscription required) in the Financial Times argues that the negative deposit rate and other measures by Draghi's ECB will fail to increase inflation. In his words:
"The driving force behind the eurozone’s disinflation process is wage repression – exercised to a brutal degree across the currency union. In fact, wage repression – joined by fiscal austerity – is the eurozone’s official policy meant to resolve the euro crisis; even if it is euphemisms such as structural reform of labour markets and welfare systems that usually make the headlines instead."
Very classical (as in the old classical political economy) diagnosis of the causes of inflation (and income distribution), and compatible with Keynesian interpretations of the causes of the Euro crisis. As I noted before, this New Keynesian nonsense that central banks can induce higher expectations of inflation and lead to increased consumption is dangerous, and has substituted the old and clear logic of the multiplier. Lower and stagnant wages means no spending. Oh well.