Matthew Yglesias breaks down news announced today by several central banks of a coordinated effort to provide liquidity in the Euro zone. The inevitable domestic question?
As with the Federal Reserve’s secret lending to American banks in late 2008 actions of this sort raise fundamental issues about fairness. Handing out cheap money to European banks will help bolster them, which will help stabilize the economy. But the exact same logic applies to all sorts of distressed institutions in the world today. Where’s the free money for American municipalities? Where’s the free money for debt-constrained households? Beyond the operational details, where’s the targeting of full employment? In its November meeting, the Fed’s Open Market Committee rejected NGDP targeting as too risky and unorthodox to be worth trying even though it might create millions of new jobs. Then European banks run into trouble, and suddenly nobody cares about being risky and unorthodox.