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So what the BLINKING BONKERS has gone wrong in the eurozone?

Is it simply that inflation creates Nazis? REALLY?

I'm shrinking, I'm shrinking ...

It wouldn't have been all that bad an idea if the shareholders had lost rather more of their money than they did, just to warn for the future, but the idea that it would be OK for us to wake up and find smoking rubble where we'd once had a payment and banking system was firmly kyboshed.

Not just because everyone's friends with the banksters, nor really because we care all that much about the banks to be honest. These are proximate worries, not the ultimate one: we don't want the money supply to shrink.

That means both deflation and falling GDP: just not what we want to happen in an economy. The point of having an economy, recall, being that the populace get to have as much of whatever as we can manage. Not less.

So, that's what happened outside the eurozone: falling money supply is A Bad Thing, so let's not do that. Save the banks, do quantitative easing, get interest rates right down to zero and while she may not be right at that point at least we're doing the best we can.

Which brings us to the problem within the eurozone, that problem being that most of the Bundesbank, and therefore much of the European Central Bank, simply doesn't believe this construction.

Frances Coppola (a fellow contributor at Forbes but much more important, since Paul Krugman actually reads her) calls their theory ordomonetarism: which I think is a neologism of hers to sit alongside the long used ordoliberalism to describe standard German right-wing economics. And as far as any of us can tell ordomonetarism consists of simply flat out not believing anything Friedman managed to convince everyone else of.

Yes, they bailed out their own banks (which suffered much worse losses than the British ones did) on the basis that they quite like having a functioning banking system. But they didn't take the next step to thinking about the effects of a shrinking money supply.

Thus, the very late arrival of quantitative easing from the European Central Bank and the near impossible insistence that Greek government bonds not be bought as part of it. Further, we actually had the ECB raising interest rates a couple of years into the worst economic performance since the 1930s and they didn't get to an effective rate of zero until some five years into the whole mass of pain.

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