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

Is it simply that inflation creates Nazis? REALLY?

Sorry, what was that? I eurozoned out

It should be said here that they don't think that inflation produces Nazis, no. Because the great German inflation was actually in 1921 to 24 and that didn't bring Adolf Hitler to power at all.

He tried, in the Beer Hall Putsch and got a jail sentence for his troubles (and the time to write Mein Kampf but ...). What did bring the Nazis to power was the massive deflation and economic slump of 1931 and '32. So the Bundesbank, as with everyone else, knows that inflation doesn't produce Nazis. Although there's a possibility of course that they do believe all not being in ordnung does.

It really just does seem to be that the central school of economic thought in Germany just doesn't believe Friedman and his new-fangled monetarist ideas.

Sure, inflation is always and everywhere a monetary phenomenon, they seem happy enough with that. But they're not buying the flip side, that so is deflation. And given that it's deflation we need to be fighting at present then so much the worse for the people of the eurozone.

All of which brings me to something much more speculative.

Which is why the same Bundesbank insisted on such restrictive rules for fiscal policy across the eurozone. No big deficits, national debts to be paid down and all that.

Normally, if you're going to be restrictive about monetary policy, then you are fairly relaxed about fiscal and vice versa. To be relaxed about both gives you Venezuela but it is odd to be anal about both. As I say this is speculative but one answer could be in Goetz Aly's marvellous Hitler's Beneficiaries. Worth a library ticket, if not the back cover price.

It's an examination of how the Nazi welfare state worked and how it was financed by plundering the occupied countries. You will, for example, find the source of the Greek claims of reparations still being owed here. But reading it you realise quite why Hitler kept the loyalty of the populace as long as he did.

Working wages very definitely went up. Pre-war economic policy was very Keynesian indeed (although probably entirely uninformed by the intellectual work itself), so much so that Germany would have gone bust by 1942 if there hadn't been a war.

Occupying France, and so on, enabled the Nazis to plunder some more and to keep steaming on. They were, in their economics, entirely populists who were bribing the population with other peoples' money.

At which point I have a little more sympathy with German insistences that governments shouldn't be allowed to bribe the populace with other peoples' money really.

But back to the original point. Why did the eurozone get QE so late, why are the peripheral countries so deep in the mire and why on Earth did the ECB allow the money supply in those peripheral countries (actually, even in Italy)?

Simply because standard German economic opinion doesn't seem to believe the last 60 years of work on the money supply. ®