The must-read Goldman Sachs analysis on Zerohedge that states that it is not sufficient to reduce wages in Greece or Spain (and even France) and that these countries will see lost decade(s) because instead of nominal wage reductions many workers are fired. It is completely in line with our analysis that production costs rise more quickly in the periphery than in Germany despite falling real wages. Furthermore they explain that, similarly to Churchill’s and Brüning’s commitment to the gold-standard, austerity and the construction of the european currency forces nominal or at least real wages to fall and inflation to remain low. Here our synthesis that a Northern Euro would reduce European and global imbalances, suffering in the periphery and investors’ fear.
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Tags: austerity,Goldman,inflation,Other Periphery,production costs