Not true. The primary objective is price stability with a much more rigid requirement than the Fed. However, the reason that price stability is a goal of both institutions is precisely because price stability provides the conditions for firms and individuals to make longer-term decisions that are more productive for the economy, i.e., greater price stability = greater rates of growth.
http://www.ecb.eu/press/key/date/199...0610_1.en.html
I should like to draw your attention first to the word "objectives" in plural. The ECB certainly has a primary objective: "price stability". However, Article 105.1 of the Maastricht Treaty adds that "without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2."
Among other objectives, Article 2 states that the Community shall promote a "sustainable and non-inflationary growth" and "a high level of employment and social protection".The reason that the money is available for Americans to borrow against is because people find that the US provides the greatest returns on their money all things considered (default risk, exchange rate risk, etc.). Thus, a decreased appetite for imports would mean less demand for loanable funds, pushing returns on loanable funds down, meaning that the funds that other countries put into the loan markets in the US would simply move elsewhere and face lower returns. Personal investment (I assume that you are referring to investments from a personal finance perspective) amounts don't change, they've just moved geograhpically and just become less productive all things considered. Thus, consumption/investments cannot increase since the loaned funds are already "investments". It is a zero-sum game as you've presented it.Originally Posted by Fuchs
I think that you're taking the graphic a little too seriously.Originally Posted by Fuchs
However, don't get too wed to the military instrument of national power. Since the majority of the global economy has a foundation that is information-based, the fact that the US economy (and the EU) has a strong information component to it means that we both have means that can be used to good effect when implementing grand strategy. The squeeze on Iranian assets through the information-based financial networks was effective in bringing Iran to the bargaining table and got North Korea to sign an agreement (actual outcomes is another issue, but it shows that the military stick isn't the only possible stick out there). As with any change, it brings new capabilities to yield and potential weaknesses to defend against.
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