Most economic downturns in advanced economies are monetary in nature. After all, Rudiger Dornbusch once said: "Economic expansions don't die of old age, every single one of them was murdered by the Fed." Printing money is the sensible response to a large credit contraction and/or a significant drop in the velocity of the medium of exchange. The prime responsibility of any Central Bank should be to keep the amount of nominal spending in the economy on a stable path. Unfortunately, the last few years have shown that Central Banks are not always willing to live up to the task.
Mario Draghi probably single-handedly saved the Eurozone from collapse with his remark "Whatever it takes" in 2012. Furthermore, under his leadership the Eurozone finally started to pull out of recession. Economic growth and inflation picked up in response to the ECB's easing programs.
Now Bloomberg reports that Merkel is pushing Jens Weidmann to be the new ECB president. This is really bad news. It is beyond me why anybody would want to appoint Weidmann as ECB president since he consistently argued for even tighter monetary policy during the biggest economic downturn of our times and despite the fact that the ECB had been undershooting its inflation target for years.
Then again Merkel and Schäuble have been wrong about pretty much everything since the Eurozone crisis started, so it doesn't actually surprise me that much after all. Schäuble, being a lawyer, once even had the audacity to call Bernanke crazy, one of the most renown experts on monetary theory, during the time when he was chair of the Fed and introduced QE 1 in response to the economic downturn.
Of course, Bernanke turned out to be right. The 3 different QE programs were effective and crucial in nursing the U.S. economy back to health in the aftermath of the Global Financial Crisis. Arguably, the Fed actually did too little too late, even though they performed much better than the ECB, at least in the immediate post-crisis period.
Finally, the Euro just jumped to a 6-months high as a result of some comments Merkel made about how the currency is actually too weak. First of all, on what economic analysis rests the claim that the Euro is undervalued at the moment? The large German current account surplus of more than 8% of GDP seems to be what is driving these unprecedented remarks. Merkel should not though that the current account is determined by domestic savings and investment decisions. a higher domestic investment rate could, for example, be achieved via higher public spending. So how about investing more money in German infrastructure or the education system, both of which are in dire need of an upgrade. It is very noteworthy that Germany does not have a single University in the global top 50 despite being the fifth largest economy in the world. Second, Merkel has absolutely no business whatsoever in meddling with the value of the Euro. It is extremely concerning that over the last few years Merkel and Schäuble have overtly challenged some of the key decisions the ECB has made in response to the crisis. The ECB must remain independent. It has the task to set monetary policy for the Eurozone as a whole and not for Germany alone, regardless of what German government officials and voters might think.