Too much easy money got the United States and Europe into trouble. And more easy money is the right answer to the question: What do both economies need right now?
In an economic crisis, our sins can look like virtues.
The U.S. entered the recession with too much borrowing, too much spending, and too much confidence, Lawrence Summers wrote for the Financial Times. But what we need now, ironically, is more borrowing, more spending, and more confidence. We need the federal government to take more money from investors at super-cheap rates. We need families opening up their wallets and living every Friday like its Black Friday. We need businesses lapsing into irrational exuberance and hiring like mad. Fiscal responsibility is usually a virtue. But not when your interest rate and GDP growth are both under two percent. Congress should brush up on its St. Augustine: "Lord make me chaste, but not just yet."
And what about Europe? The EU bound itself inside a common currency to make everybody feel wealthier. The peripheral countries -- "slow Europe" -- wanted a richer currency so they could borrow and buy more. The core countries -- "fast Europe" -- wanted their neighbors on a richer currency so they could sell them more stuff. Everybody got what they wished for and much worse. Like a sprinter leashed to a slow poke, fast Europe is now dragging slow Europe and everybody is in danger of falling down together. In the next few years, the euro as you know it might not exist. Both sides might be better served today if the euro leash didn't exist at all.