Soft Monetary Constraint and Shortage in the European Sovereign Debt Economy Insights from J. Kornai’s theory
From the fourth quarter of 2007 to the second quarter of 2020, the monetary base in the euro area grew by 330%, the money supply by 61% and inflation measured by the consumer price index - only 17%. Interest rates are around zero and negative, inflation is low, and we often register deflation. This discrepancy between the growth of money and prices has not only practical dimensions for the ECB and FED monetary policy, but also a theoretical significance. In this contribution, we propose an interpretation of these trends on the basis of concepts developed by J. Kornai in his Economics of Shortage analysis, from which we derive our insights on the sovereign debt market situation in European countries. J. Kornai was an unclassifiable economist whose work reflected to some extent the influence of the Austrian School of economics. The point here is not to transpose Kornai’s shortage economy analysis to European capitalist economies, but to show that similar phenomena are appearing today in a different institutional context.