Exaggerated macroeconomic demand

A condition in which domestic final demand exceeds domestic production capabilities. This leads to domestic CETERIS PARIBUS inflation. There is a simultaneous increase in imports; and the exchange rate of the currency in question must fall as a result. – If the production bottleneck is not broken up within some time by additional investments in expansion at home, or if this is not possible because the demand is directed to goods which cannot be produced in the own economy, then the balance of payments of this country gets more and more into imbalance. In the end, the domestic currency has to be devalued, if import duties or even import bans are disregarded. – If the economic excess demand described above takes place within a currency union, then the national debt of the member concerned increases. This has consequences for all participants in the currency area, as became very clear in the case of the Greek crisis. In one way or another, they end up having to pay for the excessive public debt of the member in question. – See devaluation, bail-out, differential tariff, euro bonds, European Debt Agency, European Stability Mechanism, European Monetary Fund, contingent debt, EMU explosive, ECB balance sheet, financial stability, Japanization, overconsumption, forced expropriation.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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