Devaluation is austerity done right

Completely correct. It means that people have time to adjust, as their existing contracts come to an end and new ones come in at new prices, and it gives a boost to the export industry.

Also, getting a 5% reduction in your pay through prices going up is a lot easier, psychologically speaking, than trying to actually negotiate a 5% pay reduction with all workers.

Because like it or not, a lot of the money is simply gone. Sure we need better regulated financial markets and less corruption in politics and the media, but in the mean time something needs to be done to get economies back on track.

Increasing taxes on "the rich" and companies are good to some extent, but they will only take you so far.

The kind of austerity that involves taking away allowances and tax credits for the poor and middle classes is idiotic. Devaluation certainly does affect the innocent, but overall it is much more equitable (and workable).

Are you talking about currency devaluation, or price inflation?

EDIT: also, are you referring to people who have their savings in cash, or investments?

Good point. I'm actually talking about inflation. I'd assume devaluation usually leads to inflation, especially if we buy a lot of imported goods (we do), but it ain't necessarily the case.

What people dont understand specially the ones that are against all inflation is this:

There is natural and artefical inflation and deflation. You get for example natural inflation when you have supplyshocks (If somebody blow up intel CPUs would be more expensiv) you get artefical inflation when you print money. The first is just the market reacting to 'something'.

The same goes for deflation, you have natural (good) deflation when you become more productive (you can see this for example in times of the (real) gold standard when moneysupply was almost constant.

Bad deflation is when you activly contract the money supply (this is the great depression story and the reason why people think deflation is generally bad).

What can we conclude out of this?

The shock to the economy was pretty big, we shuld have seen natural inflation happening, this is however still represt since the ECB pushes that down by creatning bad deflation (in real terms). In nominal terms this means 2% inflation, in real it is deflation.

When central banks target inflation (say 2%) and the economy is growing around 2% (thus 2% deflation) they acctully produce 4% inflation in nominal terms. This is all works out relativly good and is not to harmful as long as the real terms are not to big. If the become big (say a economy that is shrinking 10% or more) targeting inflation can be very harmful.

The price level should reflect the economy and not what some guy think is the right growth of the price level.

The idea would be to target NGDP or in terms of the formula MV=Py, it would mean holding MV constant (or let it grow 3-7% depening on your opinion on some other matters).

The school that supports this would be: http://en.wikipedia.org/wiki/Market_monetarism

This would mean that the ECB should look at the grow/contraction of the economy and setting the price level accordingly. That would mean in the current case that they would have do QE to hit the 'right' pricelevel.

I would recomend this book: Less Than Zero: The Case for a Falling Price Level in a Growing Economy http://mises.org/books/less_than_zero_selgin.pdf

Edit: I just found a nice post that shows a nice example of a case in history when central banks tried to recontract after the had inflated befor, this is in many ways simular with what we have today:

Danish and Norwegian monetary policy failure in 1920s – lessons for today

http://marketmonetarist.com/2012/06/12/danish-and-norwegian-...

Edit: Correction of a error point out in comments.