I'm with Cutten on this. I think it is more dangerous to increase money supply by double digits for many years than small increases in money supply. While a stable money policy admittedly would increase the short term risk of recession, it is in my opinion far riskier to increase money supply in ever larger quantities, until like a rubber band about to snap, inertia is so high that you are forced to reduce money supply quickly to defeat inflation and risk a much greater recession or even worse due to bursting of asset bubbles. It is no coincidence that the bubbles we've seen (first technology stocks, then housing, now commodities, next general inflation/ all prices), have occurred during a period of sustained double digit increases in money supply. In fact, these asset bubbles (and thus the accompanying busts) historically require this kind of loose monetary policy to flourish and that's exactly what we're seeing. The disadvantages of dealing with constant asset bubbles and asset panics are higher than the disadvantages of dealing with the sticky wage problem (less flexibility in labor markets due to lower ease of enacting real wage cuts-- without inflation you have to give nominal wage cuts which can increase short term unemployment rates, also there is the hidden reduced impact of lowering real government benefits such as retirement benefits due to headline CPI being lower than true inflation rates). Still-- I think the disadvantages of loose monetary policy are being demonstrated today. What is the end-game? It is difficult to predict, but probably inflation begins to spiral higher in terms of general prices and expectations, and within 1-4 years after that the Reserve Banks enforce a more drastic and painful adjustment period of lower rate of increase monetary supply (and thus much higher real interest rates) than had the policy been more stable money supply. The irony of it all is in this frantic attempt to avoid mild recessions at any cost, it actually increases the risk for a much more severe recession down the road and causes massive misallocations of resources in the meantime as the economy deals with constant bubbles and panics.
You hit the nail on the head, mak. The union aspect is what the ECB fears most of all in this. And the argument that Maine and New York are not like California or Arizona is so stupid I cannot believe a Central Banker even mentioned it. Sure, they have different state policies, but they are much similar in economic situations than Ireland and Germany. And the Fed doesn't take into account all of New York's needs over other states (like the ECB does with Germany). Lastly, California and Arizona can't exactly pull out of the United States when they reach the breaking point. The same language, laws, military, government, etc. The EZ? Nope...different cultures, languages, governments... Someone (I think Cutten) said that hiking from 4 to 4.25 doesn't do much, and it certainly doesn't throw the EZ into recession. I think we can pretty much agree on that. But it does give countries like Ireland, Spain and Italy the ammunition they need to continue pushing for a change in ECB policy, or at very worst, a change in their country's affiliation to the EZ (long shot, but don't discount it as stuff gets really bad). Lastly, while the ECB's action is noble and probably in the right direction (raising rates in the fact of global commodity increases) they are essentially impotent in affecting commodity prices, which only serve to raise even more as the Euro climbs against the dollar. Anyone who has been following the forex market has seen the correlation oil has had with EUR/USD. If Central Banks REALLY wanted to nip inflation, they would raise rates together in a coordinated fashion. The ECB raising rates with the Fed on hold or in an easing mode is a perfect recipe for global inflation - the kind that ECB hikes will do nothing to effect. Remember - higher ECB rates -> higher EUR/USD -> weaker dollar -> higher oil -> higher headline inflation -> higher ECB rates ->higher EUR/USD...etc The spiral can only be broken by coordinated policy.
If Spain and Italy were left to their own devices they'd be Argentina. Come to think of it what two ethnic groups mostly compose Argentina? The Euro is strong because Trichet is considered by global markets to be a serious Banker and the Fed is a currency debasing joke. The moment that perception changes Gold will trade $1200. If Trichet caves the Euro will resemble CMGI circa 2000-2002. Elected governments want to do nothing other than spend, print, spend, print. A recession no matter how deep is preferable to inflation. In fact I'd argue there's zilch correlation between accommodative policies and actual growth. To wit the aftermath of the U.S. rate cuts. Anyone here see a rosy domestic employment outlook? Would you rather be unemployed with stable/depressed prices or unemployed with basic costs shooting through the roof? Neither wages for those working nor benefits for those not working will ever keep pace with price expansion. More people will starve if the ECB and Fed continue to worry about lending than if they target inflation. I repeat: Commodity producers are taking a dim view of accepting worthless, debt ridden paper IOU's in exchange for life sustaining products. Those of you who are doves are living in the distant past.
the fact is you behave you behave like a moron, so it's normal I call you a moron I live in Bruges, where they build houses hundreds of years ago that are still standing, a few over even over a thousand years old ... want to compare to your hometown ? I'll bet you they don't come even close you wanted a few, I didn't want to waste any effort on you but I guess I will afterall just to prove you are wrong. You want some other Belgian companies: I'll give you a few Fortis, Dexia and KBC are all Belgian banks, not exactly small ones in Europe. There are companies like UCB and Solvay ... I'll stop here because I allready mentioned six, one more than you asked for ... One more thing 'trader': you know where the first stock exchange ever was ? In Bruges, about 800 m from where I live. The name Bourse comes from the Belgian family Van der Beurse. This is going to be the last effort I wasted on you because frankly you are very boring and not very clever ...
No,still not convinced,Poirot.Sounds like a bit of a dump.If you're a good example of a Belgian person then it's likely to be filled up with arrogant,boring deadbeats as well. Just checked out a few of your posts and it seems I'm not the only one who thinks you're a real dickhead.But with posts like these it's hardly surprising,try and open up your ears and you might realise that you don't know everything.Somehow I doubt that's going to happen though because you're just too thick-headed and quite frankly an awful advertisement for Belgium. http://www.elitetrader.com/vb/showthread.php?s=&postid=1983555#post1983555 http://www.elitetrader.com/vb/showthread.php?s=&postid=1983230#post1983230
Trichet using language such as inflation could explode, and signaling being in a state of high alertness does not help to ease tension either, rather the contrary.
Phew!When I saw you'd replied to my post I became filled with dread.Dread,that is,that I'd have to endure reading a load more waffle(or should that be Belgian waffle) What difference would it make if I've only made 26 posts anyway? All you've done is 1029 bullshit posts,usually trying to convince people how right you are all the time. Didn't you also post "This is going to be the last effort I wasted on you........." Oh yeah,that's right,that was your 1028th bullshit post.
if i were in a bar i woul tell you 2 nancy's to take it ouside,why don't you pm each other and give et a break