Spain, Ireland `Thrown to the Wolves' After ECB Move

Quote from jem:

What causes inflation?

Does not the answer depend on school of economics to which you subscribe.

I personally am a monetarist. So you know I do not think an increase in inputs is something which would dictate a increase in interest rates. I believe that school would say that an increase in oil prices and other inputs would act as a tax on the economy.

My concern is an excessive increase in the supply of money.

However, I think now we get into newer schools of thought. With electronic banking - I am not sure the money supply we need to worry about is the physically supply of dollars - as much as a flooding of the market with cheap lending by central banks and unbalanced spending by governments.


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On languages...

While traveling I met two pro tennis players from Belgium. They enjoyed making fun of my attempts at german, french and dutch. What was interesting is one guy was a university graduate with plans to do graduate level work or perhaps he was in law school already.

The other guy did not go to university at all but he spoke much better English. I sort of gave Erik a dig by saying you guys make fun of my accent but how come (forgot his name)'s english is so much better than yours. Erik shrugged and the other guy said... I watch a lot of cartoons.
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http://globaleconomicanalysis.blogspot.com/2008/01/money-supply-trends-are-deflationary.html
 
You money supply inflationists are funny.


Interest rate hikes don't change the money supply directly, it's the underlining demand for money which changes the supply. :p
 
A few major unions going on strikes enforcing wage increases and Trichet and Weber might in turn be forced to engage in a series of rate hikes even as signs of a slowdown are abundant, adopting the Bundesbank's "pro-active" policy. Should this scenario come together kiss the Eurozone economy good bye for the next couple of years.

June 23 (Bloomberg) -- German business confidence fell to the lowest in more than two years in June as record oil prices and the prospect of higher interest rates dimmed the outlook for growth in Europe's largest economy.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aW55qpAZIZO4

July 4 (Bloomberg) -- German manufacturing orders unexpectedly declined for a sixth straight month in May, further evidence that Europe's largest economy is losing momentum.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4Jbkzu4rXsA

July 7 (Bloomberg) -- German industrial production fell the most in more than 9 years in May, further evidence that Europe's largest economy is losing momentum.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1n8sJ.qi.9g

July 9 (Bloomberg) -- Exports from Germany, Europe's largest economy, declined the most in almost four years in May, as a cooling global economy and a stronger euro curbed demand.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajsFf1i8eihk

July 10 (Bloomberg) -- French industrial production dropped in May by the most in almost three years, adding to evidence that the euro region's economy is deteriorating.
http://www.bloomberg.com/apps/news?pid=20601087&sid=arg3jVJmv4xM&refer=home
 
It's funny because for all that fuss about the ECB since the introduction of the Euro, they have actually done a pretty good job. They did not prevent a housing bubble but so far they are at least doing what's necessary to stop inflation. It's clear that they run a risk of bringing the economy to a halt but that's a risk to take . IMO a housing bubble is worse than unemployment, people have coped with unemployment for ever in the EU, the numbers however good, are fabricated anyway. It's a shame we have to wait for workers to demand higher wages to call it inflation. Inflation is only when the poor start asking an adjustment of their share of the prosperity, there is never any inflation when asset prices go up.

Just like food and energy prices house prices should not be allowed to go up , I say raise rates and bring house prices down.
 
Quote from Pa(b)st Prime:The Euro is strong because Trichet is considered by global markets to be a serious Banker and the Fed is a currency debasing joke.
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What a difference 2 short months make.
 
Quote from matgallis:

You money supply inflationists are funny.


Interest rate hikes don't change the money supply directly, it's the underlining demand for money which changes the supply. :p
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I thought they actually sort of do in the US. Doesn't the fed OMC enforces the hike by selling bonds and letting the "money" that comes in evaporate? I think this is only part of the effect b/c a lot of rates just follow the announcement without being prodded, but a hike does take some money out of the system. My google is sore, can anybody confirm or correct this?
 
The ECB has done a good job because they haven't had to do anything or make tough decisions as they are confronted with now.

The current situation will really put them to the test. Ireland , Spain and Italy are getting clobbered and my thought is that Spain and Italy anyways will pull out if the pain lasts.

The Euro zone is not a bunch of homogenous economies hence, applying one policy to all simply will not work. Most compare this to the different economies within the United States which is a false comparison.



Quote from Kicking:

It's funny because for all that fuss about the ECB since the introduction of the Euro, they have actually done a pretty good job. They did not prevent a housing bubble but so far they are at least doing what's necessary to stop inflation. It's clear that they run a risk of bringing the economy to a halt but that's a risk to take . IMO a housing bubble is worse than unemployment, people have coped with unemployment for ever in the EU, the numbers however good, are fabricated anyway. It's a shame we have to wait for workers to demand higher wages to call it inflation. Inflation is only when the poor start asking an adjustment of their share of the prosperity, there is never any inflation when asset prices go up.

Just like food and energy prices house prices should not be allowed to go up , I say raise rates and bring house prices down.
More...
 
Quote from John_Wensink:

The current situation will really put them to the test. Ireland , Spain and Italy are getting clobbered and my thought is that Spain and Italy anyways will pull out if the pain lasts.
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"clobbered" ? :D You don't live in Spain or Italy, do you ?
I'm in Italy and I watch closely my business, my cash flow, and it's doing fine.
Then I read the international news about Italy (particularly in British newspapers) about some supposed bad problems here, and I wonder what on earth they are talking about.
Then I read the comments like yours on the internet, and all I can do is a big laugh :D
Newspapers need to sell.
 
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