An Inflation Experiment
One of the excuses that economists advance for being so frequently wrong about most things is that theirs is a science which precludes testing hypothesis. In other words there isn’t any way to set up an economy and see if your theories are valid in the real world. Well, we may have an opportunity to see whether the ECB or the Fed knows what they are doing in managing inflation.
An article at the WSJ Real Time Economics blog points out that both countries are experiencing pretty much identical inflation rates — 2.7% with vastly different responses from their central banks.
Yet given the same set of inflation dynamics, the European Central Bank has already raised interest rates once and, based on Friday’s report, is likely to do so again as early as June. TheFederal Reserve, in contrast, continues to pump money into the economy via QE2, and isn’t expected to lift interest rates from near zero for many months.
In large part, it’s a difference of emphasis. Fed officials think higher commodity prices are temporary, and that core inflation is a better gauge of underlying price trends. ECB officials target headline inflation, and worry that higher energy and food prices will filter through the economy via “second round” effects, namely higher wages and retail prices.
It’s probably not a perfect experiment as there are differences between the EU and the US as well as different mandates for each bank. Nevertheless, it probably is going to provide over time an interesting test of competing philosophies.
Of course, regardless of the outcome economists will conjure up all sorts of reasons why the results mean nothing.
Related Posts
Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.
"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.
Please Help Support BeforeitsNews by trying our Natural Health Products below!
Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST
Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!
HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.
Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.
MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser! Cleans out toxic buildup with oxygen!
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover - Reduces Smart Meter radiation by 96%! (See Video).