Let me try a different take on why this is such a bad idea. Suppose that we focus on wage rates, which are often seen as the stickiest, most inertia-driven prices. The eurozone, like the United States, has seen wage growth slump in the face of high unemployment:
Eurostat
So what the ECB is saying, in effect, is that Europe should drive down nominal wages — which can only be done by raising the unemployment rate — in order to offset the effect of oil and food on headline inflation. (Real wages will fall in any case.)Is this really a policy that the ECB would defend in so many words? I doubt it. But however sober and dignified talk of price stability may sound, that’s what the proposed policy amounts to.
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