The ECB has a basic principal like the Bank of England Monetary Policy Committee to keep inflation within tight constraints. Europe suffered during the 70's from high inflation and low productivity. It was the right wing governments starting with Thatcher who focussed on interest rates as the mechanism for controlling inflation. Since then it has been put into quasi autonomous non governmental organisational status (QUANGO) to ensure that interest rates are not used by governments for political gains in the run up to elections etc.
The ECB has no responsibility to consider effects of its interest rates on the US in the same way that the Fed considers it a domestic decision with its reviews on rates. That each will have an effect on the other is of course obvious when you consider that they are the two largest economies in the world. European Union 14,712,369 United States 13,843,825 People's Republic of China 6,991,0361 Japan 4,289,809 India 2,818,867 NB taking just the Eurozone for the EU takes the EU to second place with 10,367,276 No one is deliberately picking on the US, everyone's looking after their own interests. See managed to say all that without mentioning that the worlds credit problems are a direct result of US interest rates in the first place - DOH! -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Bob Calco Sent: 11 August 2008 20:57 To: 'ProFox Email List' Subject: [OT] Will Trichet drive the world over a cliff? http://tinyurl.com/3rpsb4 - - - Sadly, we are witnessing the sort of strategic errors that turned the recession of 1930 into a global catastrophe. The European Central Bank is now hell-bent on a course of action that will have a knock-on effect across the world and risk a dangerous implosion of the credit system. The ECB's Jean-Claude Trichet told Die Zeit today that "there is a risk of inflation exploding." Let me put it differently: there is a grave risk of social and political disorder "exploding" if the logic of his argument is followed to its grim conclusion, that is to say if the ECB charges ahead with a string of rate rises through the autumn after its move to 4.25 per cent today. The ECB mantra is that Europe and the world is on the cusp of a wage-price spiral along the lines of the 1970s. This directly contradicts Ben Bernanke at the Fed, who insists -- correctly -- that today's conditions are not remotely like the 1970s. (Perhaps this is uncivil, but I might add that Bernanke is one of the greatest economists of our age. Trichet studied political administration at ENA. He is a fine and honourable man, but he is a politician, not an economic historian) By taking this militant 1970s line, he is in effect kicking Bernanke in the teeth. Or put another way, the ECB is trying to pressure America into a tighter monetary stance. Regrettably, this has in part succeeded. The Fed badly needs to cut rates further -- probably to 1per cent. It cannot do so because the ECB keeps threatening to pull the plug on the dollar. - - - The ECB's insane monetary position and Putin's audacious all-out assault on Georgia (not to mention open support of Iran) are huge geopolitical destabilizers which directly threaten our prosperity. Hang on to your hats. - Bob [excessive quoting removed by server] _______________________________________________ Post Messages to: [email protected] Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/%(listmsgid)s ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
