Tuesday, May 27, 2008

Trichet The Comedian

Bloomberg news has an article noting that the ECB has rather consistently overshot its inflation target, and that this leads some to argue that the target should be raised to 2.5% or that the ECB like the Fed should also consider employment as a target. As any regular reader knows, I think it is a bad idea to inflate as much as the ECB does and so it would be better if they restricted their money creation. However, if they are going to pursue their current more inflationary policies, they might as well be honest about it and formally raise the target to 2.5% or 3% or whatever.

ECB President Jean-Claude Trichet apparently opposes this however, as this would increase inflationary expectations. He further argues that

"investors have not lost faith in the ECB's ability to deliver price stability and that only temporary "shocks"' have caused its ceiling to be breached."

Temporary? If something goes on year after year it sure ain't temporary. And I'd like to see the investors who actually believe the ECB will deliver what they've almost never delivered so far during the latest 10 years. I don't know what these guys have been smoking, but it sure ain't tobacco, if you know what I mean.....

Still, his assertions of "temporary" factors that last a decade and investors who actually believe that did at least provide me with a good laugh.


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