Just because central banks have a hammer does not mean they have to destroy the economy with a hammer .” The Nobel Prize winner in Economics, Joseph Stiglitz, said it at. The beginning of the year in El País , and he attacked them again a few days ago, after rebel against central both the European Central Bank (ECB) and the Federal Reserve (Fed) announced new increases of rates , despite the banking earthquake. Central banks use monetary policy as a tool to guarantee price stability. The problem is that there are times when the remedy they sell may be a fix for a tear. One of the inescapable postulates of economics. Is that inflation is a monetary phenomenon , so central banks are in charge of stopping it (with the hammer of interest rates ). But the orthodox theory has been questioned on more than one occasion, and in recent months there has.
It is irresponsible to ask for new interest rate increases
In addition to Stiglitz, the enfants terribles of monetary policy are economists as unsuspicious as the Nobel Prize winner in Economics Paul Krugman. Or the TUAC, the union advisory committee of the OECD. ” in the US and the euro zone. It is a wrong rebel against central decision in the face of the economic slowdown and the incipient financial crisis,” Veronica Nilsson, acting Italy Mobile Number Database Jiangsu Mobile Number List Secretary General of the TUAC, warned last week. “It is not the right instrument” food, supermarket, fruits and vegetables. The hegemonic discourse, inherited from the theories of Fisher and Friedman , is based on the fact that the only important. Cause of inflation has to do with an excessive increase in the amount of money, and that, therefore, the only cure would. Be to withdraw that market money. As? Making it more expensive raising rates.
Raising rates means pouring cold water on consumption
But what happens when what causes inflation is not demand? In the case of Europe, the origin of the conflict is in the high price of basic products, such as energy or food (the so-called supply inflation. Which in turn has been infecting the rest of the shopping basket. Stiglitz’s main argument against rate increases is that the current inflation crisis is not a Turkish phone number list demand problem (at least in Europe): ” Monetary policy is not the rebel against central appropriate instrument because it is not a problem caused by an excess demand. The cure can be worse than the disease,” he summarized a few days ago. “The cure can be worse than the disease” If European economies are burning right now, it is not because of excessive consumption. That has triggered prices, but because of a problem of lack of supply derived from the supply crisis.