Trichet: ... In France, I have occasionally been called the "Ayatollah of the Franc-fort" ... SPIEGEL: ... which has two meanings: Frankfurt and a strong euro ... Trichet: ... because I advocate a strong currency policy. Inflation is destructive for societies and democracy. Inflation is a tax on the poor and the weak. That is my very firm conviction.
SPIEGEL: ... which has two meanings: Frankfurt and a strong euro ...
Trichet: ... because I advocate a strong currency policy. Inflation is destructive for societies and democracy. Inflation is a tax on the poor and the weak. That is my very firm conviction.
*Trichet: ... facts are facts: Inflation in Germany has never been as low as it has been over the past 11 years.
There is a tradeoff inherent in a currency union: You reduce your ForEx risk, but you have to accept a higher inflation target, because you encompass a larger area with more variation in price level and in price changes. A higher baseline inflation both reduces the distortion inherent in these differences, and allows countries to temporarily pursue low inflation as a way to get out-of-line price levels back in line with the majority.
Greater economic and political integration can make the inflation cost of a currency union smaller, but it probably can't make it go away entirely.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
>Greater economic and political integration can make the inflation cost of a currency union smaller, but it probably can't make it go away entirely.
