Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Having an independent central bank and a stable currency is about more than short term economic benefits and losses, and definitely about more than imports and exports. The perceived benefits are mainly lower inflation and more budgetary discipline, and, if the role of the bank is chiefly to limit inflation and not to stimulate the economy, fewer bubbles.
by nanne (zwaerdenmaecker@gmail.com) on Wed Sep 12th, 2007 at 06:52:23 AM EST
[ Parent ]
Here I reveal that I am ambiguous about which is the best monetary policy for the poor. I lived through a period of high inflation, and a few more inflation hikes, and they definitely hurt the poor more -- especially retired working-class people or people just before retirement, who saw their life-long savings evaporate. (The generation that did the post-war reconstruction became the biggest loser.) There is also the trend that if fiscal indiscipline leads to runaway budget deficits, cutbacks will again hit the poor (this cycle just played out here in the last five years). These issues are opposed by the general tendency of central bankers to advocate policies that brake employee wage increase but not employer enrichment, and as redstar says, rail against unions.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Sep 12th, 2007 at 09:07:14 AM EST
[ Parent ]
Techno's diary, mentioned earlier in this thread by Pierre (link) also made me think a bit more about this. I guess a central bank solely focussed on combatting inflation is not always a good idea under all circumstances (e.g. circumstances under which politicians follow an otherwise irresponsible fiscal policy).

Now techno offers several ways to think about money, which are interesting. I think about money mostly as an institution. For the everyday person it is best if this institution is stable, for several reasons (transparancy on the market, ability to plan finances over a longer horizon, cost and risk of engaging in various kinds of transactions). This is especially true for a new currency like the euro, which people have to get used to.

Although I think that the policy to keep the euro strong and stable is generally a good one, I do not necessarily agree with every statement by Duisenberg and Trichet, of course. I do think that wage increases should not structurally go above increases in productivity, as they do in Spain -- definitely not in Germany. On the other hand, central bankers should of course speak out more against the unhealthy wealth capture by the have-mores, which they don't.

by nanne (zwaerdenmaecker@gmail.com) on Thu Sep 13th, 2007 at 08:27:42 AM EST
[ Parent ]


Occasional Series