With the denial of the reality of the ECB towards stagflation?

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Since the European Central Bank (ECB) has pursued an expansionary monetary policy, mainly economic policy, for too long, the euro area is now facing a difficult time

Doing nothing is obviously the guiding principle of “Madame Inflation”, as the head of the European Central Bank (ECB), Christine Lagarde, calls it.

If you take a look at the ECB website, it is now clear at first glance to everyone how far reality has deviated from the self-representation of the central bank. In the self-description it says: “We keep inflation under control”, which in view of the record inflation of now officially 7.5 percent in the euro zone is, of course, pure ridicule. The rate of inflation has never been so high since the introduction of the common currency.

“Our job is to guarantee stable prices”

“Our job is to guarantee stable prices,” the ECB rambles propagandistically. This is “the best contribution that monetary policy can make to economic growth and job creation.”

The ECB’s goal is not only to keep prices stable “by ensuring that inflation, the rate at which the prices of goods and services generally change over time,” but also says price increases must remain “low.” ” and “predictable”.

The ECB under Lagarde has been glossing over these claims for some time. Aspiration and reality diverge more and more fatally. Already done a year ago telepolis Of course, it is dangerous to simply dismiss the dark clouds of inflation gathering as “German angst.”

As late as last May, when the official inflation rate clearly exceeded the two percent target in the eurozone, it was clear that the situation was getting dire. Some EU countries already showed values ​​above five percent, as the US had to show.

What was fatal was that the ECB did nothing to counteract a foreseeable fatal development. Now the observer is almost left speechless that Lagarde’s ECB is still doing nothing, apparently it does not want to do anything for a long time either, despite the fact that official inflation rates in some countries have even been in double digits for months. In Estonia and Lithuania it has already risen to around 15 percent!

In five or six years, at these values, each euro will be worth only half. It should not be forgotten that inflation especially affects ordinary people. Those with low incomes have to spend a particularly high proportion on energy and food, which is why actual inflation is particularly high for this group, as poverty researchers point out again and again.

expropriation of the middle class

But it is also unmistakably clear that the expropriation of the middle class has clearly accelerated. Because those who still have savings are no longer expropriated only gradually in the face of such high inflation rates. You could say as long as inflation was low, since interest has not been paid on savings deposits for years due to the ECB’s policy of zero and negative interest rates.

But even simple savers are increasingly burdened by negative interest rates. So they also have to pay money so that the banks can work with their money. Negative interest rates are euphemistically called “custodial rates.”

However, as inflation continues to rise, meaning money in savings accounts becomes increasingly devalued, banks are constantly charging new fees. In view of official inflation rates, which have already risen to almost ten percent in the big euro countries like Spain, the expropriation of the middle class has also accelerated.

But Christine Lagarde is holding her own in the face of record inflation. You have to look back to the oil shocks of the 1970s and 1980s to find a similarly high rate of inflation. Last November, Telepolis assumed that it was “less and less impossible” for Germany to break the 6.3 percent mark by which prices had risen during the 1981 oil crisis.

According to the Federal Statistical Office (Destatis), Germany now records an official inflation rate of 7.3 percent. However, Eurostat even raised this to 7.6 percent above average. The European statistical authority works with the internationally comparable “Harmonized Index of Consumer Prices” (HICP) and not with the even more distorted “Consumer Price Index” (CPI).

ECB: No big changes

What telepolis reported, the only notable step taken by the ECB was not to limit the rise in inflation, but the central bank only adjusted its target last summer. The goal is no longer an inflation rate of just under two percent, but two percent.

That doesn’t sound like much of a change, in fact it was much more important that a new word choice was found and the very vague word ‘medium term’ was introduced. “In the medium term, we aim for an inflation rate of two percent,” the ECB now declares, and wants to accept “stronger bullish or bearish deviations” over a longer period of time.

What “long term” means and how high “major deviations” can be was deliberately left undefined to avoid pressure to act.


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