The ECB: Credible enough to march the EZ towards the precipice.

This is from ECB President Mario Draghi:

Let me use this occasion to dwell a bit further on monetary policy in the current environment. Three principles are of the essence: continuity, consistency and credibility.

Continuity first and foremost refers to our primary objective of maintaining price stability over the medium term.

Consistency means to act in line with our primary objective and with our strategy both in time and over time.

Credibility implies that our monetary policy is successful in anchoring inflation expectations over the medium and longer term. This is the major contribution we can make in support of sustainable growth, employment creation and financial stability. And we are making this contribution in full independence.

Gaining credibility is a long and laborious process. Maintaining it is a permanent challenge. But losing credibility can happen quickly – and history shows that regaining it has huge economic and social costs.

These three principles – continuity, consistency and credibility – are at the root of the Governing Council’s outstanding record during the past 13 years in terms of price stability and anchoring inflation expectations.

Hurray! We´ll all “die” but our credibility will not be “dishonored”!

4 thoughts on “The ECB: Credible enough to march the EZ towards the precipice.

  1. Well, we did almost all die in WW2, the roots of which were partly the Weimar inflation of 1923. It’s so easy to dismiss the “credibility” argument when you have not had Mr Hitler as one of your former leaders, or foes.

    • James. More than the 1923 hiperinflation, Mr. Hitler was mostly a consequence of the “austerity” imposed on Germany in the late 1020s early 1930s – notably by France – so that it would pay reparations! Now Germany seems to be “getting back at them”!

  2. History is “just one damned thing after another” as someone once said. The austerity policy in the late 20s and early 30s was almost certainly a consequence of the fear of 1923 happening all over again, True it may have backfired, but then maybe there was no way for Germany to avoid Mr Hitler given continued French insistence on reparations and the really poor global economic circumstances. The Germans knew well that printing rather than austerity in 1923 had been a colossal failure. They also think that austerity worked in recent times to get them out of the post-reunification bubble and subsequent crash.

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