Fri Apr 8th, 2011 at 05:28:15 AM EST
This is more of an inquiry than a diary.
With today's rise of the repo rate from 1% to 1.25%, we seem to be exiting "emergency mode" and, according to the ECB's logic, returning to "business as usual". Inflation greater than 2% is anticipated, therefore, automatically, interest rates must rise. It now seems likely that they will continue to rise, tending to 2% before year's end.
Problem : most of Europe is enduring cost inflation, while wages do not follow; only Germany meets the standard criteria for increased interest rates.
Worse : the distressed nations (Greece, Portugal, Ireland) will be further stressed by rate increases. To say nothing of distressed mortgage holders...
The new phase would seem to spell disaster for debtors (individual or governments), for whom inflation would seem their best hope of long-term solvency.
This seems prima facie evidence that the ECB is the Bundesbank by any other name... and smells as sweet.
But perhaps There Was No Alternative?
front-paged by afew