Jürgen Stark, former ECB board member who resigned in 2011 amid disagreement over the central bank's intention to purchase government bonds of the periphery, remarked, as we frequently noted on this blog, that low inflation in the Euro Zone is mainly due to the decline in commodity prices (in part due to the appreciation of EUR/USD). Stark stated that the International Monetary Fund, the Organisation of Economic Cooperation and Development and the ECB were all participating in a discussion about "too low" inflation which was "irrational". Irrational ? How can it be ! We are talking about central bankers and prominent economists right ?
Calling out central banks on their B.S.
In Stark's view, the low inflation is not a threat. Although we think there is indeed a risk of persistent deflation in the Euro Zone, the logic behind the arguments supporting the extraordinary measures of the ECB is flawed. And this has been true, even more so, for other central banks as well. For the risks and undesired effects associated with ultra accommodating policies at this juncture far outweigh their benefits.
Low inflation warnings ‘irrational’: Ex-ECB’s Stark
http://www.cnbc.com/id/101753733?trknav=homestack:topnews:20
Government bond yields hit historic lows
French and Spanish 10 year govt bonds reached levels not seen since the 18th century this week ! When one contemplates the level of debt of these countries, there is clearly something very wrong with this picture ....
