Word: inflationitis
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Having effectively abandoned the Marxist-Leninist ideology that was once its bedrock, China's Communist Party now draws its mandate to govern from two sources--economic growth and nationalist pride. The trouble with nationalism, though, is that it's difficult to control. What starts as criticism of the foreign can...
Which brings us back to a basic question: How strong a dollar do we actually want? Over time, a currency's value reflects an economy's fundamentals--how well a country allocates resources, how productive its workers are, how it contains inflation, etc. So in that sense, a strong currency...
ECB officials know better or, at the very least, have better memory. The goal of maintaining price stability effectively means pursuing a responsible monetary policy to avoid spiralling inflation, which this year will be well above the two percent goal because of high commodity and energy prices. Even disregarding the...
The biggest danger with inflation is that expectations quickly become internalized. Once the inflationary door is open, closing it is especially painful. This issue is only graver in places like Europe with very effective trade unions and powerful export lobbies.
John Maynard Keynes once famously remarked, “In the long run, we are all dead.” And as with almost everything else he said, he was right. At these crossroads, however, Europe’s long-term and short-term goals are aligned: It should stick...