Like the Fed, the ECB is just pretending to fight the high CPI. The fact that the ECB’s balance sheet has stopped increasing and that eurozone’s M2 is increasing at a slower pace than in 2020 and 2021 are factors that reduce the pressure on price increases, but this only means that, best case scenario, the ECB will be able to bring the CPI to lower levels. It is less likely that prices will return to pre-2021 levels. This would require a price deflation.
A distinctive feature of the economists of the so-called “Austrian School of Economics” is that they advocate a theory of money considerably different from that of their colleagues in other schools of economic thought.
The differences between the aforementioned approaches already begin in the very definition of the word inflation and this will be the main topic of this article.
Why Bad Money Drives Up Pollution
Why Low Rates and High Taxes Won’t Help Against Inflation
In addition to Croatia, there are six countries that have not yet joined the euro but should do so once the requirements are met: Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Sweden.
The ECB concludes that only Croatia and Sweden meet the price stability criteria.
Inflation is here, but there’s also a shortage game in town.
Like the FED, the ECB does not have much room to raise interest rates without causing major complications in the financial market and the economy.
You may have already come across the following phrase ‘wars are good for the economy’, but you could not explain where the economic and logical errors were in such a statement, this text comes to help you understand what these errors are.
How are prices formed? The price is analogous to a tug of war, people will try to ‘pull’ you to the side that is most convenient for them. Each buyer subjectively values a product, so each person is willing to pay a different price. The seller, in order to increase his income, tends to prefer to sell to those who are willing to pay more, and the buyer, in order to keep his money, tends to prefer to buy from the one who charges the least. Thus, the price is the result of this bargain between sellers and buyers. The more sellers, the lower their bargaining power (they will compete for the sale), so, the buyers will have more options and they will tend to buy from whoever charges the lowest price.
After the financial crisis of 2008 the Austrian school of economics saw once again a resurgence in popularity both in public and the academia. This resulted from the fact that economists, financial analysts (Peter Schiff) and politicians (Ron Paul) that were familiar with the Austrian business cycle (ABCT) successfully applied it in predicting the boom and bust of the housing market. Today the theory gained popularity as people are looking for answers to high inflation, economic downturn, an extremely aggressive monetary policy pursued by central banks around the world. However even to this day the ABCT is widely misunderstood.