Increase in ECB Interest Rates

The ECB has introduced two cartoon characters to educate young (and older perhaps?) people on the importance of price stability and therefore higher interest rates!

The girl cartoon character could be symbolic of Ireland.... green eyes, red hair and green t-shirt.

We Irish do seem to have some lessons on interest rates coming our way...

[broken link removed]
 
Interest rates will stay at emergency low levels.
Interest rates will stay at emergency low levels.
Interest rates will stay at emergency low levels.

Gosh, repeating it often enough, I think I'm actually starting to believe it.............NOT !!
 
sonar said:
The girl cartoon character could be symbolic of Ireland.... green eyes, red hair and green t-shirt.
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And her name is Anna. If ever there was a name that represented Dublin (Anna Livia) that would be it !

Those crafty divils at the ECB might be trying to edumacate us on interest rates.

Lets follow Anna - her with the green eyes and red hair - over time as she learns some important lessons from the ECB. Shall we ?
 
I dunno — they both look rather Pokémon-ish to me, especially the fella...

Subliminal acculturation? Europe's new masters? (etc.)
 
Good point - they are a bit Pokémon-like.

Maybe they should've introduced some little monsters. Dark Pokémon like Debtish and bubbledon ?
 
CoffeeBrew said:
Maybe they should've introduced some little monsters. Dark Pokémon like Debtish and bubbledon ?
Click to expand...
Like the one in the picture you mean?
 
I would not describe myself as financially astute or even having any financial literacy as my field is the human and behavioural sciences and academia so I come onto this forum to try to balance my ineptitude. I've been trying to follow financial events in the EU recently as I am desperately trying to relocate to Ireland from UK but the gap has always been too great. Despite the "hype" when push comes to shove and I do the maths I would be worse off transferring job and domicile to RoI at the moment! With that as background, can someone explain to me (because I don't really understand this since Black Wednesday and the UK dropping out of the European Exchange Rate Mechanism (?) what IS the rationale for pegging EU interest rates at such an artifical low? It appears to make no sense as those outside it (America, UK, some Scandinavian countries, Indian/Asian/Chinese sub-contenents) are not apparently subject to inflationary pressures because of the cost of borrowing. I know this. I have just been down my local high street where what were formerly "the January sales" now start in November to stimulate trade. Can anyone explain the rationale of pegged interest rates and sluggish economic growth?.......or am I completely off-beam? The corollary of this is - of course - that raised by a poster above which is how do nation-states of very different sizes and potential (e.g. Ireland vs. Germany) arrive at an accommodation on this?
 
Can anyone explain the rationale of pegged interest rates and sluggish economic growth?...
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My guess.




David Ricardo, "labour is dear when it is scarce and cheap when it is plentiful."


The west is experiencing deflation brought on by globalisation, cheap labour, more efficient production and nascent consumer economies in the East. The most telling illustration of the impact of deflation can be witnessed in the money markets in Europe and the US where long dated debt (ten years plus) is yielding about the same as short dated debt (current base rates). Which means; that the money markets are willing to bet trillions of dollars and euros that inflation will not be an issue for years in the future.

Western governments are not concerned by inflation but by deflation (see Japan). The text book method of seeing off deflation is to increase the amount of money in the economy, hence historically low interest rates, (Japan 0.10%) But western consumers have been unable to absorb all the cheap production created in the East and the Eastern consumer economy is still too small and poor to help out.

As workers in India, China, E Europe and South America produce more profits for companies than their western counterparts (because they(easterners) are cheap) more investment flows to these countries. Libertarian economists us the phrase ‘creative destruction’ to describe this outsourcing of jobs to the East, they postulate that the west will become a ‘knowledge based’ economy.

I think that incomes in the west will be influenced by globalisation and that the ‘knowledge based’ economy based mainly in the west smacks of colonial arrogance. Western economies will have to adapt to the challenge of globalisation, how this is done will involve a combination of cost cutting, efficiencies and the utilization of competitive advantage.
 
In fairness, your reference is to a text written in 1817 — 'On The Principles of Political Economy and Taxation'... I agree with you about the 'colonial arrogance' bit — but the demographics have shifted a bit in 188 years, too!

When you say that you think that 'incomes in the west will be influenced by globalisation', do you mean upwards or downwards? (relative to the '3rd world'/'emerging' economies)
 

When you say that you think that 'incomes in the west will be influenced by globalisation', do you mean upwards or downwards? (relative to the '3rd world'/'emerging' economies)
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Lets say a leveling, e.g. equally productive engineers in China and Ireland will be paid a similar wage. Radical idea?
 
'Totally'...!

I suppose Minister Cowan and his party needn't depend on (y)our vote, at the next election?

[Edit: Please don't anyone dive in with the old gag about 'more elections than a Chinaman on his honeymoon'...!]
 
Doc

In terms of global affairs, I think the Dail has as much influence as a fart aimed at a hurricane. I’d like to see a Pragmatist Party in the Dail though, Vote Pragmatist.

What’s the Irish for the Pargmatist Party anyone?
 
But western consumers have been unable to absorb all the cheap production created in the East and the Eastern consumer economy is still too small and poor to help out.

OK! So I think you're saying the strategy is not working and the contingency then put into operation is flood 'the West' (I'm uncomfortable using that term but the more anthropologically-correct 'late-capitalist Euro-American consumer economies' is a bit OTT) with virtual wealth and the housing market is essentially purchasing a lien on the future - an extension of the 'buy now pay later' credit approach. If I've understood correctly then pegged interest-rates are a handmaid of that last resort.

Duplex the model of equalisation of reward for equal work doesn't stand a snowball's chance in hell as it leaves out realities such as power politics and fundamental corruption at the base of human nature.
 
Duplex the model of equalisation of reward for equal work doesn't stand a snowball's chance in hell as it leaves out realities such as power politics and fundamental corruption at the base of human nature.
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Incomes in the US actually fell last year, (I’ll post a link when I find it) and in Ireland we have the example of Irish Ferries. Profit maximisation I think will overcome any corrupt human or political influence on this trend of equalisation. This levelling will take some time and may not result in absolute parity but the momentum created by 85% of the world’s population is irrespirable.

That trend has started in Ireland if you look at the figures for foreign direct investment over the past few years. We as a nation need to plan a response for this trend now, rather than waiting for five years and producing some half @rced reactive policies that are behind the game.
 
Marie,

you asked about EMU interest rates, and how they are set.

Well here is a quote from the ECB website:

The primary objective of the ECB’s monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term.

(In plain English, their job is to keep inflation low and stable)

Indeed, they need to act in advance of any possible rise in inflation, and therefore choke off or prevent excessive inflation.

The ECB keep an eye on the money supply, on producer prices, oil prices, and on rates of economic growth, always trying to see what is and might happen to inflation.

Over the past few years the main EMU economies have been weak, with high unemployment and no threat of rising inflation. So interest rates were reduced to a low of 2% to help these economies recover. Rates have been at 2% from June 2003.

Now there are signs of recovery, and inflation might be on an upward path, so the ECB have recently raised rates to 2.25%. Just one increase of a quarter percent.

The US also reduced their rates all the way down to 1% a few years back (2001-2002???) to help the economy out of recession. During the past year, interest rates have been increased 13 times (13*0.25) back up to 4.25%.

Does that help??

Any more questions??
 
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