Shock News!!!!! Euro-zone Inflation Not High Enough!!!!!

Worrying eurozone inflation sags again to 0.3 pct

The idiocy in this article is too much for a ratoinal person.

FRANKFURT, Germany (AP) — Inflation in the 18 countries that use the euro sank to an annual 0.3 percent in August, a sign of economic weakness that is putting pressure on the European Central Bank to take drastic steps to save a stalling recovery.

The figure was down from 0.4 percent in July, the EU statistics agency said Friday, and is the lowest since October 2009. Back then the eurozone was deep in recession after the collapse of U.S. investment bank Lehman Brothers threw global markets into a tailspin.

Italy, the eurozone’s third-largest economy, said it is seeing deflation for the first time since 1959, with prices dropping 0.1 percent in the year to August.

The figures heighten concern over the health of the modest recovery in Europe’s currency union, a major pillar of the global economy with some 17 percent of world output. The eurozone showed no growth at all in the second quarter as fears about the Ukrainian crisis weighed on consumers and investment decisions. Unemployment remained high at 11.5 percent in July, unchanged from the month before.

Core inflation, which excludes volatile food and energy, sent only a modestly brighter signal as it rose to 0.9 percent from 0.8 percent.

ECB President Mario Draghi has warned that inflation expectations are worsening and says the bank will add more stimulus if needed.

Many analysts predict the ECB will eventually launch large-scale purchases of financial assets to pump more money into the economy. The bank’s governing council meets on Thursday, but experts generally think it will hold off for several more months as it waits to assess the impact of earlier stimulus efforts.

The bank has already taken steps to boost growth and prices, cutting its key interest rate in June to 0.15 percent and offering cheap loans to banks on condition they lend more to companies.

Consumers like low inflation because it makes their paychecks go further in stores. But it is a sign of overall weak demand. And it has been so low for so long that it has raised fears of deflation, a crippling downward price spiral that comes about when people hold off buying things because they think prices will fall further.

Europe’s economy grew for four quarters but then the recovery came to a halt in the second quarter of this year as core economies France and Germany stalled. Most economists predict growth will resume in coming quarters but it is feared that uncertainty over the crises in Ukraine and the Middle East will keep the recovery too weak to reduce high unemployment.

Draghi has said that if needed the bank could make large-scale purchases of financial assets, known as quantitative easing, or QE. That step adds newly created money to the economy and in theory can lower longer term borrowing costs for companies and increase the rate of inflation.

“Today’s data should provide fresh fuel for speculation about broad-based bond purchases (QE) by the ECB,” wrote analyst Christoph Weil at Commerzbank. “We now put the probability of QE at 60 percent.”

By considering more stimulus, the ECB is leaning in the opposite direction from that of the U.S. Federal Reserve, which is expected to halt its asset purchases later this year as the U.S. economy grows more strongly.

Fascinating.  So, the ECB knows what the inflation rate of August is for the Euro Zone.  As I write this, it is Aug, 31. 

I don’t believe “fears about the Ukrainian crisis weighed on consumers” 

If anything, fears about war, and rumors of war, causes people to spend money, not save it. This is entirely demonstrable, and has been demonstrable for centuries.

Don’t you find it funny how we think we can extricate energy and food prices from our “core inflation rate”?  Energy doesn’t control our prices?  They’re volatile, but, stable, is what they’re saying, or something.

In my study of history and economics, I cannot find an example of what these lunatics are saying.  To my knowledge, there’s never been a time where people quit buying because things may be cheaper next year.  It is complete and utter idiocy to suggest this dynamic occurs or ever has occurred.  One still has to eat.  One still has to be clothed.  One, still, must by gas and electricity  for warmth and cooling.  Shoes?  …. the same concept.

Here’s the brass tacks.  The EU economy didn’t grow at all during the last quarter, but, inflation rose at 0.3%. 

This means, in toto, every person living in the Euro-Zone lost value. 

Let’s say you have a job which pays 20 Euros/hr.  You’d like to save money, but, it’s difficult with the mouths you have to feed. So, this last quarter happened to you.  The economy didn’t grow, so, you didn’t get a raise, unless you’re working for a company which is soon to be out of business.  But, inflation grew at 0.3% this quarter.  This means the value of your 20 Euro/hr is now 19.94 Euro/hr. Worse, let’s say we have a pitiful savings account, in which we have 40,000 Euros.  But, because times are hard, we didn’t put any in last quarter.  That money, while still nominally is worth 40,000, it’s really only worth 38,8000 Euros, because of the inflation rate.

The AP, in this story, let something out which I’m sure they meant to keep hidden.  They said ……….

“ Consumers like low inflation”

Indeed. When consumers are happy the economy grows, always.  Not if or when “inflation” is occurring or not.  Inflation is a symptom, not a cause.

Steady growth, with low inflation, is key to people’s prosperity.  Always!!!!!

It doesn’t, and never works otherwise.