This scheme argues that what causes inflation is basically an increase in demand, that is, when there is more demand in the market for goods and services which in turn increases prices and therefore inflation. A key aspect of this pattern of increased demand is that it has to do with the ability of workers …
Category: Economics
The Reasons That Lead the Global Economy to “Difficult Paths”
The world economy is likely to be headed for a new recession and overall a time of difficulties. Things are not so good. This has to do with the combination of a number of structural trends currently permeating the global economy. 1. Inflation is here to stay There is a more structural dimension to inflation, …
The ECB’s aggressive interest rate hike is causing problems for the EU
The ECB’s aggressive interest rate hike is causing problems for everyone in Europe. To citizens who are asked to pay a higher installment on their mortgage or consumer loan, to businesses that are raising the cost of servicing their loans, to states that see their existing bonds collapse, and even to public debt that, instead …
Why the EU’s Proposal to Impose a Cap Only on Russian Natural Gas is Wrong?
In the past two weeks the structural pathologies responsible for the EU’s energy gridlock have combined with a series of extreme weather events – such as unprecedented drought – to record unimaginable energy prices. The day-ahead electricity prices in France, the EU’s traditional electricity exporting power, reached on September 2 even above 1,000€/MWh, while natural …
The Limits of “Economic Orthodoxy”
Every year the executives of the US Federal Reserve System gather in Jackson Hole, Wyoming for an annual financial symposium. At this year’s meeting, everyone was expecting the position of Fed chief Jerome Powell. And the message from the American central banker was clear: at the moment the priority is to reduce inflation. The direction …
The US “Productivity Paradox” appears again
The recent release of data on non-farm labor productivity in the US economy confirmed concern about a continued downward trend in this critical indicator. Labor productivity fell in the second quarter of 2022 by 4.6% as output fell by 2.1% and total hours worked increased by 2.6%. Compared to a year ago productivity fell by …
What do the Spread Control Mechanism mean for the EU Economy?
The 50 basis point increase in the ECB’s deposit rate, double what the ECB had initially communicated and in line with the hawks’ wish, was combined with the announcement of a new spread control tool, the Transmission Protection Instrument (TPI). The threat of recession is greater in Europe: the war in Ukraine and the energy …
How Can Fiscal Policy Tackle Stagflation?
Economic policy generally has many objectives. To increase income and employment, to keep prices stable, to ensure the sustainability of public finances, to provide adequate liquidity conditions and so on. Usually these goals relate to reactions to economic disturbances, such as an economic crisis, a pandemic, a war, or anything that threatens the financial well-being …
Stagnant Inflation Management
In recent times, the global economy has entered a strong inflation component based on ever-increasing energy and food prices. If the causes of price increases are limited to the region of Europe, and given that the EU is purely an importer of energy, one could argue that this is an “imported inflation” over which monetary …
Emerging Stagnant-inflation in the Eurozone/EU & USA
Inflation begins to make a threatening appearance in the EU and US since last summer due to a combination of dynamic economic recovery in COVID-19 conditions, serious problems in international trade and supply chains and upward trend in international oil and mainly gas prices. Inflation had reached high levels before the Russian invasion of Ukraine. …