Inflation: the ECB is confident of victory

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Inflation: the ECB is confident of victory

Even after the recent reduction in interest rates by the European Central Bank’s optimistic: In the fight against Inflation more instruments are yet to come. The talk of “helicopter money”.

Benoît Coeuré, one of the Directors of the European Central Bank (ECB), has defended the loose monetary policy of the Central Bank. The recent easing round from 10. March have shown that the Central Bank ran out of funds, said Coeuré in Paris.

In front of around one and a half weeks, the ECB reduced the key interest rate in the Euro area to zero percent, the value of paper purchases to be extended and the purchase of corporate bonds, as well as new long-term loans announced. Many experts and journalists assessed this step as a “desperate act” and evidence that the guardians of the Euro have shot its bolt completely.

Governing Director Coeuré sees it differently. The new package of pranks said the firm will, the still-weak Inflation back to the target value of the Central Bank of close to two percent closer, Coeuré. However, the ECB also seems to be willing to go a step further.

ECB Director Benoît Coeuré

In the debate on diving of late, even more bizarre bearing in approaches such as the “helicopter money estimated”. ECB chief Mario Draghi had called to demand a “very interesting concept”. The guardian of the Euro would not have discussed this before, however, even closer.

A helicopter that drops money

The term “helicopter money” comes from the economic discourse of the Anglo-Saxon period, and is attributed to the US Economist and Nobel prize winner in Economics Milton Friedman. Helicopter money describes the massive expansion of the money supply by the Central Bank, by giving this money directly to citizens or companies.

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Friedman, one of the most important representatives of the idea of the “free market” in the 20th century. Century, had brought in his “Optimum Quantity of Money” is the hypothetical example: A helicopter drops of money. The detour via the banks would be circumvented, and the citizens could spend the money directly, and so the Inflation boost. So far, the concept has not been implemented, at least in modern times in a big way, since Draghi’s Speech, but discussed time and again.

Not only on the ECB to leave

Despite such mind games governing Director Coeuré the Euro-zone countries urged to contribute actively to a sustainable economic recovery. “This requires a concerted effort regarding the economic and budgetary policy,” says Coeuré. So all countries could design their tax structures more growth-enhancing. Public expenditure could be reallocated in the direction of investment, research and education.

nm/bea (dpa, rtr)