Monday, 10 March 2008

The Pensioner, The ECB and ... The Government

Question To Trichet (The president of the European Central Bank, the one that set the European interest rates.):

Mr Trichet, I am not so happy with what you said. You said that you always do what is necessary to deliver price stability. And then you said that we are in a more prolonged period with inflation rates over and above the target of the ECB. And probably you know that there are a number of people around, including economists from banks who cannot really say what they think, and ask not to be quoted on this, who say that the ECB is supporting the banks when they should actually be giving more support to the pensioners in the street.

Because, if you keep on with these inflation rates of 3% and more, that means a cut of 10% in three years in pensions, and that could put many people in poverty. This is not a nice questions for me to have to ask, but are you sure that you, as the ECB, have the people in mind which you should have in mind regarding your mandate or are you placing too much importance on the banking sector? And the whole thing connected to this. You have a good reputation, but to my mind you are endangering your reputation right now.

Trichet Answer : I have already said - anticipating your remark - that our 320 million fellow citizens are asking us to be faithful to our mandate. It seems to me that a number of observers, including market participants, often forget that we have a mandate, and that this mandate is clear.

If we need any confirmation that we have to be faithful to our mandate, this would certainly come from the 320 million fellow citizens of the euro area, who are asking us to deliver price stability.

They know very well that we are not ourselves able to modify the price of oil when there is a commodity price shock at the global level. However, they are asking us to deliver price stability in the medium term. This is our mandate.
So, I will very much echo what you said. That said we believe that the present monetary stance is precisely in line with this objective.

My comment :

Indeed the ECB is failing its mandate for the 5 millions or so fellow Finnish citizens. Inflation has gone to the roof, purchasing power has been badly damage. The situation during the next two years seems to provide no relief at all , on the contrary 2008 and 2009 are predicted to see inflation over 3 said earlier it would mean that in 3 years time your purchasing power will be reduced by 10% if you salary doesn't follow suit...

Now the smart government headed by the financial minister Jyrki katainen has promised to reduce income tax thus most probably fuelling even more inflation. The incompetent housing minister is being pushed in corners by lobbyist and is unable to make the reforms (land reforms) necessary to underheat the housing market.

By the way, there have already made inflation worse by increasing oil tax at the turn of the year by 10%, indeed their plan is to push for Biofuel as they have a vested interest through Neste oil (which is 50,1% state owned)

I'm not even talking about Matti Vanhanen, since he is busy to destroy the free press and shaping a "Mr ecology" profile before the next election...

So what do we want? an uncorruptible and politically free ECB that is serious and act on inflation. What do we want about the government? nothing we just need to get another one: at best let's try a change, we have nothing to lose as I can't see how we can get worse ;->

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