Everything you're supposed to know about inflation and were afraid someone would tell you
ECB: Educational:
"The European Central Bank, in cooperation with the national central banks of the euro area, has produced an information kit entitled 'Price stability: why is it important for you?' for young teenagers and teachers in all the official languages of the European Union.
"This tool consists of an eight-minute animated film, leaflets for pupils and a teachers' booklet. The film features two secondary school pupils, Anna and Alex, finding out about price stability. The leaflets provide an easy-to-understand overview of the topic, whereas the booklet covers it in greater detail."
Follow the link and you can see the cartoon where Anna and Alex learn about the Inflation Monster and how the European Central Bank (ECB) keeps him in a little glass jar. Pure hokum!
Mike Shedlock, writing in Bill Bonner's DAILY RECKONING online investment newsletter, brought this to my attention, he explains it better than I can:
"Even though it is entertaining, it sure flops as an educational tool
unless of course the goal is self-serving propaganda by the ECB, for the ECB.
"Unfortunately the video does not explain that the real source of inflation is printing of money by the central bank itself. Nor does it explain why 2% is such a good inflation target. Finally it does not explain how prices across the board can be contained by broad brushed practices like setting of short-term interest rates.
"Those things were not explained simply because they cannot be explained ..."
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posted by J. Keen Holland @ 1:25 PM
4 comments
4 Comments:
Let me get this straight. Central Banks create inflation and the work to control it. Sounds a lot like job insurance to me.
I'll bet next you'll tell us that government acts to increase the costs of doing business (in a host of ways) and then complains bitterly and threatens retaliation when the prices of goods and services rise. One wonders why government doesn't complain when tax receipts rise as the result of economic growth and inflation.
In the great state of Norf Calina, the state gasoline tax will rise by ~15% on January 1st, since a portion of the tax is based on the wholesale price of gasoline. Of course, this is not "inflation" even though it will increase retail prices.
Absolutely right, Ed. No amount of tax increase can cause inflation which is a monetary and not a fiscal phenomenon. OTOH, the "market basket" schemes which governments claim to use to measure and report on inflation will pick up an increase in gas price (if there is any) related to the tax hike and report it as inflation or put some more adjustments in the footnotes to the report to avoid admitting that inflation is happening. The one thing that will never be done is for government to take responsibility as the cause of decline of purchasing power of the currency.
"..increase in gas price (if there is any) related to the tax hike..."
Keen, you and I both know that the pump price WILL increase by the same amount as the increase in the tax (~$0.03). Retail margins are too thin in that business for anything else to occur.
True story.
I lived in Alabama (near Montgomery) for several years before returning to SC. A few years back AL decided to increase gasoline tax by five cents per gallon.
There were a couple of stores just across the state line in Georgia (I-85) that always had prices 5-10 cents lower than AL. I had a three day conference to attend in Atlanta.
On the day the tax increase went into effect I was enroute to ATL and the GA stores still had their regular prices. On my return trip their prices had increased exactly the same five cents. So they still had a favorable price differential from AL, but had gained a nickel per gallon profit 'cause of the AL tax increase.
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