Published initially on September 17, 2023 – updated pm November 17, 2023

Le Commencement de la Fin -The Launch of the End

An about-face without a mask from Her Excellency Ms. Christine Lagarde .

I predicted that Europe was going to go through one of its greatest periods of Stagflation while Madame La Marquise Christine Lagarde in her statements to German and European newspapers, including even during her visit to Cyprus (read details in my writing below), it continued to mitigate this trend and promise the sale of shares and assets to allow #cashing and #profit growth during the wind of turmoil. 

Through this almost lethargic “wait and see” approach, Madam President, Christine Lagarde therefore opted not to intervene on the first repercussions of inflation inherited from the #covid19pandemic , nor on the impact of blockages at the level of the #supplychainmanagement Chain and the sectors affected, namely small and medium-sized enterprises which are the first and most exposed to such changes in international trade flows.

Crumbling of parity and purchasing power eroded by inflation as compensation for the losses and cuts in the rate of profit and the profitability of international trade which suffer from speculation and the lack of corrective reaction and above all the continuation of sanctions which turn out to be double-edged and given that their origins are Western, they have a rapid boomerang and expansion effect like a tiger being let out of the cage, a devastating effect without any measure or consideration at the level of its intensity or the sectors where it occurs such as continuous bursts of targeting and slaughter of forms of creation of added value

I had written on the question of Stagflation since the outbreak of hostilities but no one had reacted at that time and now we are getting there and Ms. Christine Lagarde is resigned to admitting it even though she was making haughty speeches without economic substance and financial based on the reality of the facts on the ground. All that Madam Marquise Christine Lagarde did was “shift the blame” to make people accept that the strategy pursued under her presidency by the European Central Bank was infallible and corrective, which was more of an addition of fuel to the fire , a fire from a spark from the East 

Christine Lagarde had therefore not taken decisions to moderate the impact coming from the combination of these inflationary and disruptive factors at the level of operational vectors, productivity and employment as well as the distribution of the money supply.

Madame Christine Lagarde had therefore not applied corrective measures coupled with more targeted intervention on the fluctuations of the Euro, greater openness to the currencies of other countries, especially African ones, and the integration of new payment and settlement methods for debts and loans. 

Ms. Christine Lagarde just continued to target the capital market and the adjustment on the Dollar and the monetary policy and that of the interest rate favored by the Federal Reserve Bank of New York , an admission on the lack of absolute independence of European monetary policy.

This policy thus wanted to allow the flow of direct investments towards sectors not yet completely affected by the repercussions of the sanctions, to give them time to undertake rescue and refuge operations, therefore a withdrawal and a retreat in the face of the continual erosion of the liberal system of exchange of commodities and circulation of parallel currency.

We are no longer in a capitalist system where the invisible hand regulates opposing forces in a position of balance of their strengths and their weaknesses through the magic of the Invisible Hand.  

It is the end of the so-called propaganda on the democratization of gain and the realization of profit through the entrepreneurial spirit and the globalization of this adventure presented to third countries as a bait to attract them to the liberal system which is in progress to receive a Knock-Out in cascade, one after the other from first China, India and now Russia. 

The authorities of the #United States and the #European Union who are sawing off the branch on which their national interest and their economic reasons for being are planted: they have every interest in putting on new gloves and approaching #Moscow and #beijing with approaches to settlement and conciliation so as not to complete cutting down the tree under which they have found shelter and places of relaxation since the great imperialist expansion which was in fact accompanied by the emergence of Soviet Russia , is leading the world into a disastrous drift for more than a century of endless conflicts and wars.

The fire is at the edge of this forest which is in fact transformed into a jungle thanks to the flagrant non-compliance with signed agreements and the intransigence of imposing directives without taking into account the national and cultural personality of the States which reject westernization excessively and its distorted, usurping and devastating liberalism of local and regional living conditions for the popular masses. Through manipulation of capital markets and the continual pressure of the policy of conditionality pursued by the World Bank, the International Monetary Fund and the major international banks and financial groups.

The orientations of the so-called “Sustainable Development” and its double at the level of their relationship with the international market through their programs of offers of tax, financial and infra-structural advantages and other forms of seduction which is designated by the label: Attractiveness. In fact an attractiveness of unrest and imbalances exhausting national resources for a real take-off or even the production of high added value production.

Thus, countries receive loans just to compensate for their drop in export income and also to fill the growing deficits in current accounts and those of external balances, are thus integrated into a spiral of debt and loss of distilled growth. by the effects of the international situation whose levers are ultimately in the hands of these large supra-international groups which ignore and with no regard for national borders.

Thus, globalization in such forms is achieved by the importation of all the problems of the West whose primary effects are in the majority of cases, the insemination of an extroverted system of subcapitalization accentuating regional imbalances, injustices institutional constraints and the sustainability of selective underdevelopment of national capacities for economic growth.

Eurozone in Inflationary Environment

🆕📈 #OECD #inflation rises to 🔟.5⃣% in September 2022, with inflation pressures broadening beyond food and energy in most countries.

Find out more ⤵️
https://fal.cn/3tm8R

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War in Ukraine ‘severely affects’ Eurozone economy

• 04/14/22 at 3:06 p.m. – Updated at 3:37 p.m.
• Source: AFP – Trends Tendances

The war in Ukraine is having “severe” repercussions on the euro zone economy, Christine Lagarde said on Thursday, as soaring energy prices, disrupted supply chains and falling confidence cloud the outlook.

“The war in Ukraine is severely affecting the eurozone economy and has considerably increased uncertainty ,” declared the President of the European Central Bank during a virtual press conference. “The impact of the war on the economy will depend on the evolution of the conflict, the effect of current sanctions and possible additional measures,” she added.

These uncertainties explain the caution of the guardians of the euro zone  who, unlike the other major central banks,  have not initiated increases in their key rates , nor even defined a precise timetable for raising them to try to curb the surge in price.

At the end of the Governing Council, the institute therefore contented itself with reiterating its March signal in favor of price stability , announcing that net purchases of assets, carried out within the framework of the APP, will take end of the “third trimester”. The first increase in rates will take place “some time after” the end of these repurchases , or “between a week and several months” later, said Ms. Lagarde.

The ECB maintained its rates at their historically low level on Thursday.

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“The persistence of high energy costs, combined with the loss of confidence, could lower demand and slow down consumption” , thus hampering growth in the euro zone, estimated Ms. Lagarde. The Frenchwoman painted a discouraging picture of the situation  : “the war is already weighing on business and consumer confidence, particularly through the uncertainty it causes. Energy and commodity prices are rising sharply. Households are facing a higher cost of living” while “businesses are facing higher production costs and the war has created new bottlenecks” in supply chains.

Africa Turmoil

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European Central Bank

– Débat sur la Monnaie: Economie Politique ou Politique Economique

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Updated 12/1/2021

KEY POINTS

On Friday, headline inflation stood at 4.1% for this month, according to preliminary data from the European statistics office Eurostat.
This was the highest level since July 2008, according to Reuters data, and was above a consensus forecast of 3.7%. The September figure was 3.4%.
ECB President Christine Lagarde said on Thursday that rising energy prices, recovering demand and supply bottlenecks are currently driving up inflation.
Eurozone inflation rises to 4.1% in October, hitting new 13-year high

Saïd El Mansour Cherkaoui, Ph.D. ★

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Madam President of the European Central Bank European
monetary policy must have a universal objective and not be limited to the members of the euro zone alone.

Tightening credit standards when difficulties exist increases pressure on productivity and growth. Non-performing loans for their amortizations can be sold at auction.

The ECB can play a central role in the integration of Africa given its raison d’être which is the European integration process.

In fact, with the rise of Fintech and the trend towards digital monetization, the European Central Bank should be at the forefront of these technological developments that can support economic growth and job creation while increasing profitability and maintaining price stability in Africa.

The instruments currently used by the European Central Bank must increase the areas of their operations and implementations to extend monetary policy outside the Eurozone. This is achievable through the mechanisms of foreign exchange operations, the management of foreign exchange reserves, and as mentioned above integrating the operations of the European Central Bank into payment systems such as those provided by Fintech allowing transnational operations and in first place in Africa.

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Africa Destiny: Fintech Infobytes

 Said El Mansour Cherkaoui  August 24, 2023

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Finally, a voice speaks out on the reasons for the passage and continual demotion of formerly colonized countries from the level of developing countries to the level of underdeveloped countries and currently sinking to the level of under-capitalist countries.

This undercapitalization has been accentuated by the globalization of direct and indirect foreign investments and their impact on social structuring and the consolidation of local elites which facilitate the internalization of the demands of international financiers. Poverty has consolidated and spread like an economic virus in subcapitalist societies, weakening their participation in global growth, thus accentuating recessions and even current inflation.

The manipulation of commodity prices as well as consumer product prices is the result of this complicity between supporters of the Global Supply Chain and these governing elites, including national banks and transnational financial institutions. The United States has opened an investigation into this matter.

Likewise, the Eurozone is experiencing an inflation rate of 4.9% year-on-year, which has not been the case since the launch of the Euro in 1999.

Finally a voice speaks of the reasons why formerly colonized countries have migrated from the level of developing countries to the level of underdeveloped countries to effectively access the status and privilege of currently sinking into deep sub-capitalism.

This undercapitalization was accentuated by the globalization of direct and indirect foreign investments and their impact on social structuring and the consolidation of local elites which facilitated the internalization of the demands of international financiers. Poverty has spread and spread like an economic virus in subcapitalist societies, weakening their participation in global growth, thus accentuating recessions and even current inflation.

The manipulations of raw material prices and consumer product prices are the result of this complicity between supporters of the Global Supply Chain and these governing elites including national banks and transnational financial institutions. The United States has launched an investigation into this possible collusion.

Likewise, the Eurozone is experiencing an inflation rate of 4.9% year-on-year, which has not been the case since the launch of the Euro in 1999.

The Euro zone designates a list of countries which have the dual characteristic of belonging to the European Union and having opted for the euro as their national currency. The Euro (€) is currently the official currency of 19 of the 27 EU member countries, which together constitute the Eurozone and some 341 million people use the Euro every day, making it the second most common currency. used in the world. 

As of 01/01/18, these are Germany, Austria, Belgium, Cyprus, Spain, Estonia, Finland, France, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia. Although using the Euro as currency, Andorra, Monaco and The Vatican are not part of the Eurozone countries.

Eurozone inflation figures for November are historic. At 4.9% over one year, European inflation has never reached such levels since the launch of the euro in 1999. The rise in raw material prices (energy prices increased by 27% year-on-year in November), combined with strong economic growth and the emergence of bottlenecks in industry continue to explain an extraordinary return of inflation that no one believed in until a few years ago. month. Remember that the dominant theme before the Covid crisis in early 2020 was the risk of deflation which had threatened the United States and Europe, like Japan, for decades.

With such figures, the dilemma of the ECB and all central banks becomes more and more untenable. How to stop extreme monetary policies of zero interest rates accompanied by liquidity injections to combat this inflationary peril can generate a high risk of recession and threaten purchasing power and consumption.

Neither the ECB nor any other central bank has yet made a decision, and is unlikely to do so quickly given the uncertainties surrounding the Omicron variant and its potential consequences for growth and financial markets.

The ECB’s official objective is still… 2%, while another major risk will then appear: the impact of massive rate increases on debt service. If interest rates skyrocket, the situation will spiral out of control and require fiscal austerity.

No alternative text description for this image
Updated 11/27/2021

Christine Lagarde • President of the European Central Bank 7 p.m. • Modified • 19 hours ago

We do not expect the current rise in inflation to last, I explained in an interview with the editor-in-chief of the Frankfurter Allgemeine Sonntagszeitung, Gerald Braunberger.

Some other important points covered:

➡️ If we at the European Central Bank were to tighten monetary policy now, we would expect to see the impact in 18 months. But our forecasts show inflation falling between now and then.

We would cause unemployment and would not have countered the current high inflation. I would find that false.

➡️ Interest rates can rise when we see inflation reaching our 2% target in the medium term, sustainably and sustainably – that is, not just for a short period of time.

Interview with Christine Lagarde, President of the ECB, conducted by Gerald Braunberger, Dennis Kremer and Christian Siedenbiedel on November 23 and published on November 26, 2021

Madame Lagarde, inflation rates are increasing all over the world. Inflation in the United States is 6.2%, while in Germany a rate close to 6% is expected for November. Is inflation getting out of control?

At the European Central Bank we are of course monitoring this very closely. And not only because our main objective is to maintain price stability and inflation is a crucial indicator of this. But also because we know that inflation affects people. The less privileged and less affluent are those who suffer the most from inflation. This is why we must continue to examine it very carefully.

Are you feeling the effects of rising inflation in your own daily life?

Of course, the rise in energy prices is the most notable. After all, energy price inflation now accounts for about half of high inflation rates. You can’t help but notice the price increase when you refuel at a gas station or buy heating oil for the winter. As a French person, I closely monitor the prices of good bread at the bakery. This stands out at the moment and has many people worried – but we expect this rise in inflation will not last. It will ease next year. We expect inflation rates to start falling as early as January.

What makes you so sure? Won’t there be second-round effects if unions demand higher wages to compensate for higher prices?

Judging from what we know so far from employer and union surveys, no strong inflationary pressure is to be expected from this front at the moment. The negotiated salary agreements have been very moderate so far. For next year, slightly higher salary demands can be expected. But from what we see, the deals are unlikely to be of a magnitude likely to trigger a wage-price spiral.

Don’t you think that employees might get nervous and still demand compensation for inflation if inflation rates now reach a level that hasn’t been seen in many years?

This does not appear to be the case at the moment. And if we look at inflation expectations, both those that can be derived from financial markets and those that result from surveys, then most people do not expect higher inflation in the longer term. Inflation expectations have risen, but are below our 2% inflation target. We do not see any de-anchoring of inflation expectations.

Personally, have you ever doubted that inflation could persist longer than your experts currently predict?

I ask myself this question again and again. To answer this, you need to consider what is causing today’s high inflation rates. I would distinguish three groups of determining factors. The first are statistical base effects that are linked to the pandemic, such as Germany’s VAT cut last year and its reversal, which are now pushing up prices sharply compared to the previous year. Similar transient pandemic effects can be observed with regard to package holidays, for example. These factors will automatically disappear next year, as they will no longer be taken into account in the year-over-year comparison. Supply bottlenecks constitute a second group of factors. Demand jumped after the end of the first confinement while supply is still limited. These bottlenecks in, for example, computer chips, containers and road transport capacity obviously persist longer than we initially thought. But the situation will gradually improve next year in this regard as well. The third group is energy prices. We expect energy price developments to stabilize at least next year. The third group is energy prices. We expect energy price developments to stabilize at least next year. The third group is energy prices. We expect energy price developments to stabilize at least next year.

But surely no one can know with certainty how oil prices, for example, will develop next year?

We see at least good reasons why the sharp rise in energy prices will not last until the second half of 2022. There are in any case no expectations on the oil futures markets that the rise in prices continues. But we seek to evaluate and consider as many sources of information on this topic as possible.

– Read the full conversation – Click here
Christine Lagarde • More – President of the European Central Bank •

Lire la conversation complète – Cliquez ici
Christine Lagarde • Suite – Présidente de la Banque centrale européenne •

At today’s Eurogroup meeting, we discussed the positive economic outlook in the Eurozone, with monetary and fiscal policies supporting a strong recovery. We are convinced that the current rise in inflation is transitory. We also discussed the objectives of a digital euro.

Response from Dr. Saïd El Mansour Cherkaoui

In a world subdivided by natural resources and by the degree of participation in global supply and demand, the signs of crisis represent only indicators for international financial institutions whose firm belief is that in the long term the market will be capable of correcting its excesses, even going so far as to adopt the thesis of the “new paradigm”. 

With this self-assurance is based on the belief that growth now comes through longer and longer economic cycles and higher and higher rates of development, with low inflation and increased productivity, thanks to efficiency and innovation brought by new technologies. Rostow would be delighted and Keynes would be impressed while Friedman would be relieved, all without any consideration for the development of the human factor. 

For these decision-makers, there are collateral damages in the form of frequent financial mishaps, with all the human and political tragedies that they entail, they remain only inevitable misadventures on the road to the economic El Dorado.  

The interest rate serves as a lever such as the “Invisible Hand” which indirectly regulates any market integrated into the financial and commercial world. It is widely accepted that financial instability is deeply rooted in the financial crisis affecting the functioning of markets which imposes recommendations on emerging and developing economies with the sole aim of making them beneficiaries of loans and financial transfers. These indirect capital movements serve to alleviate the impact of expenses and deficits resulting from investments undertaken by emerging and developing countries in establishing infrastructure and transformative operations in order to be able to compete with their peers for attracting foreign direct investment.

The broad financial incentives and facilities offered to foreign investors coupled with infrastructure spending coupled with the low return received in exchange for heavy investments and long-term depreciation reduce treasury revenues. The States of developing economies are thus reduced to capping external debt.

However, some time ago, even the International Monetary Fund and the World Bank recognized that a large number of their interventions did not benefit emerging and developing countries which are going through a very severe crisis, and that medicine administered in the form of sending consultants had disastrous second-effects and the prescriptions presented in the form of recommendations proved poisonous and even ended up as overdoses.

Assessments and declarations from Christine Lagarde: See and read the details in these two links

Two years ago, I began my mandate as President of the ECB. It’s very different from what I expected!

The pandemic has been a challenge like no other and I am pleased to say that the Eurozone economy is now firmly in recovery mode.

In addition to the pandemic response, there are other areas of progress that I am particularly proud of:

1️⃣ Our review of the strategy, completed in July, which provides a solid basis for how we will conduct monetary policy in the years to come.

2️⃣ Our climate change roadmap which defines how we can take climate risks into account when making political decisions.

3️⃣ Our decision to launch the investigation phase of a digital euro project – this will prepare us for Europe’s digital future.

https://www.linkedin.com/feed/update/urn:li:activity:6860893770485927936/

Watch again:
President Christine Lagarde on supply bottlenecks as one of the elements currently pushing inflation.

Christine Lagarde, President of the European Central Bank, speaks during a press conference on the results of the Governing Council meeting, in Frankfurt, Germany, October 28, 2021.

https://www.linkedin.com/feed/update/urn:li:activity:6859761637142929408/

Response from Said El Mansour Cherkaoui, Ph.D.
Ms. Christine Lagarde – European Central Bank

European monetary policy must have a universal objective and not be limited only to members of the euro zone.

Tightening credit standards when difficulties exist increases pressure on productivity and growth. Non-performing loans for their amortizations can be sold at auction.

The ECB can play a central role in the integration of Africa given its raison d’être which is the European integration process.

In fact, with the rise of Fintech and the trend towards digital monetization, the European Central Bank should be at the forefront of these technological developments that can support economic growth and job creation while increasing profitability and maintaining price stability in Africa.

The instruments currently used by the European Central Bank must increase the areas of their operations and implementations to extend monetary policy outside the Eurozone.

This is achievable through the mechanisms of foreign exchange operations, the management of foreign exchange reserves, and as mentioned above integrating the operations of the European Central Bank into payment systems such as those provided by Fintech allowing transnational operations and in first place in Africa.

Now for your sweet short explanation about bottlenecks, you really make me laugh. This is something we listen to on Sidewalk Radio not at your level.

So if we want to find solutions at Radio Hood, no corkscrew for the bottlenecks, just do like the French Hussars, pop the cork with a blow of the saber and there are no more bottlenecks .

Not bad Madame Lagarde, On guard Split yourselves like the 3 Masterquaires.

Regarding your statement on Supply Chain Management, there is a big difference between what factories can produce and when they produce it that you have not developed at all on this operational productivity and on supply.

Secondly, in terms of transport logistics, it is not just sea freight, there are other means and vectors of transport.

For the maritime side, I’ll just give you an example of my writing on how the Port of Oakland is tackling this issue with tack, here is my article on it:

Port of Oakland: Giant cranes raised Why?

Port of Oakland: Giant Cranes Raised Why?

Said El Mansour Cherkaoui March 12, 2021 Symposia of Determinations I found out about this unusual movement and arrival of these Giant Cranes just a week ago, around March 10, 2021. An article around this date presented this event like a very, very new happening and was developed on the modernization of the Port of Oakland tackling the new challenges raised by the dual competition …  Continue reading

Christine Lagarde

• European Central Bank
• International Monetary Fund
• The World Bank
• African Development Bank Group
• Global Leverage
• AFRICANA COMPANY

Cryptocurrency

Cryptomoney #cryptocurrency

Response from Said El Mansour Cherkaoui, Ph.D. ★
For the moment it is a pure scam like the casinos.

A currency that floats without meaning, or productive and growing added value and which is not based on a monetary reserve.

This reserve should be a surplus of which several interbank transactions verify and sanction, control and increase its transfer base, its convertibility [example of Central Banks and LIBOR] and its achievements in the form of deposit, exchange, conversion, settlement , loans and support for productions. integrated into the international circuit of regional, national and interbank exchanges.

Add to that, Cryptomania is not used for payment of debts, financial obligations such as taxes.

If all these procedures do not exist in the fiduciary identity and financial value of Cryptomania, it cannot therefore claim legal institutional and monetary financial legitimacy.

It is neither the number of participants, nor the level of transactions, nor the amount achieved, nor the slogans and propagandist speeches that will give legitimacy to Cryptocracy and Cryptorobotech.

Publications by Said El Mansour Cherkaoui on related subjects

Some of my publications related to the subject addressed by President Christine Lagarde can serve as a complement to my aforementioned commentary while presenting the role of the World Bank and the International Monetary Fund in shaping the evolution of the global economy by highlighting emphasis on the economies of Southern countries. (The articles are written in French and/and English).

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European Central Bank

– Débat sur la Monnaie: Economie Politique ou Politique Economique

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• Said El Mansour Cherkaoui 25/9/19 Oakland USA
• Sciences Po, Grenoble
• Institut des Hautes Etudes de l’Amérique Latine, Paris
• Université de la Sorbonne, Paris III

Publié par Said El Mansour Cherkaouiavril 28, 2020 Publié dans Cours en Ligne, Développement Economique, Programme de Formation Étiquettes :Cours en Ligne, Développement Economique, Programme de Formation

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The Bubble Triangle

Jul 1 Written By William Quinn When we started researching historical bubbles, we were surprised by how much the different episodes had in common. They always seemed to occur when there was abundant money or credit, they always seemed to occur in assets that had recently become much easier to buy and sell, and they always involved Continue reading 

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BRICS and the Building of Financial Great Wall

Update: April 3, 2022 – 12:37 AM Pacific Time – Originally published at LinkedIn on August 31, 2015: Building New Economic World Powerhouses on BRICS and MINT ★ Said El Mansour Cherkaoui, Ph.D. ★ Published on July 1, 2015 – 78 articles published at LinkedIn Great Wall and Great Break Banking Time for BRICS Updated on April 2. 2022 This article is another confirmation…Continue Reading →

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Russia★China & Europe★USA

Russia wants “unfriendly countries” to pay for Russian natural gas in rubles. That’s a new directive from President Vladimir Putin as he attempts to leverage his country’s in-demand resources to counter a barrage of Western sanctions. “I have decided to implement … a series of measures to switch payments — we’ll start with that —…Continue Reading →

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Eurozone: Monnaie et Inflation

European Central Bank Débat sur la Monnaie: Economie Politique ou Politique Economique Said El Mansour Cherkaoui 25/9/19 Oakland USA Sciences Po, Grenoble Institut des Hautes Etudes de l’Amérique Latine, Paris Université de la Sorbonne, Paris III Publié par Said El Mansour Cherkaouiavril 28, 2020 Publié dans Cours en Ligne, Développement Economique, Programme de Formation Étiquettes :Cours en Ligne, Développement Economique, Programme…Continue Reading →

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Crypto Casino Royal – CryptoMania

Posted December 5, 2021 – Said El Mansour Cherkaoui Sciences Po, GrenobleInstitut de Recherche Economique et de Planification, GrenobleInstitut des Hautes Etudes de l’Amérique Latine, ParisUniversité de la Sorbonne, Paris III Bitcoin plunges overnight – CNN 04/12/2021 – Bitcoin prices plunged overnight to a low of about $43,000. The famous infamous Dame which I baptized as…Continue Reading →

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Crypto-Monnaie et Monnaie

Posted December 5, 2021 – Said El Mansour Cherkaoui Sciences Po, GrenobleInstitut de Recherche Economique et de Planification, GrenobleInstitut des Hautes Etudes de l’Amérique Latine, ParisUniversité de la Sorbonne, Paris III Bitcoin plunges overnight – CNN 04/12/2021 – Bitcoin prices plunged overnight to a low of about $43,000. Echange Initial sur la Cryptomonnaie 📈 Si 📈…Continue Reading →

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Eurozone: Money and Inflation

Publications by Said El Mansour Cherkaoui on Related Topics Some of my publications related to the topic addressed by Presidente Christine Lagarde can be used as complement for my aforementioned comment while presenting the role of the World Bank and the International Monetary Fund in shaping the evolution of the World Economy with emphasis on…Continue Reading →

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26 November 2021

Madame Lagarde, inflation rates are increasing around the world. Inflation in the United States is 6.2%, while in Germany a rate of close to 6% is expected for November. Is inflation spiralling out of control?

At the European Central Bank we are of course monitoring that very closely. And not only because our primary objective is maintaining price stability and inflation is a crucial indicator of that. But also because we know that inflation affects people. Those who are less privileged and less well off are the ones who suffer the most from inflation. That’s why we need to keep looking at it very carefully.

Do you feel any effects of rising inflation in your own daily life?

Of course, the rise in energy prices is the most noticeable. After all, energy price inflation now accounts for around half of the high inflation rates. You can’t help noticing the price increase when you fill up your tank at a petrol station or buy heating oil for the winter. As a French person, I keep a close eye on the prices for good bread at the bakery. That stands out at the moment and is making many people worried – but we expect that this rise in inflation will not last. It will subside next year. We expect that the inflation rates will start to fall from as early as January.

What makes you so sure? Won’t there be second-round effects, if the trade unions demand higher wages to compensate for the higher prices?

Judging by what we know from surveys of employers and trade unions so far, no strong inflationary pressure is to be expected from that front for the time being. The negotiated wage settlements have been very moderate so far. For next year, somewhat higher wage demands are partly to be expected. But based on what we are seeing, the settlements should not be on a scale that might trigger a wage-price spiral.

Do you not think that employees could become nervous and nonetheless demand compensation for inflation if inflation rates now hit a level that has not been seen for many years?

That does not seem to be the case at the moment. And if we look at inflation expectations, both those which can be derived from the financial markets and those resulting from surveys, then most people do not expect higher inflation in the longer term. Inflation expectations have risen, but they are below our inflation target of 2%. We don’t see any de-anchoring of inflation expectations.

Do you personally never have any doubts that inflation might persist for longer than your experts are currently predicting?

I ask myself this question again and again. To answer it you have to consider what is driving the current high rates of inflation. I would distinguish three groups of driving factors. The first are statistical base effects which are related to the pandemic, such as the VAT reduction in Germany last year and its reversal, which are now sharply pushing up the price increase relative to the previous year. Similar passing pandemic effects can be seen in respect of package holidays, for example. These factors will automatically disappear next year, as they will fall out of the year-on-year comparison. Supply bottlenecks are a second group of drivers. Demand surged after the end of the first lockdown whereas supply is still constrained. These bottlenecks in, say, computer chips, containers and road haulage capacity are obviously persisting for longer than we had initially thought. But the situation will gradually improve next year in that respect too. The third group is energy prices. We expect that energy price developments will at least stabilise next year.

But surely nobody can know for certain how oil prices, say, will develop next year?

We at least see good reasons why the strong price increase in energy will not last into the second half of 2022. There is in any case no expectation in the oil futures markets that the price increase will continue. But we are seeking to evaluate and consider as many sources of information on this topic as we can.

Do you understand the special concerns in Germany about the high inflation rates?

Yes, I understand these concerns very well; inflation in Germany is higher than in some other countries – in Italy or France for example. In addition, there are cultural differences and a special history with inflation in Germany in the 1920s. The collective experience of inflation in Germany is a different one to that of France or Italy. I understand all that. That’s why we have to thoroughly explain why we nonetheless think our strategy is correct and that we are following price developments very carefully.

Many people in Germany have long been calling for signs that the ECB will tighten its monetary policy strategy.

If we were to tighten monetary policy now, we would expect it to have an impact in 18 months. That is the extent of the time lag before our monetary policy measures take effect. According to our forecasts, however, inflation would have fallen back again by then. We would cause unemployment and high adjustment costs and would nonetheless not have countered the current high level of inflation. I would find that wrong.

Prominent economists like Charles Goodhart think that the whole world is about to enter an era of higher inflation. Does that not worry you?

It goes without saying that we think about longer-term inflation developments. The issue is whether factors which have so far dampened inflation, such as demographic developments or globalisation, are now reversing and could lead to higher rates of inflation. There could be changes; after the pandemic firms may think differently about globalisation and relocating production to cheaper countries. Globalisation will change, but it will proceed and will in all likelihood continue to temper inflation.

But many firms have been talking about deglobalisation since the outbreak of the pandemic.

People have been talking about that for around a year, but it is not really observable in practice. The incentive for firms to cut costs will remain stronger than their desire for independence from suppliers and control over the supply chains. I don’t see any sustainable price-increasing development. By contrast, in my estimation, the changes in demographic developments could have an impact on the future path of inflation, as indeed could digitalisation. But all in all, I see factors that will suppress inflation in the longer term rather than factors that will drive it up. In any case, monetary policy has enough time to respond appropriately to such longer-term trends.

But are climate policies themselves not going to make energy more expensive and push inflation up, at least temporarily?

This could indeed be the case. If the governments keep their commitments on the Paris Agreement and the recent climate conference in Glasgow, it will have an impact on energy prices. Studies show that energy prices react to climate protection measures by increasing significantly at first. However, when demand falls, the price will drop significantly. This effect will materialise.

Deutsche Bundesbank President Jens Weidmann will step down at the end of the year. Will you miss him?

I will. I have the utmost respect for his intellect. I look back fondly on our many encounters over the past few years, for example at G20 meetings. There is one photo in particular that reminds me of that good cooperation– it shows us both at a G20 meeting in Mexico.

Are you not slightly relieved that Mr Weidmann – a big sceptic of the current ECB stance – will be gone?

I am not relieved in the slightest, just the opposite – I am a bit sad that he decided to go. But I am certain the German Government will choose a candidate that will represent the Bundesbank’s views and the concerns of the German people in a similar fashion. I paid close attention to Mr Weidmann’s speech at the Frankfurt European Banking Congress recently. In it, he described the Governing Council of the ECB as a place where any opinion and any concern can be voiced. I see that as part of my approach to leadership. I am 65 and my experience has taught me that it is good to bring people together, exchange arguments and talk openly about concerns and objections. It is only then that you can try to find as much consensus as possible. We cannot always unanimously agree on every single decision.

In a recent speech, Mr Weidmann called on the ECB not to underestimate inflation. Have you been doing that recently?

In recent quarters, we have had to gradually adjust our inflation forecasts. This is true. But most economists all over the world have not fared any better. This experience has taught us to consistently review our baseline scenario and adjust it when needed.

So can you assure us that you will raise interest rates when necessary?

Of course, we will act when necessary. When we see inflation reaching our two per cent target over the medium term, durably and sustainably – meaning not just for a short period of time – then the interest rates can rise again. Such an interest rate hike must serve our mandate of price stability, just like our entire monetary policy. When these conditions are met, no one will be happier than me to normalise monetary policy. Before we can raise rates, however, we will need to reduce our asset purchases.

Unconventional monetary policy measures have now become almost normal – is this not a problem? When asset purchases and negative interest rates were introduced, the general public was told that these measures were temporary. Many now doubt that the ECB will ever go back.

Back in the summer we unanimously approved the outcome of our monetary policy review. Part of that is the medium-term symmetrical inflation target of two per cent. We also agreed on what makes up our toolbox, and asset purchases are explicitly included. We need to ask ourselves which instruments work best to help us fulfil our mandate. We should keep all our tools ready, but we do not need to use all of them all the time.

In 2020, following the outbreak of the COVID-19 pandemic, the ECB launched the pandemic emergency purchase programme (PEPP), which has allowed it to buy bonds flexibly. Is it really going to end in March 2022, as you promised? The pandemic is coming back with a vengeance right now.

Under the current circumstances, I have no reason to doubt that we will stop net asset purchases under the PEPP in the spring. This does not mean that the PEPP will end completely – the maturing bonds need replacing and these reinvestments will need to continue. And let us not forget that we have other purchase programs in our toolbox. I sincerely hope – for the sake of everyone’s health – that the pandemic will be over in the spring and that we will be more resistant to the new infection waves like the one we are seeing in Europe now. That is out of my hands, though – it is up to the scientists who develop vaccines, and of course to the people themselves, who should decide to get vaccinated.

Robert Holzmann, the Governor of the Oesterreichische Nationalbank, has suggested that the ECB should stop all of its asset purchases next autumn if inflation has reached two per cent by then. What do you think of this proposal?

I generally do not comment on what individual heads of central banks have said. All opinions are welcome, but they should be expressed at the right time. That time is 15 and 16 December, when the Governing Council of the ECB meets again.

Some central banks, such as the Reserve Bank of New Zealand, have recently voiced concerns about a global rise in asset prices. Are you also concerned?

Asset purchases have been very efficient, but their impact may weaken over time. Therefore, we must always be mindful of their side-effects, for instance rising asset prices, to decide whether using this tool is still proportionate. Rest assured – we are paying very close attention to it.

Do you not feel that the side-effects are starting to dominate?

No, the impact of the bond purchases is still positive and clearly outweighs the negative side-effects.

Nevertheless, it seems like the ECB shies away from the exit for fear of spooking the financial markets.

It is my strong belief that monetary policy needs to work for all Europeans. The markets are not our primary audience, nor are they the main recipients of our communication. Nevertheless, we do need to pay attention to financial stability. There is no price stability without financial stability. The two are closely interconnected, although it is price stability that is our primary mandate. And our monetary policy affects the economy not only through banks, but also via the financial markets.

Some market players try to put the ECB under pressure by vociferously calling for interest rate increases – for example via Twitter. Do you pay attention to them?

I’m glad to say that I don’t have to follow all the things people say on Twitter. My press team takes care of that.

On the other hand, the ECB is increasingly accused − under the heading of fiscal dominance − of giving too much consideration to European countries’ high levels of debt.

Fiscal policy is not my area. However, I was really very satisfied with the developments on 20 July this year. Europe’s government leaders decided, together, to launch the Next Generation EU recovery fund, which will be able to issue common bonds at the EU level. Germany has also agreed to it. For this, I am very grateful to Angela Merkel who recognised the importance of the issue. It sent a very strong fiscal policy message.

Though, some critics considered the message rather questionable.

Unfairly. You know, the rest of the world always doubts Europe. I have lived long enough outside of Europe to know that and to regret it. However, that agreement in July was a clear demonstration that Europe takes the right decisions when it comes to it. It was a privilege for me, as ECB President, to be able to support this process. It was no stroll in the park. It was a tough debate that cost a lot of time and many long nights. However, it was a strong signal to the world. Now, though, the European governments have a duty to stick to the agreement and to deliver what they promised. They must implement the promised structural reforms and they must shape a strong Europe. Implementation is always the hardest part. I remember well the words of my friend, Wolfgang Schäuble, who – as a minister in the Council of European Finance Ministers – always said “Implementation, implementation, implementation.” He always looked at us very strictly as he said it. And he is right. In the next three years, we will see how well Europe can succeed in this.

Is the ECB then ready to act against the fiscal policy interests of EU Member States, if necessary? Is the ECB independent of political pressure?

We are an independent institution and of course our actions are independent of political pressure. A pressure, by the way, that I often observed abroad as Managing Director of the International Monetary Fund. It’s no fun for those central bank governors. That is why it is clear to me that we must focus on our mandate. We will simply ignore attempts to exert political influence.

Do you think the ECB will have to withstand even heavier political pressure in the future?

There may be attempts to exert more pressure. But it won’t lead to anything.

Doesn’t all of this depend on the success of your predecessor, Mario Draghi, who is now Italy’s Prime Minister? If Italy gets a handle on its problems, does the ECB President also sleep more peacefully?

All Member States and all European heads of government shoulder huge responsibility. The instruments are here; they are on the table. A good €800 billion is at the ready in the Next Generation EU recovery fund. Now governments must decide how they will use it. That is not my responsibility. However, they should know this can change the course of things.

You also wanted to change a few things at the ECB – for example, the way the ECB communicates with the public. Are you satisfied with the results so far?

We are working on it. Yes, it was my objective from the start to communicate simply without falling into the trap of oversimplifying. That is why, for instance, we have changed the introductory statement that I make before our press conferences after the meetings of the Governing Council. We have shortened it and cut back on the jargon. Sometimes we have used terribly complicated words to explain basic concepts. It doesn’t have to be like that. Without good communication, we cannot do our job as central bankers.

Nevertheless, the introductory statement is still hard to understand for people outside the world of finance.

Yes, that is true. My neighbour certainly won’t be reading it before bed. However, we can still make it more understandable. In times gone by, central bankers were proud of the fact that it was difficult, if not impossible, to understand them. I have the privilege of knowing the former Chair of the US Federal Reserve, Alan Greenspan, quite well. He would probably disapprove of my approach. Times have changed, however. In the world of fake news, nothing is more important than being properly understood.

There is need for explanation when it comes to your efforts to make monetary policy greener. For many climate activists, you are not doing enough. Greenpeace even paraglided onto the roof of an ECB building to call for more climate protection.

Yes, I remember that well. My first thought was: how dangerous is this – and how can we prevent an accident? Personally, I do not think it is a safe and appropriate way to express your point of view.

Do you perceive the type of criticism as unfair?

Civil organisations have to speak up when they deem it necessary. However, central banks are not in the driving seat when it comes to fighting climate change. We are not the ones who are steering the bus; that is more the governments and parliaments. But we are all sitting on the bus together. And everyone on the bus – that includes you and me – should not forget that climate change is about the survival of humanity. That is why, within our mandate, we have to take climate-related risks into account in our calculations. But of course the ECB does not decide on climate policy.

Let’s end with a personal question. How often is Europe’s monetary policy decided at your kitchen table?

More often than you might think. A few important decisions have been made there. For example, we made decisions on the pandemic emergency purchase programme, or PEPP, at my kitchen table. We were all in lockdown and I sat there without Zoom and without the video conferencing system. Unbelievable how quickly you forget it. Back then, we had one conference call after another. Luckily, we all knew each other well enough already to know who was speaking. Even if I had to ask every now and then.

You said you would see yourself as an owl when it comes to monetary policy. That is to say, you wouldn’t allow yourself to be limited to just one monetary policy position. After two years leading the ECB, do you still see yourself as an owl or are you now more of a dove?

Absolutely as an owl – guided by its mandate. Since I said that, friends from around the world now send me either figurines or photos of owls. I am now a passionate collector of owls.