Mario Draghi Lays Out Plan For A Dangerous Round Of Stimulus | WHAT REALLY HAPPENED

Mario Draghi Lays Out Plan For A Dangerous Round Of Stimulus

Authored by Hans-Werner Sinn, op-ed via The Guardian,

The outgoing ECB chief is locking his successor into a new phase of expansionary monetary policy...

We should remember that the Maastricht treaty assigned the ECB the single, non-negotiable goal of maintaining stable prices, which, if taken literally, would mean an inflation rate of zero.

Then came the euro crisis. With inflation plummeting, the ECB turned the still-tolerable upper limit for the inflation rate into its target. Suddenly, it was argued, the bank would seek to achieve inflation of “close to, but below 2%”. Draghi even went before the television cameras to claim in all seriousness that this was the ECB’s mandate.

And now, at the end of his term of office, Draghi is seeking to bind his successor, Christine Lagarde, to a council decision that will force her to aim for 1.9% inflation with a symmetrical concern about potential deviations. In plain language, this means the ECB will try to achieve this figure on average over time, netting out future above-average inflation rates with below-average inflation in recent years.

Webmaster's Commentary: 

This was a really nasty "economic trap" which Draghi has laid for LaGarde; one has to wonder how she will able to maneuver around it, to prevent a further economic worsening in Europe.