Modern economics

Today ECB has raised European point interest rate with 0.25 points in a time when Portugal asked for financial support to avoid bankruptcy and Ireland and Greece already received a multi billion Euro package to save the countries economics. And Spain is still at risk. ECB seems to make its decisions based on good old school of economics.

When I studied at Stockholm University 10 years ago, we were taught that interset rates were to be raised in times when inflation raises above inflation goals. The big difference is that a decennium ago, inflations rates were rising in times when unemployment rates were low, countries economics were on top and Centralbanks had to subpress economics to avoid a meltdown. But do you think that unemployment rates of 8% (England), 12% (Greece), or 7.5% (Germany) are low? Or even our own Swedish economy that is described so positivly in media. But read inbetween the lines: unemployment rate of 7.6%, Industrial orders begin to sink and sinking consumtion figures. I do not think that these are signs for an upgoing and positiv development. Government incitaments of tax reductions for the working did not have the planned effect. Unemployment rates did not sink as wished and consumtion did not raise. Instead the whole EU and even the US can see raised inflation rates that put governments and Centralbanks in fear.

Well, then lets see why inflation is higher than foreseen? ECB states that it is afraid that high petrol prices will statute a higher inflation rate in the future. High petrol prices, did I not write something about petrol in the last couple of weeks? Yes, right, there were a couple of wars going on and the only winners (for now) are the weapon industry that has its show-off at the sights. Now, they can really advertise for their latest technics. Swedish ministers talked about the Swedish involvement in Lybia as if this was some kind of commercial jippo, " now we canshow how great our planes are"! Well, ok, If the weapon industry now will make much more money thanks to the problems in those petrol-generating countries that lead to a financial crisis due to higher inflation and subsequent raised interest rates... let the weapon industry help those countries in need, those countries that will have even more problems to pay of their debts because of the higher interest rate. Do not put this on our shoulders by raising interest rates according to market rules that no longer apply.