Trichet continues to deny reality whilst sticking to an inflation (which is itself based on inflation expectations) target. A wonderful example of what mechanical "one rule" based systems can accomplish in the hands of civil servants. I applaud his dogged quest to slay the inflation dragon, but bemoan his (and by extension the ECB) lack of forsightedness and the grave danger the EU is in.
This can be illustrated by the question: Which economic phenomenon happens faster? Inflation (based on expectations which require time to formulate) or Deflation (which is based on market prices of real and financial assets)?
The below article is one of many that will come out in the next year or two reflecting the prospects of the Euro as a viable currency. The history of the Euro will one day be described as (I will now demonstrate my education by inserting a widely used phrase from an English philosopher) "Nasty, brutish, and short".
Euro's Popularity Drops Among Currency Reserves
By Joellen Perry
Word Count: 517
FRANKFURT -- The euro's share of global foreign-exchange reserves fell last year, the European Central Bank said in a report that could damp speculation that the dollar is losing its status as the world's dominant reserve currency.
Meanwhile, ECB policy makers Wednesday ratcheted up their anti-inflation rhetoric. ECB President Jean-Claude Trichet said in testimony to the European Parliament that he sees the "first signs" that high oil and food prices are spilling into broad price rises across the euro zone.
With euro-zone inflation at 4%, its highest since official records began in 1997, the ECB raised its key rate by ...