Who Needs a Central Bank?
“Recovery is here!” the Pollyannas shout. “This is the first sign. And soon all nations will be following with their rate increases.” They talking, of course, about the Australians decision to hike their central bank index rate. And instantly the howls of recovery were on the lips of all the pundits. But the recovery at large is still not on the horizon. We may be facing a serious battle with deflation, and that the evidence is all around us, Australia notwithstanding. And now we have seen more than just anecdotal evidence. A few days ago, the United Kingdom, which has been struggling with a weakening currency, released inflation numbers far below expectations. Not only was inflation lower than expected; the figures were actually negative. What does that mean? Well, when inflation numbers turn negative, that is deflation. And England wasn’t alone. The number one economy in the Eurozone, Germany, released numbers that said the same thing. Prices are not increasing, they are decreasing…
