Noah denkt™  -
    Project for Philosophical Evaluations of the Economy
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Oh no!
Dialog with the Alter Ego on the interest rate hike of the ECB, drafted and published on April 8, 2011
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Question by Alter Ego of Noah denkt™ (AE): What does Noah denkt™ make of yesterday’s quarter point rate hike
by the European Central Bank?
Answer by Noah denkt™ (Nd): Well, if it had been up to us, we certainly wouldn’t have done this?

AE: Why?
Nd: Because this decision severely undermines the growth prospects that southern Europe’s debt ridden EURO
members so desperately need. In fact, it seems to us as if this decision might be the final straw that could break
the camel’s back. Do not forget that we are still reeling from
the aftershocks of the Japanese tsunami, that we are
still
in the midst of the Arab revolution, that Portugal only yesterday asked for a national bail-out and that the
recovery of the world economy is at best nascent. Can there be a worse moment to hike interest rates than this?  

AE: But should a central bank not be ahead of the curve? Isn’t it true that we do have substantial inflationary
pressures in the system? Just look at the rising oil and food prices. Doesn’t that suggest that we should start
reining all this in, instead of waiting until we have to take more draconian measures later on?
Nd: That argument can certainly be made. But we would still be leaning more towards a less cautious approach.

AE: How do you justify this playing with fire which you are recommending here?
Nd: Well, it seems to us that these are unprecedented times that we are living in. And, in our opinion,
you cannot
adequately manage the existential challenges which our turbo-dynamic societies produce if you are being too shy
about the capabilities that you can bring to bear.

AE: In other words, it seems to you as if the ECB is too risk-averse?
Nd: In this case, yes. In fact, it seems to us, as if it is particularly the German culture, which, obviously, is playing
host to the ECB that is almost hysterically risk averse. Just look at Germany’s reaction to the nuclear crisis in
Fukushima and do not forget
its abstention on the Libya vote. With a pampered timidity like this you simply cannot
address our super fast reality in a proper way.

AE: And yet, Germany’s economy is doing quite well right now. Doesn’t that validate its careful approach?
Nd: Well, things may be looking good right now in Germany’s economy. We are somewhat hesitant though about
what this will be like in the medium future.

AE: So, are you abandoning the bullish sentiment which you have been defending for quite a while now?
Nd: The least we can say, at this point, is that we are not so sure right now, if there isn’t a pretty rough patch
coming up in the next couple of months. In particular, it seems to us as if the
Spanish solvency could come under
pressure again. And that would certainly raise the specter of
a new, more harrowing EURO-crisis.

AE: But isn’t it true that
you have defend the EURO earlier on?
Nd: Sure. And we stand by this. It is possible though that we will have to go through a nerve wrecking phase in the
coming months until it finally becomes clear that the world isn’t prepared to let the EURO fail.

AE: In other words, it seems prudent to you to hedge your investments against a possible phase of uncertainly?
Nd: Perhaps.
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Keywords:

the future of the EURO, defending the EURO, feasibility of the EURO, ECB rate hike,
unnecessary ECB rate hike,
overly cautious European Central Bank, success of the EURO, in
favor of the EURO currency,
rescueing the EURO currency, criticizing the ECB