Higher prices will most likely be needed in the future to equate real demand with supply

Dr. Thomas Mayer: After years of very low interest rates and large-scale asset purchases monetary policy had lost traction already before the Corona Crisis hit. The function of the ECB during this crisis has been reduced to funding fiscal policy in financially weak states with uncertain market access. As this is overstretching its mandate the ECB is in unchartered legal territory. Politicians will have to come up with a legal fudge to rescue it from there. We are now extending credit (lots of it to governments or with government guarantees) to create money for consumption. Hence, the new money will not be backed by more goods produced by a larger capital stock in the future. Some hope that the velocity of money will be permanently lower in the future, but why should it? Hence, higher prices will most likely be needed in the future to equate real demand with supply.
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	27.05.2020 Higher prices will most likely be needed in the future to equate real demand with supply >> GROUP: Shadow ECB Council / EZB-Schattenrat Dr. Thomas Mayer Tweet Teilen Dr. Thomas Mayer: After years of very low interest rates and large-scale asset purchases monetary policy had lost traction already before the Corona Crisis hit. The function of the ECB during this crisis has been reduced to funding fiscal policy in financially weak states with uncertain market access. As this is overstretching its mandate the ECB is in unchartered legal territory. Politicians will have to come up with a legal fudge to rescue it from there. We are now extending credit (lots of it to governments or with government guarantees) to create money for consumption. Hence, the new money will not be backed by more goods produced by a larger capital stock in the future. Some hope that the velocity of money will be permanently lower in the future, but why should it? Hence, higher prices will most likely be needed in the future to equate real demand with supply. >> Kontakt Zum aktuellen TEEC-Impuls		Benutzername Passwort >> Ich bin kein Mitglied und bitte um einen Testzugang
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