Inflation: Those who blame the ECB are playing along with Putin's perfidious game

Enlarge image

European Central Bank in Frankfurt

Photo: Schöning / IMAGO

That's right: what people are currently experiencing in terms of inflation is hard to bear.

That's also true: inflation of the foreseeable ten percent is far from what Europe's central bankers, as guardians of prices that are as stable as possible, wanted to aim for at a gentle two percent.

A drama, of course.

Only: what the monetary watchdogs have now noticed about bashing has something increasingly dangerous about it.

The central bankers are being held accountable for inflation that they obviously don't have.

This in turn distracts attention from how much Vladimir Putin drove the energy price explosion - and it now threatens to damage people's confidence in the central bank and the currency more than all the supposedly outrageous false forecasts of the experts at the European Central Bank (ECB).

No argument too stupid

To be clear: Europe's central bankers are anything but gods – and they are fallible.

Only the hasty criticism that has just taken on a life of its own and is being parroted by Hinz and Kunz is more like a tumultuous shitstorm.

The driving critics are partly old zealots who have always found the euro bad or southern Europeans sloppy (or both), partly interested people like the bank representatives who are driving Europe's central bankers to higher interest rates simply because they make money from it.

No argument seems too stupid.

The central bank of the euro did not see the inflation coming despite allegedly all clear signals and an endless number of wise voices.

It is said that it now has to raise interest rates all the more badly - and thereby endanger the economy, just because it did not react earlier.

Christine Lagarde is simply to blame if we now have so much inflation.

And the head of the curious association of family businesses would probably prefer to have Lagarde deposed – because she doesn't want to make the right policy.

You have to be that twisted (it was Germany's greatest wish that central bankers should never be deposed; you can't suddenly want that because the person just doesn't fit into your own world view).

more on the subject

Central banks under pressure: The price woesBy Tim Bartz

Blaming the ECB for almost ten percent inflation instead of categorizing the rise in prices primarily as a result of warmongering is at least analytically original.

It doesn't help to point out that prices had already risen before the war began in February 2022.

The warmongering began in the spring of 2021, when Putin deployed troops on the border with Ukraine - and the situation began to escalate when he had the first maneuvers held there at the end of 2021.

This always panicked the markets and sent oil and gas prices skyrocketing, if only for fear of war - long before Putin attacked.

Gas prices have already doubled between April and autumn 2021.

And crude oil prices shot up as well, reaching the $100 mark last fall.

Coincidence?

At the same time, energy prices for Germany's consumers soared – by a good eight percent from April to December alone – and then gradually the prices of all goods that require a lot of energy to produce.

At the end of 2021, headline inflation reached more than five percent (at that time boosted by the re-increase in VAT).

You have to have a curious understanding of cause-and-effect logic in order not to attribute the simultaneous surge to a large extent to Putin's saber-rattling - as well as to the corona-related bottlenecks in many supply chains worldwide that became acute at the same time.

Even if inflation has of course also reached many other areas, because many providers are trying to pass on their higher costs to customers.

It's hard to say what would have happened if the warmongering had dissipated.

And how quickly inflation would have subsided again.

Idle: Since no forecaster was counting on war by the end of 2021, it was still common practice to expect less inflation again soon.

Not just at the ECB.

If critics now complain with great excitement about the central bankers, that is, to put it mildly, not entirely honest.

The German Council of Economic Experts, whose member responsible for monetary policy was already keenly involved in the ECB bashing at the time, did not come close to predicting inflation in this way either.

Even at the end of 2021, the Bundesbank, which was supposedly so cautious, was still expecting only 3.6 percent for this year - not even close to ten;

next year the rate should be two again.

collective failure.

As if the ECB should have seen the dramatic energy and food crises triggered by the war coming, when no one else saw it coming.

(If anyone has foreseen the current gas prices, please report - then we will correct the passage!).

The kitchen economist's thesis that the ECB would not have had to intervene so badly if it had reacted earlier - and that it would not be so economically painful now - is correspondingly daring.

That's awesome.

Higher interest rates would have changed little or nothing about the energy price shocks caused by the war.

We would still have the crisis today, only perhaps even worse because of the higher interest rates.

British experience suggests that inflation would not be lower here today.

The Bank of England actually raised interest rates much earlier.

Except that inflation on the island today is not lower, but actually higher than here - and the economic consequences are no milder.

Irresponsibly negligent

If the concern about persistent inflation is currently gaining ground, it is largely because we read and hear about the shocks that are already occurring or are approaching and that are affecting Germany's consumers with regard to gas bills.

Or because petrol costs so much.

Because energy prices have now made breathtaking swings, we are facing a critical winter - and the Russian President has been able to ensure new panic attacks and price records on the gas markets for months.

Not because the ECB did or didn't do anything.

The economy has been heading towards recession since gas prices escalated this summer.

In mid-August, Putin's suggestion that Nord Stream I would be closed for a few days for maintenance, of course, was enough to send gas prices skyrocketing from 200 to almost 250 euros per megawatt hour.

Inflation as a weapon of war.

If the findings are correct - and in the worst case the ECB is responsible for a smaller part of the inflation - there is something irresponsibly negligent about the hasty Lagarde bashing.

Then the monetary authority is driven to tackle inflation with crazy interest rate hikes, which is not caused by a lack of interest at all.

This threatens to do unnecessary damage as tightening credit conditions worsen the already emerging recession - without addressing the root causes of the energy crisis.

The tragedy is that this is where the real damage to the credibility of the monetary authorities threatens to occur - one that could do much more damage in the long run than a rate hike more or less.

Also because the ECB is being stylized as evil by the hasty crowd of its critics.

A shaky diagnosis threatens to take on a life of its own in public perception.

And because, to make matters worse, the currency watchdogs could soon be blamed for the deepening recession.

It's quite possible that, beyond all military disasters, Putin is terribly satisfied with the way the West is weakening itself.

Anyone who convinces people today, without need and with really convincing arguments, that the euro central bank is largely to blame for ten percent inflation, not only plays in Putin's perfidious game - he also creates false expectations about what the ECB can really do about a war-related crisis .

This is not only dangerous here and now.

It threatens to damage trust in the currency watchdogs well beyond the current inflationary and wartime era - and thereby doing exactly what critics accuse them of.