http://www.businessweek.com/articles/2013-10-31/europe-gets-a-halloween-scare-on-inflation
On October 31st Europe's inflation plummeted to 0.7 percent. This is very low, especially since in September it held a record high of 12.2 percent. This is not good for the European Central Bank. Due to the decrease in inflation the bank now has a lot of pressure on them to cut interest rates. October now marks the ninth consecutive month inflation has decreased below the bank's 2% target. In the article they say; "One especially troubling aspect of the inflation data was a slump in the services sector, suggesting that recovery across the region has not gained much traction. The last time inflation was this low, in 2009, the euro zone was mired in recession." This is not only not good for the European Central Bank but countries that use the euro could possibly be affected too.
Compared to the U.S. Europe's inflation is lower then ours and seems to be hurting them right now. Thankfully the U.S. has not been hurt yet due to inflation being too low, but it could be possible. The European Central Bank and the U.S. Fed have the same 2% target for inflation, which I thought was very interesting and did not expect. So long story short the over all U.S. economy might be doing worse than the European Economies but our inflation is definitely better than theirs.
Thursday, November 21, 2013
Are fears of inflation overblown? - Chicago Tribune
http://articles.chicagotribune.com/2009-06-17/news/0906160441_1_inflation-prices-stock-market
This article is a little old again, but the title caught my attention. It says that people are worried about to much money being spent, and they are worried about the inflation increasing. Well for inflation to raise you need plenty of money and plenty of demand. During this time there was not much demand, people were saving. I think this is still true today though. I believe people are very fearful of inflation rising yet they don't realize because they are demanded less with their money and saving it, they are keeping inflation down.
I think that inflation is low right now because the demand is down and so is the quantity of money. Even though some economists say that our economy is getting better, even with the high unemployment rate, I don't think it is growing or getting better fast enough. The economy might be better than it was over all from 2-3 years ago, but for me personally I feel like my family has started to save money more and more. I also think that the majority of the U.S. citizens are in the middle class and although there is plenty of money there, the majority of the money is in the top 1% but that is really another topic. I definitely think there is a big fear for inflation but I wonder if that is not a good thing considering it seems to be keeping the demand down and therefore the inflation down, but in my second article it talked about how a little rise in inflation might cause a economic boost which would be good, if it is only a little. So maybe the Fed should focus on a way to get people to demand a little more but not too much more.
This article is a little old again, but the title caught my attention. It says that people are worried about to much money being spent, and they are worried about the inflation increasing. Well for inflation to raise you need plenty of money and plenty of demand. During this time there was not much demand, people were saving. I think this is still true today though. I believe people are very fearful of inflation rising yet they don't realize because they are demanded less with their money and saving it, they are keeping inflation down.
I think that inflation is low right now because the demand is down and so is the quantity of money. Even though some economists say that our economy is getting better, even with the high unemployment rate, I don't think it is growing or getting better fast enough. The economy might be better than it was over all from 2-3 years ago, but for me personally I feel like my family has started to save money more and more. I also think that the majority of the U.S. citizens are in the middle class and although there is plenty of money there, the majority of the money is in the top 1% but that is really another topic. I definitely think there is a big fear for inflation but I wonder if that is not a good thing considering it seems to be keeping the demand down and therefore the inflation down, but in my second article it talked about how a little rise in inflation might cause a economic boost which would be good, if it is only a little. So maybe the Fed should focus on a way to get people to demand a little more but not too much more.
It's Time to Start Hoping for More Inflation - U.S. News
http://www.usnews.com/news/articles/2013/11/05/its-time-to-start-hoping-for-more-inflation
The article is more up to date then my last. This is from November 5th this year. I read the article and was a little confused. Inflation has been persistently below 2 percent objective, which is really good, but in the article it says that it could pose risks to economic performance. The Fed is not afraid that prices are spiraling out of control, it's that inflation is getting to low. not that prices are spiraling out of control. The article states; "Instead, the latest statements from the Federal Open Market Committee, the Fed committee tasked with setting interest rate policy, show the Fed is keeping its eye on whether inflation is getting too low."
I wonder how inflation can be too low. All I have ever heard in my seventeen years is all the negative inflation has on an economy, never anything good. The article gives a simple version of how inflation can boost growth; "Consider a city with a lot of renters. Apartment owners may see some young and relatively high income people move into the city and decide they can charge more for rent. If that happens on a broad enough scale, more employers may feel the need to raise their wages in order to attract workers. Ideally, that raise leaves workers with some leftover money to spend or save elsewhere, making them richer in real terms. And the money from higher rents, meanwhile, could lead rental companies to hire more workers or boost pay to their workers, which could also be an economic boost." From this example I can see how inflation can sometimes help boost the economy, but I just think there are so many negative affects that we should be happy that inflation is low. I think that also if we try to raise inflation to help boost the economy it will just get out of control and end up stunting economic growth instead of boosting it.
The article is more up to date then my last. This is from November 5th this year. I read the article and was a little confused. Inflation has been persistently below 2 percent objective, which is really good, but in the article it says that it could pose risks to economic performance. The Fed is not afraid that prices are spiraling out of control, it's that inflation is getting to low. not that prices are spiraling out of control. The article states; "Instead, the latest statements from the Federal Open Market Committee, the Fed committee tasked with setting interest rate policy, show the Fed is keeping its eye on whether inflation is getting too low."
I wonder how inflation can be too low. All I have ever heard in my seventeen years is all the negative inflation has on an economy, never anything good. The article gives a simple version of how inflation can boost growth; "Consider a city with a lot of renters. Apartment owners may see some young and relatively high income people move into the city and decide they can charge more for rent. If that happens on a broad enough scale, more employers may feel the need to raise their wages in order to attract workers. Ideally, that raise leaves workers with some leftover money to spend or save elsewhere, making them richer in real terms. And the money from higher rents, meanwhile, could lead rental companies to hire more workers or boost pay to their workers, which could also be an economic boost." From this example I can see how inflation can sometimes help boost the economy, but I just think there are so many negative affects that we should be happy that inflation is low. I think that also if we try to raise inflation to help boost the economy it will just get out of control and end up stunting economic growth instead of boosting it.
Federal Reserve considers explicit pledge: Low rates if inflation stays down - The Washington Post
http://articles.washingtonpost.com/2013-09-23/business/42307809_1_low-inflation-federal-reserve-interest-rates
The Federal Reserve is leaning toward an explicit commitment to keep interest rates at rock-
bottom levels, as long as inflation remains low.
The pledge would be an attempt to strengthen assurance that the central bank will not tap the brakes on the recovery until it is certain that the momentum can be sustained. The Fed already has vowed not to raise rates — a move that would slow economic growth — at least until the unemployment rate falls to 6.5 percent or inflation rises above 2.5 percent.
It is strongly considering adding a third prong to that promise: not to move if inflation is below a certain target.
Above I have a link to the article but also I just pasted the article right on. The article is a little old but it still looked interesting to me. In the article it says that the Fed has vowed to not raise rates as long a inflation remains low. I feel like vow, commitment, are such a big promise to make, which is another word the article used to describe the Fed's persistence to keep the interest rates low. I think this will cause trouble for the Fed.
If inflation goes up I think the Fed will have to raise rates because what else can you do. I think the shouldn't have made such of a great vow because it could be really hard to keep, and they don't have complete control of inflation so there is never knowing what to expect. I also think that inflation goes up and the rates rise, people will get mad. I know that sounds stupid but even though the Fed said they would keep them low, if inflation stayed low, people will still be upset by the increase in rates. There are a lot of uneducated people in this world, and probably a lot on this topic, so I feel that they would blame the Fed for the raise in not only the interest rates but the inflation as well. I think it is really great that the Fed is trying to keep the rates low, but I think vow, commitment, and promise are promising too much.
The Federal Reserve is leaning toward an explicit commitment to keep interest rates at rock-
bottom levels, as long as inflation remains low.
The pledge would be an attempt to strengthen assurance that the central bank will not tap the brakes on the recovery until it is certain that the momentum can be sustained. The Fed already has vowed not to raise rates — a move that would slow economic growth — at least until the unemployment rate falls to 6.5 percent or inflation rises above 2.5 percent.
It is strongly considering adding a third prong to that promise: not to move if inflation is below a certain target.
Above I have a link to the article but also I just pasted the article right on. The article is a little old but it still looked interesting to me. In the article it says that the Fed has vowed to not raise rates as long a inflation remains low. I feel like vow, commitment, are such a big promise to make, which is another word the article used to describe the Fed's persistence to keep the interest rates low. I think this will cause trouble for the Fed.
If inflation goes up I think the Fed will have to raise rates because what else can you do. I think the shouldn't have made such of a great vow because it could be really hard to keep, and they don't have complete control of inflation so there is never knowing what to expect. I also think that inflation goes up and the rates rise, people will get mad. I know that sounds stupid but even though the Fed said they would keep them low, if inflation stayed low, people will still be upset by the increase in rates. There are a lot of uneducated people in this world, and probably a lot on this topic, so I feel that they would blame the Fed for the raise in not only the interest rates but the inflation as well. I think it is really great that the Fed is trying to keep the rates low, but I think vow, commitment, and promise are promising too much.
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