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Thursday, October 25, 2012 11:11 AM

Fed and ECB Smokescreens to Print Money

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Fresh on the heels of ECB president Mario Draghi's Lies In Defense Bond Purchases, Including a Warning of Deflation comes news of an unexpected rise in Eurozone price inflation.

Economists had expected price inflation to drop, instead Eurostat reports Euro area inflation estimated at 2.7% up from 2.6% in August.

Looking at the main components of euro area inflation, energy (9.2% compared with 8.9% in August) is expected to have the highest annual rate in September, followed by food, alcohol & tobacco (2.9% compared with 3.0%), services (2.0% compared with 1.8%) and non-energy industrial goods (0.8% compared with 1.1%).

Euro Area Inflation

click on chart for sharper image

Smokescreens to Print Money

As with the Fed, apparently the ECB does not consider the two key things people need (food and energy) as important. Instead the ECB appears to be worried about deflation in non-energy industrial goods.

Appearances are deceiving. All this talk of inflation and deflation is nothing but a smokescreen for the ECB and the Fed to do what they want to do: print money.

Both central banks can and do bend their words at will, to make whatever policy decisions they want.

ECB president Mario Draghi even went so far as to proclaim fighting deflation gave it a mandate to break the treaty under which it was formed.

Draghi's stance has nothing to do with prices or price stability but rather everything to do with the implosion of the eurozone economy, the implosion of eurozone credit, the sorry state of European banks, the rise of radical movements in Greece and Spain, and of course the very existence of the euro itself.

He can't come out and say "the ECB does not care about prices right now", and he certainly cannot spout out the reasons as noted in the above paragraph, so instead he spouts outright lies hoping someone will believe him.

Source of Inflation

While claiming to be "inflation fighters"  the fact of the matter is the true source of inflation is fractional reserve lending and central bank policies.

Mike "Mish" Shedlock

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