Inflation does slow growth…

The title of the post is very true but people do not understand inflation as much. Inflation is just the quantity of money in the system. Central bankers try to let out as much money as the economy grows. If it doesn’t do this enough then it is deflation, if it does it too much it is inflation. Europe has been slow growing for a while but it is getting even slower with inflation. The Financial Times has it here:

“The eurozone moved closer to recession on Thursday after it emerged that the economy contracted in the second quarter for the first time since the launch of the euro.

Yet, while concerns mounted in Europe that the weakness in growth could prove protracted, evidence of growing global inflationary pressures continued to build. Just hours after the eurozone figures were released, US data showed consumer prices rose twice as fast as forecast by economists in July, hitting an annual rate of 5.6 per cent – the highest since January 1991.”

The rest can be found here.


Published in: on August 15, 2008 at 1:16 pm  Leave a Comment  
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