Lou Thomas

Trichet, ECB Missing the Point with Crude

The arrogance of assuming that the ECB is some kind of junior partner to the Fed, attempting, but oh, how badly, to lick its master's feet, is truly from yesterday's world. Columnists need to learn a new word that describes the present situation: multi-polar.

The dollar is still too high, which allows the US to continue to import more goods than it exports, which exports inflation to the Eurozone. Each time some indebted U.S. consumer takes out a home equity loan and buys a BMW, dollars from that sale are exchanged for Euros at a central bank, and those Euros in turn are used to pay workers who cannot buy that car they just made, because it is has been sent to the U.S. More money chasing too less stuff equals inflation. So the high dollar is part of the EU inflation picture and must be addressed. ECB interest rate hikes assist in that necessary correction; they are not mainly aimed at putting the brakes on Eurozone economic activity. The ECB's main concern with the dollar's decline is that it be orderly, not that it be stopped.