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Portugal more or less declared bankruptcy yesterday. Here’s how the ECB responded today:

Worried about rising prices, the European Central Bank raised its benchmark interest rate for the first time since 2008 on Thursday, risking damage to weaker economies like Portugal, which only a day earlier became the third country to request an international bailout….The bank president, Jean-Claude Trichet, and other members of the governing council had warned repeatedly over the past month about the risk that higher oil prices would fuel a general increase in prices.

This is nuts. Inflation is a monetary phenomenon. Surging oil prices are a supply and demand phenomenon. Oil prices aren’t going up because there’s too much money in circulation, they’re going up because supply is limited, there’s unrest in the Middle East, and demand keeps rising inexorably upward.

I have some sympathy for bond hawks who say that although bond prices aren’t currently showing any fear of either inflation or financial collapse, markets can turn quickly and it’s best to keep from ever getting to the point when that turn might happen. Still, a little more inflation right now would be a good thing, not a bad one, and economic growth would be a really good thing. Anything that gets in the way of growth is just begging for bigger trouble down the road. This panicky action from Trichet is a big mistake.

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

payment methods

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