Effects of European Inflation Slump on the US

Mario Draghi, the head of the European Central Bank, announced the ECB’s plans to hold back the inflation that’s bringing down the value of the Euro. With Europe is still in stimulus mode, the continent has seen very low inflation making borrowing and spending easy.  The European Central Bank has been acting slowly to revitalize the European economy, avoiding the large measures like those taken by the Fed and the Bank of England in buying up government debt. The ECB has moved to lower the value of the Euro by giving out cheap loans to commercial banks that promised to lend the money to businesses and consumers. While this may help bring the European economy out of a slump, the effects in the US are mixed. While on the one hand Americans can now buy more European goods for less, selling domestic goods and services may be harder than once before. American corporations could receive greater investment from foreign institution but the situation may make it even more difficult for Americans looking for jobs.

The move by European bank regulators and the silence of American lawmakers has been heralded by some as the best move for global stability. US leaders have encouraged the strength of the dollar, saying it signals a strong economy, but some economic analysts argue that higher currency prices will not grow the economy in the long run. Officials in the US are operating on the argument that the US economy does not need as much help as other developed nations. Leaders in the US believe that a stronger global economy is the best thing for the American economy even if means that American goods are harder to sell and American jobs are harder to find.

“You’re seeing American officials turn a blind eye to Mario Draghi talking down the euro, and turn a blind eye to interventions by the Chinese, because in both cases they’re making the judgment that having a stabilized situation and decent growth prospects in these countries is far more important,” said Adam Posen, president of the Peterson Institute for International Economics. “I tend to agree with that.”

 

Read More –Overseas Stimulus Moves Drive Yen, Euro and Renminbi Down Against Dollar (New York Time, Binyamin Appelbaum, Jack Ewing, and Neil Gough)

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Originally from Gaithersburg, Maryland, Millan is a senior at the George Washington University studying Biological Anthropology.

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