Brad DeLong notes that Mario Draghi, the head of Europe’s central bank, went off text in his speech at Jackson Hole. Here’s his summary of Draghi’s extended ad-lib:
The speech text says:
- The ECB knows that inflation has declined.
- The decline in inflation has not led to any decline in expectations of inflation.
- THE ECB will, if necessary, within its mandate, use QE and other policies to keep expectations of inflation from declining.
The speech as delivered says:
- The ECB knows that inflation has declined.
- My usual line is that the decline in inflation is due to temporary factors that will be reversed.
- That explanation is now long in the tooth: the longer “temporary” lasts the greater the danger.
- In fact, it is too late to “safeguard the firm anchoring of inflation expectations”.
- Inflationary expectations have already declined.
- We will use all the tools we have to reverse this.
Is this deviation a mere line wobble….Is this deviation an audience effect….Or does it signal a recognition on Draghi’s part that the Eurozone is heading for a triple dip, and that if he doesn’t assemble a coalition to do much more very quickly to boost aggregate demand we will have to change the name “The Great Recession” to something including the D-word, and he will go down in history as the worst central banker since the 1930s?
I would like to know…
I suppose we’d all like to know. The Germans better start taking this stuff seriously pretty soon. They can’t stick their heads in the sand and live in the past forever.