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For a while I have wanted to write something about what psychologists call “cognitive dissonance”. The way I think about cognitive dissonance is that individuals tend to look for confirmation of their already held views.
Today Milton Friedman would have turned 102 years. Happy birthday Uncle Milty!
My colleague Arne Rasmussen put it well in a comment on Facebook today:
While it is becoming increasingly clear that Europe is falling into a Japanese style deflationary trap European central bankers continue to refuse to talk about the need for monetary easing to curb deflationary pressures. Instead they seem to be focused on everything else. We have been through it all – the ECB has concerned itself with who was Prime Minister in Greece and Italy about Spanish fiscal policy, rising oil prices in 2011 and about “financial stability”. And believe it or not it has become fashionable for European central bankers to call for higher wages in Germany!
Last week I wrote a post criticizing Fed chair Janet Yellen for apparently becoming a "stock picker". Later later in the week she spoke before the US House Financial Services Committee in Washington she seemed to tone down a bit her "stock picking" comments, but she nonetheless commented on the general valuation of the US stock market.
This is ECB's chief economist Peter Praet in an interview with Les Echos:
In country after country it is now becoming clear that we are heading for outright deflation. This is particularly the case in Europe - both inside and outside the euro area - where most central banks are failing to keep inflation close to their own announced inflation targets.