Economist Edin Mujagic fervently hopes that De Nederlandsche Bank’s projections for 2023 will come true. Only then will 2023 be “relatively speaking a good economic year,” he thinks. “And I have to honestly say the estimates look realistic.”
And Mujagic is not surprised. ‘If I hear someone from DNB saying that the Dutch economy is going to grow about one and a half percent when everything calms down, then that’s about the percentage you can have as a Dutch economy without talking about too much or too little growth. So realistic.’
But where DNB’s inflation estimates look realistic in Mujagic, Klaas Knot’s DNB Inflation College – held last Friday – is far from realistic. “I heard some amazing things there,” he continues. ‘Like, it was very quickly a thing of the past. We have high inflation now, and the last time was in the 1970s. Knot said, “By the way, we had an oil crisis then.”
Then the reason, now the reason
According to Mujagic, Knot means that the oil crisis was the reason for the inflation then, as it is now. “That makes him very short-sighted,” says Mujagic. “Like he only told half the story. The other half is that inflation managed to stay high in the 1970s and became persistent due to the faulty monetary policies of central banks.’
Mujagic speaks of a “red line” in the inflation advice, “because there has been little or no discussion of the consequences of the policy DNB has pursued since 2008.”
Power
Yet there is a grain of truth in Knot’s story, Mujagic also acknowledges. Rising energy prices play a role. “But if you look at the Dutch, Eurozone, US inflation chart, you name it. Then you see inflation starts to pick up a bit, about seven or eight months before the war in Ukraine. So there are other things involved.’
Mujagic sees another worrying development as the increase in the money supply. “There was almost no discussion of this last Friday,” he continues. ‘It has increased by more than 80% in the Eurozone since 2008, and this ultimately has consequences for how quickly prices are rising. And I think Japan is a good example: they depend on imports for 90% of their energy. But Japanese inflation is still below four percent. They’ve done much better since 2008, and I think you can see that very clearly in the monetary inflation figures.’
Bankruptcy policy
According to Mujagic, Klaas Knot points too easily to rising oil and energy prices, and too little to the failed policies of central bankers. “A day before the conference he was still at the ECB, where the decision was made to raise interest rates again,” he concludes. “But he should have said, for the sake of completeness, that it’s not just about raising interest rates or not, but also about the extent to which they do. And we know you need to do a lot more to fight inflation.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
