Hayek and the ECB

11/09/2006 Mises Wire Jeffrey A. Tucker

From the FinTimes Today: Jean-Claude Trichet, president of the European Central Bank, writes: "Over the next two days, the European Central Bank will host a conference to discuss the role of money in monetary policymaking. At present, the dominant academic view seems to be that monetary aggregates should have no part in monetary policy decisions. From this perspective, money does not deserve to be central to one of the two "pillars" of the ECB's monetary policy strategy. I do not share this view. In this I follow Friedrich Hayek, who wrote in The Pure Theory of Capital: "It is self-contradictory to discuss a process [inflation] which could not take place without money and at the same time to assume that money is absent or has no effect."

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