Who Is Right?

Carter Dougherty describes differences in monetary policy between the orthodox European Central Bank and less orthodox central banks in the United States, Britain and Japan in “European Central Bank resists rush to print money” (The International Tribune, March 24, 2009).

FRANKFURT: At the European Central Bank, being a maverick means holding steady as others bow to the prevailing winds.

With its peers in the United States, Britain and Japan cranking up monetary printing presses in a bid to prevent their economies from falling into deeper holes, the E.C.B. is resisting the rush into the least orthodox central banking policies in contemporary history.

"Exaggerated swings without perspective," Jean-Claude Trichet, the E.C.B. president, said recently, "would delay the return of sustainable prosperity because they would undermine confidence, which is the most precious ingredient in the current circumstances."

When others sharply cut interest rates, the E.C.B. was slower to act. When others stepped in to bail out financial institutions, the E.C.B., constitutionally limited in its powers, left that to national governments.

And now, with other central banks acting to create money out of thin air because they cannot prime the lending pumps by lowering short-term interest rates any further, the E.C.B. remains wary of the specter of future inflation.

Beneath it all is an aversion to anything that smacks of "printing money," a phrase that evokes Europe's worst economic nightmares, everything from kings debasing their currencies so they could fight endless battles to the hyperinflation and currency collapses in Germany after it lost two wars in the 20th century.

Which policy course will more effectively restore economic activity?