Economics: Most of us were punished as children for things we didn't do, often by parents making up for spoiling us earlier. An invented wrong was usually trotted out to save the parent from admitting fault.

But whatever the loss of face in the short term, in the long run it's always better to be straight with people.

This week one of those "this is going to hurt me more than it hurts you" messages emanated from the European Central Bank (ECB).

Axel Weber, who sits on the bank's governing council and is also president of the Bundesbank, is among a set of powerful central bankers worried about rising monetary naughtiness.

In their view, inflationary pressures are building up around the world and a corrective spanking is needed. Or, as central bankers say in what is their own inimitable way: "It is important that, as a central bank, we are vigilant on price developments and that it does not come to inflation that is above our boundary of tolerance".

So says Weber. On Wednesday Europe's monetary headmaster , Jean-Claude Trichet, said more of the same. Both are right to flag the fact that interest rates are indeed too low. But they might admit why. A few years ago, central banks cut rates too far and too fast.

But instead of admitting that mistake, they are now treating us like small children. The bogeyman of global inflation is going to get us if rates don't rise, they tell us in patronising tones.

Funnily enough, children understand the basic precepts of monetary policy better than most.

Suppose a child gets three bars of chocolate every week. By increasing or decreasing the ration from this average level, you suddenly have a powerful tool to influence behaviour. For good or bad behaviour, you can change the weekly ration up or down by one bar. The difference between bad and good behaviour is two bars of chocolate - two-thirds of the weekly ration.

Now suppose that, over time, the weekly ration drifts up to 10 bars. For any self respecting eight year old, the choice between making your maiden aunt a cup of tea or putting a whoopee cushion under her seat is now a no-brainer: With nine bars in the bag, the extra two foregone are worth the fun.

Of course, in this scenario, you might increase the bars of chocolate given or taken away.

But a sudden change in incentive structures could lead to tantrums on the one hand, or rising expectations on the other.

And the fact is that feeding your kids too much chocolate each week will make them unfit and fat.

Simply put, if monetary policy is too generous, changes in interest rates cease to have a strong effect. By keeping monetary conditions tight, additional loosening of credit has more long term impact.

The challenge for central bankers is not just changing rates up or down at any given time for cyclical reasons, but achieving the correct medium-term average rate.

In tightening rates now, the ECB is engaging in the latter task, but giving us cyclical excuses.

As the 1970s showed, tough love makes a big difference. A stern father of the German economy, the Bundesbank guided consumers and investors through the 1970s by keeping rates high. Businesses focused on productivity, increasing their export share despite a strengthening deutschmark.

In Britain a weak Bank of England - then subservient to the government - produced high inflation, a toytown currency and a spoilt brat economy full of strikes and bad management.

German and British fortunes have since reversed. Despite having interest rates significantly higher than in the euro zone, UK unemployment is just 5 per cent of its labour force, compared to 8.2 per cent for the euro zone.

Despite having the lowest interest rates in their history, Germany and France bear the shame of mass youth unemployment.

Instead of cutting taxes and reforming labour markets, French and German "leaders" hoped that the ECB would bail them out by lowering interest rates below levels justified by the ECB's own monetary policy strategy. The movement in interest rates since then is just what they wanted. At first, the ECB needed to prove its credentials and from a trough of 2.5 per cent in April of 1999, its first tightening exercise brought the ECB's main refinancing facility up by two and a quarter percentage points in just 18 months.

They came down the hill just as fast, from 4.75 per cent in May 2001 to 2.5 per cent in March 2003.

It was during this period that two quite strange reductions got over the wall. Half of a percentage of this reduction was a panic response to the events of 9/11.

But, in May of that year, the ECB also cut rates by a quarter percentage point, justifying the action with reference to a downward revision in monetary growth figures.

Although a downward move in the economic cycle justified most of that period's loosening, those two particular reductions were exceptions.

This is what created today's so-called "monetary overhang" or "excess liquidity". But if those reductions were not cyclically justified, neither are the recent increases. This last statement does not mean that they should not happen. It means they should not happen now.

That they need to happen is clear enough. Money supply is growing by 8.6 per cent - way in excess of the ECB's reference value of 4.5 per cent. And lending to private sector in the euro area has gathered pace to 11.3 per cent as of April.

Moreover, from a historical level of 3 per cent, real interest rates in the euro area - nominal interest rates less the rate of inflation - are virtually nil.

For Ireland and Spain, rate rises can't come soon enough (lending growth here is 30 per cent). But for Germany, France and other laggards, rate rises now might prejudice a nascent recovery.

Having let average rates slip too far, the central bank will have to raise historical real interest rates at some stage over the present economic cycle. But they must state precisely that this is what they are doing and time this move in a manner that is sensitive to the cycle.

Of course this won't be what the Irish economy needs. But then, at this stage, the ECB probably figures that we're beyond correction.