Yves here. This post may strike readers as a tad wonky, but the role and governance of central banks has become a subject of debate in the US, and I expect it to move more into the spotlight in the EU as the crisis continues. And as you read the post, the ECB had been trying to avoid scrutiny for good reason. It manages to make the oft-criticized Fed look good.
Anne Sibert is the wife of former central banker, now Citigroup chief economist Willem Buiter, who was a very outspoken and vocal critic of the Fed during the crisis, particularly of its “quasi fiscal role,” meaning the way it subsidized banks in ways that involved taking real balance sheet risk outside Congressional budgetary processes. Buiter argued this might well be a violation of the Constitution.
He and Sibert have written and done advisory work together, often for central banks. They were called in by Iceland shortly before its crisis erupted, and apparently told the central bank it was toast. Her experience makes Siebert a commentator who cannot easily be ignored.
By Anne Sibert, Professor and Head of the School of Economics, Mathematics and Statistics at Birkbeck College, London and a member of the a member of the Monetary Policy Committee of the Central Bank of Iceland. Cross posted from VoxEU
The European Central Bank was once known for its obsessive focus on price stability. Since the global economic crisis, however, its role has extended to preventing the insolvency of banks and sovereign countries. This column argues that such a move has badly harmed the institution’s legitimacy – something that will damage both its policy effectiveness and confidence in the governing bodies of the EU as a whole.
The ECB’s role has evolved in its decade-long existence. In this note I describe how the choices of the ECB have damaged the institution’s legitimacy. This matters because decreased legitimacy lowers the ECB’s future policy effectiveness and weakens the legitimacy of all other institutions of governance in the EU, including the European Commission, the European Court of Justice, and the European Parliament.
In evaluating the ECB’s performance, I split the last eight years into two parts:
The benign period up until August 2007 when the institution was focused on price stability; and
The period after when the ECB was called upon to help contain the liquidity crisis and, within its powers as a central bank, to mitigate the banking sector insolvency and sovereign debt crises.
Prior to August 2007 the ECB produced stable and only slightly above-target inflation. However, it lacked procedural transparency. The Treaty makes it clear that it was intended that members of the Governing Council should vote. An astonishing 834 words are devoted to describing exactly how the voting mechanism is to work. Unfortunately, in comparison to other central banks that are supposed to make decisions by majority rule, such as the central banks of Japan, Sweden, the UK, and the US, the ECB is opaque about how its policy rate decisions are reached. It does not reveal the vote or publish minutes. When questioned by the press or the European Parliament about the lack of procedural transparency, ECB President Trichet’s stock response has been to view transparency as being equivalent to explaining one’s decisions ex post and to extoll the virtue of the ECB in this regard.
No voting
It turns out that votes on policy rates are never taken. Apparently, some small subset of the Governing Council decides, prior to the meeting, what the policy rate will be and this is then presented to the entire Governing Council, which we are to believe always or almost always unanimously approves. This explains how the Governing Council is able to produce the lengthy post-policy meeting statement that Mr Trichet views as the ECB’s major contribution to transparency. With the decision made before the meeting, there is ample time to prepare it.
That this extraordinary decision-making mechanism has gone on for so long with no formal explanation beggars belief. Who gets to make the decision? Why is it that no Governing Council member has ever insisted upon their legal right to a vote on monetary policy? Is there really never any dissent? How can that be? That we are able to ask these questions about an institution that is supposed to be one of the world’s two most important central banks is not good for its legitimacy. Moreover, while this arrangement has functioned well enough so far, what would happen if some future president were a little less like Mr Trichet and a little more like, say, Davíð Oddsson?
In Mr Trichet and the Governing Council’s defence, the ECB is woefully badly designed. The Governing Council has 23 members – a ludicrous size for a decision-making body. If each member gets a ten-minute opening statement, the rate-setting meeting would have gone on for almost four hours before any actual debate begins. With no formal way of reducing the size of the decision-making body, Mr Trichet may have had little choice but to make monetary policy informally.
Pre-crisis
In the period after the crisis the ECB has done a reasonable job relative to other central banks. It initially responded to the August 2007 liquidity crisis by dousing markets with liquidity in an attempt to drive down the interest rate. This was bad as the problem was not that financial institutions could not borrow at a reasonable interest rate using the good-quality collateral demanded by the Eurosystem. Instead, it was that they could not sell their asset-backed securities or use them as collateral because the markets for these assets had dried up. However, as the liquidity crisis continued and widened into a solvency crisis, the ECB’s policies evolved. When – for example – the spread between the three-month LIBOR and the overnight indexed swap rate widened, the ECB responded sensibly by undertaking liquidity-providing longer-term refinancing operations with a maturity of three months and offsetting these with their main (short-term) refinancing operations. In mid-October 2008 it made the necessary and massive changes in what was to constitute eligible collateral.
Financial stability role
Unfortunately, the ECB has not been a model of openness in its financial stability role. It does not tell us how it values illiquid marketable securities or how it decides its haircuts. When a member of the ECON committee of the European Parliament asked about how asset-backed securities are valued for collateral, Trichet said, “This is done by the system in ways which I considered appropriate but that we can improve at any time if we judge that they should be improved…”. In other words, I’m not going to tell you and only our opinion matters.
The ECB’s haircut policies are hard to fathom. Why do haircuts increase sharply with an asset’s maturity even when the potential illiquidity does not necessarily do so? This policy only encourages the issuance of short-term debt. No wonder banks are facing massive short-term debt refinancing requirements during a period that they are also trying to access the markets for additional capital. With no explanation, one might wonder if the ECB even has a coherent theory of how to determine haircuts.
This opacity about collateral policies is potentially much more damaging to legitimacy than the lack of transparency in monetary policy. In deciding what securities to accept as collateral and how to value and haircut them, the Eurosystem is redistributing wealth.
In its attempt to maintain financial stability the ECB and Eurosystem have had to walk a fine line between providing just enough liquidity to keep potentially solvent institutions afloat and subsidising the financial sector. Given the lack of transparency it is not easy to judge how well they have done at this, but a couple of examples show that sometimes – through design or otherwise – they have strayed into the subsidisation territory.
One example was the policy of allowing Icelandic banks to borrow from the Eurosystem using each other’s debt as collateral.
Another was the unlimited one-year fixed rate liquidity provision of June 2009 which may have been a transfer of about €1 billion from taxpayers to delighted banks (see Buiter 2009).
Playing Santa Claus to banks – Icelandic or otherwise – is not part of the ECB’s mandate and does not enhance its legitimacy.
So far, the ECB appears to have been less competent in managing the sovereign debt crisis than it was in managing the liquidity and banking crises. That ECB policymakers did not speak out about the state of Greek finances, although they must have realised by 2004 that Greece was verging on insolvency, and that they continued to accept Greek sovereign debt on the same terms as they accepted German sovereign debt must have suggested to the market that there were two possibilities. Either, the ECB had superior information suggesting Greece was unlikely to be insolvent or the ECB knew that Greece – or at least its creditors – would be bailed out if Greece were to become insolvent. This may have led the market to be complacent for far too long.
Securities Market Programme
The introduction of the Securities Market Programme threatens the ECB’s legitimacy as the potential fiscal role is an inappropriate activity for an independent central bank. One can imagine that it must have been distasteful to Mr Trichet to undertake such a task, but – understandably – he may have viewed it as a less unpalatable option then allowing Greece to default in May 2010.
Not all uses of the Securities Market Programme are inappropriate, however.
In the event of a wholesale creditor run based solely on self-fulfilling expectations, it is reasonable for a central bank to intervene and act as a lender of last resort to financial institutions that would otherwise be solvent.
Likewise, in the event of a run on sovereign debt that is based solely on self-fulfilling expectations, it is reasonable for a central bank to make it clear that it stands ready to purchase as much of the debt as it takes to halt the run.
As the recent rise in the yields on Spanish and Italian debt was likely a result of fear-based self-fulfilling expectations, the ECB was justified in its purchases of this debt.
The failing of the institution is that it is not credible that it is willing to purchase enough of the debt to contain the run.
Unfortunately, the ECB’s insistence on secrecy with respect to the programme is particularly damaging. It is widely believed that the average discount to face value paid for the Greek debt acquired (prior to August at least) was no more than 20%. The national central banks appear to have sought out the lucky counterparties. And, the ECB won’t say who they are or how much they paid. The possibilities for corruption under such a system are endless. And one does not have to be a conspiracy theorist to imagine that taxpayers throughout the Eurozone were called upon to subsidise German and French banks after their own governments failed to exercise proper regulation and supervision.
Advice for the new President
The incoming ECB president does not face an enviable situation. The sovereign debt crisis is gaining strength, dampening the economic recovery that might have otherwise been expected to follow the liquidity and solvency crises. His predecessor set a reasonably high standard for competency, but his opacity damaged the legitimacy of the organisation.
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Is there an “effective method” for determining if a run is caused by self-fulfilling expectations? I would be interested in an explication of such a method.
Well it’s been all day now and your question is still sitting there like a man playing checkers by himself in the park.
I think that’s because there is no good answer and folks just don’t want to embarrass themselves by trying to take it on, knowing deep in their hearts that they are spouting nonsense with lots of numbers. ha ha 393934r7477
So a single mandate is not all it’s cracked up to be either? Barney Frank here we come.
the role and governance of central banks has become a subject of debate in the US, and I expect it to move more into the spotlight in the EU as the crisis continues.
Are you suggesting that nobody has ever questioned the role and governance of central banks before now?
And why should we care if central banks are questioned?
It was heavily debated in the US when the Federal Reserve was created, and was not a discussion in polite company until the crisis. The myth of Fed independence plus naive faith in its competence and good intentions meant no one asked tough questions.
‘[The role of the central bank] was heavily debated in the US when the Federal Reserve was created.’
Some sources say otherwise. G. Edward Griffin, The Creature From Jekyll Island, p. 23:
Asset-backed money is a brilliant invention but as currently implemented (banking) it is inherently dishonest and unstable.
Common stock is also backed by assets and if used as private money has none of the ethical and stability problem of the banks.
The sooner we abolish all government privilege for the banks, the sooner we can move to ethical and stable money creation.
The legislation was not passed until 1913, and it was VERY controversial.
DOH!
Long fight between the “Money Trust” (the 1910 group described above) and the Greenbackers. The Federal Reserve Act was essentially a compromise under which the Greenbackers got government control of monetary policy, but the Money Trust got the seignorage.
Nasty deal, actually.
It seems obvious today that banker wealth is essential to funding political war chests. Jefferson, Jackson and Lincoln strongly battled this power. Obama not so much.
From Web of Debt
“The Populist movement of the 1890s represented the last serious challenge to the bankers’ monopoly over the right to create the nation’s money”
“Roosevelt complained in 1906: To destroy this invisible government to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day”
@jimhaygood… actually both you and Yves are correct! Did you read the whole book? Chapters 21 & 22 are all about the big public discussions on the central bank issue in 1911 and 1912 (it was a huge issue in the 1912 election). What is fascinating is how the Jekyll Island crew were so devious and strategic in the way they managed the public discussion – lots of kabuki and bunraku. Griffin gives a great explanation of all the propaganda games, the various elite allegiances and the behind the scenes manipulations that lead to the creation of the central banking system and how they convinced the Democrats to pass it(by staging faux debates and changing a bit of wording here and there, sound familiar?). There are interesting parallels between the bankster’s relationship with Obama now and Woodrow Wilson then. Woodrow Wilson had been picked years before as the bankster’s guy and they neatly orchestrated his election. Some very eerie 100 year similarity in the money and power games, and the the collusion of the banksters and the politicians (who were much more concerned with HAVING money than where it came from).
Oops, misplaced my response… see a bit below.
I know for sure that I responded to the right comment thread this time and it still took me down here. Oh well, it’s close enough.
Since when was this a benign policy goal? I mean, I understand that this is supposed to be a critique of the way the ECB has operated, but what is the point of analysis if you stipulate that all actions taken in an arbitrarily chosen period must be understood as “benign” or “malign” beforehand? By positing this, she has made it impossible for herself to understand what went wrong in the first place (since she assumes that all actions taken before 2008 must be understood as benign, but misguided), even while what went on in that period was intensely problematic.
Is it really that hard to accept that for the “southern” economies, a low inflation/interest rate policy is, if anything, malign, even while it may be advantageous to more highly developed economies such as NL/DE?
She’s a bit indirect here. She says the goal is legit, but read what she says about the ridiculous meetings that pretend to make decisions but had the decision made by a star chamber with the committee beforehand.
Moderate inflation is considered a legit goal. She’s still very critical of the process. And she says the goals post crisis were not so hot. So even though this is written in bureaucratese. this is a pretty critical piece.
(Btw, it’s Sibert, not Siebert)
The only complaint I have to “It was heavily debated in the US when the Federal Reserve was created, and was not a discussion in polite company until the crisis” is that we were not alive when it was formed and I grew into this crisis world. I did have the luxury of the Clinton years only because my parents had money, but we can’t all be polite company without a little education.
“The failing of the institution is that it is not credible that it is willing to purchase enough of the debt to contain the run.”
First, best hope that’s not true, else what credibility does the first bond purchase round have, right?
But suppose they actually do it, by purchasing a mind-numbing pile of promises nobody is likely to keep, given that acting in good faith is what so broadly and badly broke down to begin with, while nobody, anywhere, was held to account? Sounds like some cracked disc version of the “I’m crazy enough to nuke you” ploy Nixon is said to have trotted out on North Vietnam (and was duly ignored).
What does a crisis “based solely on self-fulfilling expectations” really mean when THIS crisis’ very nature is that it emits from a fundamental fracture of trust? A systemic failure of good faith?
Why believe unlimited monetary intervention by either Europe or the US is good policy in an essentially lawless global financial environment?
Your fourth para, she means an irrational run. You can bring a bank down, for instance, even if it is perfectly sound, if everybody yanks their money out at once. You might think of it as yelling “fire” in a crowded theater.
You can bring a bank down, for instance, even if it is perfectly sound, if everybody yanks their money out at once. Yves Smith
If matching maturities between deposits and loans was enforced then everybody would not be able to pull out their money at once – only those with demand deposits could. Of course that would put banks out of the money creation business – a good thing.
It’s inherent in the role of financial intermediaries to borrow short and lend long. If matching maturities were strictly enforced, demand deposits wouldn’t be available … only something like floating-rate CDs with a minimum one-year term.
Although it’s theoretically possible for a sound bank to be taken down by all deposits being withdrawn at once, in practice, it doesn’t happen. And if it did, that’s really the only proper role of a central bank — to lend at a penalty rate to solvent but illiquid institutions.
It’s inherent in the role of financial intermediaries to borrow short and lend long. Jim Haygood
Actually banks create demand deposits when they lend in exchange for a promise to repay that deposit plus interest (which is not created, btw). Banks are thus money creators, not money lenders.
If matching maturities were strictly enforced, demand deposits wouldn’t be available … only something like floating-rate CDs with a minimum one-year term. Jim Haygood
Demand deposits would be available but at a cost. Or the government could offer free money storage and check clearing for its fiat up to a certain amount.
And if it did, that’s really the only proper role of a central bank — to lend at a penalty rate to solvent but illiquid institutions. Jim Haygood
No. Why should a bank have the right to create and lend legal tender? And if you say the central bank is part of government then why should the government create and lend money to some but not to all others equally? Remember, when government (or the CB) spends or lends money it is essentially taxing the population via inflation. So why should the entire population be taxed for the sake of reckless bankers?
Banking is inherently risky. It should not be made less risky by government privilege because that just magnifies and transfers the risk to the entire nation.
F. Beard — “Or the government could offer free money storage and check clearing for its fiat up to a certain amount.”
Three words: Post Office Bank. This has actually been done in the past and it should be revived.
A perfectly sound bank would be one that lent its own common stock as money. Then no run would be possible since the money holders would own the unencumbered assets of the bank. All they could do was vote at the next shareholder’s meeting to dissolve the corporation and liquidate the assets or sell the stock to someone else. However, who would borrow common stock? It might be very difficult to repay. So then banks might simple buy assets with their common stock in which case they would become a holding company. The value of their money (common stock) would be based on the value of their assets and their reputation in managing them.
Well, if fighting the liquidation of bad debt is positive, central banks really do a good job in general. But at what cost to the individual or the people in general? For whom is it really good, I think we know the answer: the looters.
A lot of German voters see the ECBs credibility destroyed by its actions on Greece. Hence the unwillingness to let the ECB support Italy and Spain. It is a tragedy, but the mistakes are in the past and the trajectory seems fixed.
Making the Fed look good. Say no more! Say no more!
‘The national central banks appear to have sought out the lucky counterparties. And, the ECB won’t say who they are or how much they paid. The possibilities for corruption under such a system are endless.’
Exactly like the Fed, which fought a Bloomberg FOIA suit for two or three years before being obliged by court order to cough up the damning data.
It’s becoming all too clear that so-called central bank independence, widely touted as a bulwark against inflation in the 1980s, is being abused by the bankster cartels in a highly self-serving and high-handed manner.
These private-cartel wolves ludicrously attired in woolly sheep suits have become odious. Why is banking so very special that it receives self-administered government protection (with an open-ended credit line) in much the same way that, say, the steel industry did sixty years ago? (And how did that steel industry protection work out for us? Where’s Bethlehem Steel these days, anyway?)
If abusive bank cartels masquerading as quasi-government agencies weren’t so tied in with the destructive fallacy of fiat currency, it would be far easier to give them their marching orders to walk the plank. As it stands, they’ve become the financial heroin dealers to indebted states, which naturally are reluctant to drop a dime on their pushers and face potential ‘seignorage cold turkey’ (although that is not a necessary outcome).
Trichet will go down as the Greenspan of Europe — a buffoonish poseur who left nothing but financial and institutional wreckage behind him. Doubtless he has a bright future on the rubber chicken circuit, propagating his towering ignorance to the callow and the credulous.
…the destructive fallacy of fiat currency, … Jim Haygood
Fiat is the ONLY ethical government money form. The problem is that fiat is being debased to support the banks. The government should have nothing to do with banks other than to vigorously enforce the laws against fraud and insolvency.
The author writes, “It is widely believed that the average discount to face value paid for the Greek debt acquired (prior to August at least) was no more than 20%.”
I ask, is that even possible? Let’s say the Greek 10-year bond was trading in a range of 50 to 57 cents on the dollar on Monday. Let’s also say that the ECB came in and bought a tranche of 10-year debt at 80 cents on the dollar.
Wouldn’t the range of prices for the day be 50 on the low and 80 on the high? Wouldn’t this be public record?
Is it possible that the absence of a single treasury in the Eurozone puts a lot of constraints on ECB and we cannot use the same ruler to judge ECB as we judge the Fed?
Steve,
the criticism in above piece is valid with or without single treasury.
However, the piece is too mild.
E.g. Sibert states that ECB knew by 2004 that Greece was heading for insolvency. Still, she excuses the ECB for buying Greek government bonds in Mai 2010 when Greece crisis finally became obvious for everybody. How can that be excused? Doing nothing — or doing something with no effect — for 6 years ….. and then violate EU treaties and ECB rules ….. only to make the certain outcome so much more expensive for euro zone tax payers?!
Sibert refers to ECB buying bonds from Icelandic banks, which those banks had first ‘sold’ to each other. I do not recall. ECB aiding non-EU banks??
However, it was reported in Irish papers that some Irish banks were doing this trick, and the ECB being a willing and knowingly perpetrater in the crime (late last year, or early this year?).
Also, the ECB has accepted almost anything as collateral for cash return to weak (insolvent?) banks. The ECB now has a football player as collateral!
Also, European banks took shit from their subsidiaries outside EU and shoved that as collateral to the ECB.
And so on and so on.
“The ECB’s haircut policies are hard to fathom. Why do haircuts increase sharply with an asset’s maturity even when the potential illiquidity does not necessarily do so?”
Ms Sibert seems to lack a basic understanding of fixed income finance.
Jim Haygood is absolutely correct in saying that the Federal Cartel (Reserve) is a restraint of trade. Neo-Liberal politicians spend a great deal of time telling the public that the creation of money from thin air by the sovereign people is a great sin but have little to say about the sin of private banks blowing up house price bubbles by the same process. Of course such politicians are as Jim says “partners” with the private bankers.
Neo-Liberal politicians spend a great deal of time telling the public that the creation of money from thin air by the sovereign people is a great sin but have little to say about the sin of private banks blowing up house price bubbles by the same process. Schofield
Bingo!
“Damaged legitimacy”…it’s a terrible use of language.
It’s this kind of shoddy thinking from people who should know better that pervades the culture and contributes to the populace accepting illegitimate acts because they are characterized, instead, as being part of “a damaged legitimacy”.
“Legitimate” would be so much more effective here. You’d be making a clear, definitive statement. “The actions of the ECB are not legitimate.”
Instead, we get this bullshit…a diluted distortion, wherein the simple, yet tight adjective, “legitimate”, is morphed into the fuzzy, flaccid, mealy-mouthed noun of “legitimacy”. And it’s a “damaged legitimacy” at that, so that the already difficult-to-define “legitimacy” is further compromised by adding the vague “damaged” as a modifier.
How do we respond to such emptiness? “OK, the legitimacy of the ECB exists, but not as strong as before”.
What measures do we take against an institution, still endowed with “legitimacy”, but with a “legitimacy” that is impaired?
Please take a moment to reflect on these questions…and in the partially pregnant pause of this semi-damaged solemnity consider the following:
Take a f*cking stand, Anne.
Is the opacity of the ECB legitimate or not? If not, then how is the legitimacy of the ECB merely “damaged”?
At the risk of sounding vague, right on. Words either mean something definite or they mean nothing at all.
Oh dear. What a mess. I’m not sure I’m understanding it all. News today is saying that our Fed stepped in to flush the EU with a zillion dollars (since our money markets had stopped giving the EU dollars, yes? – but that doesn’t make sense if we were causing a potential default…) and that Japan, China, etc. were also stepping up. So who do you think is saved? I think it is kiss-me-quick: Goldman Sachs and JPM et. al. They are holding all those Greek CDS contracts and if Greece defaults, as the Germans would wish, our banks eat it. I think it would be a deserving banquet too just because I am so mad at all the banks. But rationally I have to say that it would have caused so much harm that it couldn’t even be considered. So now we have handed over bundles of cash and we are going to stretch it out till 2013 to give our looney cousins enough time to come together politically so they can legally make fiscal decisions. They have (per above article) been making quasi-political decisisons on the q.t. for some time. Kind of explains why Trichet has been losing his shit on a daily basis. Of course he is just the figurehead because all of the governing council have cell phones and they have chatted each other up on where to put interest rates so it doesn’t look like they are subsidizing their banks…. they knew they had 51%. Right? So I’ve got a question: Where does this leave Basel. And is Jamie Dimon a total insider? Duh.
If the marketplace is discounting Greek bonds by 40% and the ECB is accepting such bonds at a 20% haircut from par, isn’t there an opportunity for arbitrage – buy the bonds on the market and sell them to the ECB? This undermines legitimacy? Shoot, it undermines rationality! The more I learn, the stupider the system gets. This process of buying sovereign debt at above market prices creates a continental moral hazard. That is, it creates an artificial cost (reduced) for risk, meaning more risk would be taken – and more losses incurred. Oh hell yes, this lack of transparency combined with gifting the big banks means “The possibilities for corruption under such a system are endless” – in fact IT IS CORRUPT ON ITS FACE.
The system is completely insane. Economies need credit. Large credit systems need a central bank. The problem is that regulators and central banks are too close to the big players in the credit markets and become corrupted without even being aware of what they are doing. I would much prefer that the globes CBs worked hard to keep the system afloat but allowed individual banks and individual countries to crash – much like an admiral might sacrifice one or two capital ships to save the fleet. The way things are going, they are going to sink the fleet in their effort to save one or two ships.
What do we replace the existing Central Banks with?
a liquidity computer
Nothing. The US has done without a central bank before and it can do without a central bank again. The US Government can simply create, spend and tax (as necessary to control price inflation) its own fiat. As for the private sector, without a CB, the banks’ ability to leverage would be drastically limited which is why the entire population, including savers, should be bailed out too in order to prevent deflation as existing credit was paid off.
Let’s start over with no central bank, no private debt and savers with a big chunk of new money in their accounts. Even the banks would be fixed.
The US has done poorly without a central bank in the past (on the gold and silver standards).
What the Greenbackers proposed back in the 19th century was to have the Treasury fulfill the money-creation and money-depletion functions of the central bank, directly, with transparency and direct political control. I have come round to this point of view.
This seems to be pretty similar to what you advocate.
This seems to be pretty similar to what you advocate. Nathanael
Partially. The government should be the ONLY issuer of its money and it should be cheap fiat. But I would limit the government to only creating, spending and taxing that fiat; it would not borrow or lend money and it would not recognize any money but that fiat. However, fiat would only be legal tender for government debts, not private ones and every legal encumbrance to private money supplies should be removed except for the usual laws against fraud and insolvency.
Separate government and private money supplies is Biblical (Matthew 12:16-22) and has the advantage of keeping both government and private money supplies honest (The private sector would have the choice of using fiat or private money supplies for private debts).
The real source of the crisis is public sector indebtedness. This scheme looks like yet another public sector bailout that will push debt levels of European governments ever higher.
This is the true source of the problem
Advanced country debt levels reach 100 percent of GDP
No, it’s not. The real source of the crisis is banking fraud, but you’d have to have actually read Naked Capitalism to understand. (The public sector debt is a side effect.)
Agreed! The dollar is being wasted on the banks; it should be used to bailout the entire population which would fix everyone including the banks.
The ECB decision making sounds awfully familiar to me… oh wait its exactly the same as the EU council.
Officially the EU council also has to vote on certain key areas, in reality voting never takes place but consensus is reached amongst its members.