on money (in the abstract)

[David Morris]

On Tue, Nov 22, 2011 at 7:26 AM, Kai Frederik Lorentzen
<lorentzen at hotmail.de> wrote:
> Isn't it, perhaps, better to bring that Euro project to an end?

Maybe so, but probably won't happen.  See below.

Powergrab at the ECB
http://www.counterpunch.org/2011/11/18/powergrab-at-the-ecb/

The battle between Germany–the largest economy in the eurozone–and the
ECB has been brewing for months. Germany is adamantly opposed to any
pooling of debts and, thus, will not support eurobonds, fiscal
transfers or allowing the ECB to act as lender of last resort. Here’s
how the Bundesbank President Jens Weidmann summed it up in a recent
interview:

“The eurosystem… must not be a lender of last resort for sovereigns
because this would violate Article 123 of the EU treaty [prohibiting
monetary financing – or central bank funding of governments].
[...]

While the German position is principled, it is also impractical.
Europe is in crisis, a slow-motion bank run is rapidly turning into a
full-blown panic. Policymakers will have to be flexible if they want
to avert another Lehman-type meltdown.

In contrast, the ECB position is not only unprincipled but also
calculating and cynical. Everyone who’s followed events, knew that the
emergency fund (EFSF) would never be ready in time to address the
firestorm in the bond markets. That meant that yields would continue
to rise (which they did) until the ECB provided some form of backstop.
But the ECB  delayed its intervention until it had toppled Prime
Minister Silvio Berlusconi and inserted its own agent (Mario Monti) to
carry out its diktats. In other words, ECB chief, Mario Draghi,
deliberately manipulated bond purchases to effect regime change before
thumbing his nose at Germany and doing exactly what he planned to do
from the very beginning. For those who still doubt this, take a look
at this article by Reuters on Friday:

“The European Central Bank is ready to show some flexibility in its
response to the euro zone debt crisis, despite vocal resistance from a
German-led group of ECB policymakers to the bank unleashing the
overwhelming firepower it can muster….

ECB officials beyond the German-led group are ready to use the bank’s
controversial bond-buying program to help lower government borrowing
costs if they reach unsustainable levels, as Italy is experiencing….

ECB officials have welcomed the appointment of Mario Monti as Italy’s
new prime minister and look forward to his administration delivering
austerity measures to restore confidence in Italy’s strained public
finances….

Marko Kranjec, chief of Slovenia’s central bank and, like Weidmann, a
member of the ECB’s 23-member Governing Council, told Reuters on
Saturday Italy’s austerity reforms go in the right direction and the
ECB was willing to support sovereign borrowers as long as it does not
put price stability at risk.

“We are flexible,” Kranjec said. He declined to comment in detail on
the ECB’s bond purchases but said they would go “as far as needed.”
(“Analysis: Despite fuss, ECB ready for some crisis flexibility”,
Reuters)

Can you see what’s going on here? Draghi and his banker cohorts never
had any intention of following the terms of the treaty. (“No bail
outs”)  It’s just a big game. They just needed time to bump-off
Berlusconi and install their own puppet regime before they went on
their bond buying binge. Here’s more from Reuters:

“Euro zone and International Monetary Fund officials have discussed
the idea of the European Central Bank lending to the IMF, to provide
the fund with sufficient resources for bailing out even the biggest
euro zone sovereigns, officials said….

But EU law forbids the ECB to finance government
borrowing…..Policymakers have discussed, therefore, how to get the ECB
involved in crisis-fighting without endangering its independence.
Lending money to the IMF, rather than any euro zone government, could
achieve that, officials said…

Article 23 of the ECB statute says that “the ECB may conduct all types
of banking transactions in relations with third countries and
international organizations, including borrowing and lending
operations”.