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Bundesbank Blasts Draghi's QE, Fears "Monetary Policy Is Hostage To Politics"
"The concept of an independent central bank clearly focused on price stability is neither old-fashioned nor outdated," exclaimed Bundesbank head Jens Weidmann. As The WSJ reports, he criticized the European Central Bank’s decision to buy private-sector bonds and signaled his fierce opposition to purchasing government bonds, underscoring his reluctance to back additional stimulus measures to combat weakness in the eurozone economy. "There is a risk of monetary policy, especially in the euro area, being held hostage by politics," Mr. Weidmann said
As The Wall Street Journal reports,
In an interview with The Wall Street Journal, Mr. Weidmann rejected calls from the International Monetary Fund and within the ECB for Germany to cut taxes or ramp up public spending despite mounting signs that its economy is succumbing to Europe’s downturn. The European Commission should consider rejecting France’s 2015 budget, which exceeds deficit targets mandated by the European Union, he added.
Mr. Weidmann said he stands by the conservative principles that have characterized the Bundesbank throughout its nearly 60-year history: keeping inflation low; protecting the central bank’s balance sheet from risks and strict separation from the financial needs of governments.
His cautious stance stands in contrast with the ECB’s latest attempts to convince investors that it will act forcefully to boost the flow of money to the economy, and may raise doubts about the bank’s ability to gain the consensus needed to do still more expansive steps if needed. It also exposes the deep rifts that still mar the Eurozone, with countries including France and Italy calling for more flexibility while Germany insists on fiscal rigor.
“There is a risk of monetary policy, especially in the euro area, being held hostage by politics,” Mr. Weidmann said in an interview Monday at the Bundesbank’s headquarters in Frankfurt, just a few kilometers away from the ECB.
...
Although buying bonds in financial markets isn’t forbidden, “the ECB’s mandate is more narrowly limited than that of central banks in other currency areas,” Mr. Weidmann said, referring to rules preventing the ECB from financing governments.
"These concerns are particularly acute whenever the central bank buys specifically the most risky sovereign bonds,” he said. Besides, with government and corporate borrowing costs already super low, such a policy would have limited effect. Tying fiscal policies together through ECB bond purchases “is a dangerous path,” he said.
But it's not just the Germans...
On Tuesday the Dutch central bank delivered its own critique of ECB policies, warning in its semi-annual report that that easy-money policies could cause financial instability and fuel asset bubbles. “The medicine should not become worse than the disease,” it said.
Finally, Weidmann notes,
“Against the background of the announced target for the balance sheet, I see a risk that we will overpay for these assets,”
Indeed, as Mises Patrick Barron concludes,
Of course the ECB will get stuck with low-quality loans purchased at inflated prices! Economic logic makes this a certainty. If the institutions selling such loans could get as high a price in the open market as the ECB will offer, they would sell them now. This program is nothing more than a back door bailout to politically connected, privileged, special interest groups. It is corruption on a grand scale. Of course the ECB has a good role model–the US Federal Reserve Bank.
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What?!?! Unpossible!
I'm SHOCKED!
SHOCKED!
http://www.youtube.com/watch?v=-Gf8NK1WAOc
Draghi, the Wall Street Euro pimp, doesn't give a shit about doing the right thing. Just needs to keep the insolvent system afloat so the banks maintain a stranglehold on the people.
Weidmann is wasting his time by making cogent remarks to a group of white-collar criminals.
They are just trying to keep the ball rolling, but it looks to be rolling over a cliff.
So does Putin say he does not want to take printed Euros for gas, now that winter is on the horizon?
Who gives a shit what Weidmann says, he is not a Goldman alumni.
Politics determining the future of society rather than the bankers? Preposterous! Outrageous!
Must see, German journalist tells how he was recruited by the CIA (and how the mass-media propaganda is pushing for world war):
http://www.youtube.com/watch?v=yp-Wh77wt1o
Thanks. The cracks in the evil Empire are widening.
many europeans like me are very happy about Weidmann making his remarks. in fact, we are thankful for them and request them further. after all, the whole political "selling point" of the EUR was about having a good copy of the BundesBank principles, while the main technical point was having the right size to withstand currency wars
I thought it was all having a huge headquarters in Anglo Saxony?
I have to correct you there: it's not "Anglo Saxony", aka England, it's The City of London. Exactly one square mile of ancient Roman city, in theory. Not really part of England, or the UK, at least not legally. No citizens, only Fellows, with the right to drive sheep over the bridge. Protected by Gog and Magog, for unclear reasons. It's Minder in Parliament has the right to rember any MP about the prerogatives of The City, and no, I'm not bullshitting
and yet you are confusing (on purpose) Deutsche Bank with the Deutsche BundesBank. The first is a commercial bank, the second is the national bank
Correct. Here are two very informative videos on that subject:
Part 1: http://www.youtube.com/watch?v=LrObZ_HZZUc
Part 2: http://www.youtube.com/watch?v=z1ROpIKZe-c
excellent videos. a pity they are so damn fast, for me. in short, it's corporations that run the City
in the very medieval sense of corporations (the same european fascists were talking about), i.e. trade corporations / guilds
The business of Germany is business. But it produces so much better, and so much more, than its "trading partners" that it has to lend to them in order to keep selling to them. The trading partners cannot repay, given their dead end demographics and socialist rot, and the euro prevents them devaluing their way out. The German people and the German business community are basically saying "Fuck you, pay me" but don't have mob muscle to enforce such. All that foreign debt germany holds on its precious balance sheets cannot be paid back. And Germany's physical and (ever dwindling) human capital stock will not maintain its current returns. You are Japan, delayed a decade or so, and your currency union gizmo only delayed the coming disaster, while making the inevitable oh shut decline steeper. One more time, it's the conceit of central planners wreaking disaster on a massive scale, but Germany seems incapable of learning this one thing, and this one thing is Sauron's evil eye and the dark side of force and cthulu's red steaming genitals all at once.
Well, Mario Draghi is stuck between a rock and a hard place. From the perspective of the markets, he does too little. From the perspective of Germany, he does too much. This is compounded by the fact that the Germans have a disproportionate amount of influence on the ECB governing council, due to their country being something of the locomotive of the Eurozone.
Even so, Germany has mainly kept itself afloat through exports. But with a stalling gobal trade market, that model of growth may have seen its best days. Difficult decisions are ahead one way or another.
Define "European."
"Besides, with government and corporate borrowing costs already super low, such a policy would have limited effect"
thats the bottom line.
Diminishing returns abound. Maybe Janet and Mario can double the debt loads again this year. That will get stocks higher at the expense of fiat currency, the policy du jour!
You, me, and Dr. Engali should form a band. Do either of you play an instrument? I do not.
we shall call it Doc engali and the tone deafs
I'm thinking Fonz and the Cangaroo rejects....we''ll as kito to join.
Kito will be our manager. He was born for this role.
https://www.youtube.com/watch?v=1dKrEDptjps
THE BIGER THE CUSHION THE SWEETER THE PUSHTIN!
THE WIDER THE WASTEBAND THE DEEPER THE QUICKSAND
YOU KNOW WHAT I MEAN!
Ton Defs
Want to join our band Nodebt? You can play the didgerido.
it's spelled dildo.
Not much call for a trombone these days. (Yes, I play the trombone- go on, laugh, get it all out of your system.) Maybe we could cover some George Clinton stuff.
Yes many trombones have gotten rusty.
No, I don't play an instrument, but I do play with myself from time to time. Does that count?
Or are politics held hostage to banking....
Well when you can only get elected with shit tons of moolah then you can say...oh...wait...
At this point on the timeline.......What are they even trying to accomplish ???
Higher pay?
A cushy job after their term...that is for sure....
Avoiding hard choices, hoping it will be the next guys problem ?
Cut the niceties, Weidmann, and just scream at the top of your lungs: "WE'RE FUCKED, PERIOD!"
Would make a nice change from all this prudent newspeak.
so what are they going to do about it?
"It also exposes the deep rifts that still mar the Eurozone, with countries including France and Italy calling for more flexibility while Germany insists on fiscal rigor."
the crux
no way germany agrees to full scale "printing" ... unless (and even then only a chance) they get much more say in individual country fiscal matters (ie: quit your damn deficit spending) ... and would countries agree to germany's terms??
euro should break apart (low bund yield is an implied bet on break up ... mark would soar) ... only way i see euro surviving is much lower euro (parity with usd)
lol. how I love this discussion, and how I love to read the various interpretations in the media
so, let's see:"keeping inflation low;protecting the central bank’s balance sheet from risks and strict separation from the financial needs of governments"
the first is "safely" between zero and two. the second is currently decreasing, and the third is anyway not even being discussed
but for Dr. Krugman the first is apocalyptic, for most the second is ballooning, of course with the third. I'd say it would be fun if it wasn't actually a serious matter
price stability means inflation close to zero. To me it seems they have already moved the target from inflation below 2 percent to inflation below 2 but close to 2 percent.
Central bank balance sheet is decreasing : There is a lot of talk lately of increasing the balance sheet of the ECB with one trillion.
Strict separation from financial needs and governments : the only thing standing in the way of that separation seems to be Germany (and maybe a few small Nordic countries). QE is in the air.
I was in Lille on sunday. In front of Le Palais des Beaux Arts an eloquent Parisian was explaining how 'fou' the system is and that the debt can never be repaid without creating more debt. Between hist teeth he mentioned that the solution was extinguishing of debt aka QE. My fear is the dude was, without saying it, preparing the French public for a big middle finger towards Germany. I bought his book as he seemed to be in the know.
Even non-economists like me are starting to understand some basics of the game that is being played, Ghordius. They ( you ? ) are playing with fire. Yes, the system might need an overhaul. That does not equate to an ( old fashioned ? ) rip off.
Please convince me I am paranoid.
Of course the ECB is going to pay. You have the squid at the helm and they are going to make the taxpayer pay a premium for shit that should be trading at a deep discount. We live in a mark to fantasy world.
how many votes does that squid have in the ECB council? what is he talking about? what is the ECB balance sheet doing, since one year?
in the last 18 months, the big difference between the FED and the ECB was that the first was forcing itself to eat, and the second was offering a buffet for banks that were increasingly sated. but now the Squid Chef is offering to eat sausages if packaged properly, and even the French government is protesting
Ghordius it's not going to be much of a badge of honor either way. If Europe does nothing credit will absolutely start blowing out from the Piigs and work it's way inward. It will be quite a sight to see.
It seems to me that the squid does what it wants and then gets the official stamp of approval after the fact. Spanish bonds are yielding less than U.S bonds for no reason.
Must have just discovered zero hedge and got a login
So....if they can't do their "job", time to end all central banks. Let the "elected" officials control their own printing presses. That way the 50% + 1 "voters" control their own fates.
Ever since LTCM
Soon followed by STLC (short term liquidity crisis.)
Smartest men in room attack!
At least the Dutch (or "the Ditch" as the Spanish Called it) once had a gold standard once.
Ah, Spain! Your King was always Portugese!
Fears? It is all about politics.
As Martin Armstrong notes, the head of the IMF, Christine Lagarde, is a lawyer.
The chairman of the FED is a politial appointee. It has been noted that the FED lost it's independence under Truman in 1951.
Shut up and print us some Moniezz!
And give it to me just like the last time!
Ignore the name calling! It's New York!
Just don't call The Bambino fat...
Backdoor ????.....is that like AIG getting 100¢ on the $, so they could give it all to Goldman Sachs
Germany recent economic (exports) strength courtesy of vendor financing the periphery. Greece (Greece!!!!), as an example, has had the advantage of a strong currency (euro) ... and goldman sachs to help hide its deficits ... to buy goods from germany. Financed by core banks.
Why the troika has been so interested in bailing out these countries ... give them loans which are turned around and given to core banks (Deutsche Bank's balance sheet more hazmat than yucca mountain) rather than help citizens.
“The medicine should not become worse than the disease”
It simply cannot be put more succinctly and/or elegantly. That, in a nutshell, is exactly what we have...
financial chemo 5% survival rate
The SWIFT payment system lock out tells you everything you need to know about central bank independence.
More like "Central Bank dependence."
Interest rates in the USA can only go higher from here folks. That's what Taper means...the end of QE is the end of QE PERIOD.
"Bring on the whiners of the strong dollar." Like for example...the Indepdendent State of Taxass.
http://video.cnbc.com/gallery/?video=3000316750
But, But, But, the banks job is to print.....
Hey Mr Bank President! Start Printing!
And get to work too!
It'll be called BRICS-G before long
It'll be called BRICS-G before long.
We should all devolve back to small city states, each with their own currency....
Conversions and valuations can still be handled by dataa sources and spreadsheets
"The concept of an independent central bank clearly focused on price stability is neither old-fashioned nor outdated…There is a risk of monetary policy, especially in the euro area, being held hostage by politics." -- Jens Weidmann
When was the concept of a central bank not political? Central banks are created to provide wealth and control people and resources to the advantage of the controllers.
Weidmann cannot fix the ECB by tweaking it; he only makes it stronger.
When you start tweaking what the ECB is doing and saying it will be better or stronger if this or that is done then what you are really doing is supporting its continued dominance and rearranging the chairs on the Titanic.
The only thing I would entertain at this point is criticism of both the ECB and the EU – both combine as a political and financial network of tyrannical bankers who are overriding the sovereignty of the nations of Europe and channeling their resources into a banker-controlled world government.
The ECB and the EU have central goals; they are not conflicting. The overriding truth is they are political organizations first because they were instituted to override the sovereignty of European nations. And in their weak moments they admit it; i.e., that they must have reduced sovereignty for this thing to work. That’s anti-freedom, anti-self-determination. The bankers are substituting themselves for elected officials. Germany gets to elect Merkel, France gets to elect Sarkozy or Hollande but these people override them.
The EU was sold as a marketing organization. What a lie.
Imo, any move to strengthen their organizations is bad for the people, i.e., "cutting taxes" would increase the money supply, implying the government knows what to do with it, you don't, that's the difference.
These peoples are not civic statesmen; they are bankers.
Another headline that deserves a "Captain obvious award"
As history of the EU shows, France decides what rules to obey and when. Same goes with 'democratic' decisions. First time Trichet went for the post as head of the ECB he got just a single vote as against 10 for his opponent. Cue outrage in France and a demand that despite the vote Trichet must still be given the job. Whih duly happened shortly after.
Italy is the smartest boy in the classroom concerning sucking every penny out of the EU. After all, they are the inventors of the Ponzi scheme. In the past Italy was forced too inflate their Lira to fool creditors like the U.S. is doing with the dollar but now with the Euro they can’t and they don’t have to do that anymore. They get bailed out now on Eu-taxpayers account. Mainly North-European as usual. Germany will be the chump at the table.
Banks in Italy and Spain Take More Than 45% of ECB Loans http://www.bloomberg.com/news/print/2014-09-18/banks-in-italy-and-spain-take-at-least-40-of-ecb-loans.html
This Is How Italy “Fixes” Its Unsustainable Debt Problem http://www.zerohedge.com/news/2014-09-22/how-italy-fixes-its-unsustainable-debt-problem
btw Russian sanctions are working . . . . on Germany. Industrial production plunges! http://www.maxkeiser.com/2014/10/russian-sanctions-are-working-on-german...
if he's so pro independent ECB, why is Germany so hell bent on controling ECB actions and criticizing Draghi at every step? Anyone see the humor of this article?
if he's so pro independent ECB, why is Germany so hell bent on controling ECB actions and criticizing Draghi at every step? Anyone see the humor of this article?