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Mario Draghi's Slippery Downward Slope
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
Mario Draghi made another huge faux pas last week, but it looks like the entire world press has become immune to them, because it happens all the time, because they don’t realize what it means, and because they have a message if not a mission to sell. But still, none of these things makes it alright. Nor does Draghi’s denying it was a faux pas to begin with.
And while that’s very worrisome, ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are -largely due to ’cause and effect’, no doubt-. We saw an account of a North Korean defector yesterday lamenting that her country doesn’t have a functioning press, and we thought: get in line.
It’s one thing for the Bank of England to research the effects of a Brexit. It’s even inevitable that a central bank should do this, but both the process and the outcome would always have to remain under wraps. Why it was ‘accidentally’ emailed to the Guardian is hard to gauge, but it’s not a big news event that such a study takes place. The contents may yet turn out to be, but that doesn’t look all that likely.
The reason the study should remain secret is, of course, that a Brexit is a political decision, and a country’s central bank can not be party to such decisions.
It’s therefore quite another thing for ECB head Mario Draghi to speak in public about reforms inside the eurozone. Draghi can perhaps vent his opinion behind closed doors, for instance in talks with politicians in European nations, but any and all eurozone reforms remain exclusively political decisions, even if they are economic reforms, and therefore Draghi must stay away from the topic, certainly in public. Far away.
There has to be a very clear line between central banks and governments. The latter should never be able to influence the former, because it would risk making economic policy serve only short term interests (until the next election). Likewise the former should stay out of the latter’s decisions, because that would tend to make political processes skewed disproportionally towards finance and the economy, at the potential cost of other interests in a society.
This may sound idealistic and out of sync with the present day reality, but if it does, that does not bode well. It’s dangerous to play fast and loose with the founding principles of individual countries, and perhaps even more with those of unions of sovereign nations.
Obviously, in the same vein it’s fully out of line for German FinMin Schäuble to express his opinion on whether or not Greece should hold a referendum on euro membership, or any referendum for that matter. Ye olde Wolfgang is tasked with Germany’s financial politics, not Greece’s, and being a minister for one of 28 EU members doesn’t give him the liberty to express such opinions. Because all EU nations are sovereign nations, and no foreign politicians have any say in other nations’ domestic politics.
It really is that simple, no matter how much of this brinkmanship has already passed under the bridge. Even Angela Merkel, though she’s Germany’s political leader, must refrain from comments on internal Greek political affairs. She must also, if members of her cabinet make comments like Schäuble’s, tell them to never do that again, or else. It’s simply the way the EU was constructed. There is no grey area there.
The way the eurozone is treating Greece has already shown that it’s highly improbable the union can and will last forever. Too many -sovereign- boundaries have been crossed. Draghi’s and Schäuble’s comments will speed up the process of disintegration. They will achieve the exact opposite of what they try to accomplish. The European Union will show itself to be a union of fairweather friends. In Greece, this is already being revealed.
The eurozone, or European monetary union, has now had as many years of economic turmoil as it’s had years of prosperity. And it’ll be all downhill from here on in, precisely because certain people think they can afford to meddle in the affairs of sovereign nations. The euro was launched on January 2002, and was in trouble as soon as the US was, even if this was not acknowledged right away. Since 2008, Europe has swung from crisis to crisis, and there’s no end in sight.
At the central bankers’ undoubtedly ultra luxurious love fest in Sintra, Portugal, where all protagonists largely agree with one another, Draghi on Friday held a speech. And right from the start, he started pushing reforms, and showing why he really shouldn’t. Because what he suggests is not politically -or economically- neutral, it’s driven by ideology.
He can’t claim that it’s all just economics. When you talk about opening markets, facilitating reallocation etc., you’re expressing a political opinion about how a society can and should be structured, not merely an economy.
Structural Reforms, Inflation And Monetary Policy (Mario Draghi)
Our strong focus on structural reforms is not because they have been ignored in recent years. On the contrary, a great deal has been achieved and we have praised progress where it has taken place, including here in Portugal. Rather, if we talk often about structural reforms it is because we know that our ability to bring about a lasting return of stability and prosperity does not rely only on cyclical policies – including monetary policy – but also on structural policies. The two are heavily interdependent.
So what I would like to do today in opening our annual discussions in Sintra is, first, to explain what we mean by structural reforms and why the central bank has a pressing and legitimate interest in their implementation. And second, to underline why being in the early phases of a cyclical recovery is not a reason to postpone structural reforms; it is in fact an opportunity to accelerate them.
Structural reforms are, in my view, best defined as policies that permanently and positively alter the supply-side of the economy. This means that they have two key effects. First, they lift the path of potential output, either by raising the inputs to production – the supply and quality of labour and the amount of capital per worker – or by ensuring that those inputs are used more efficiently, i.e. by raising total factor productivity (TFP).
And second, they make economies more resilient to economic shocks by facilitating price and wage flexibility and the swift reallocation of resources within and across sectors. These two effects are complementary. An economy that rebounds faster after a shock is an economy that grows more over time, as it suffers from lower hysteresis effects. And the same structural reforms will often increase both short-term flexibility and long-term growth.
And earlier in the -long- speech he said: “Our strong focus on structural reforms is not because they have been ignored in recent years. On the contrary, a great deal has been achieved and we have praised progress where it has taken place, including here in Portugal.
So Draghi states that reforms have already been successful. Wherever things seem to go right, he will claim that’s due to ‘his’ reforms. Wherever they don’t, that’s due to not enough reforms. His is a goalseeked view of the world.
He claims that the structural reforms he advocates will lead to more resilience and growth. But since these reforms are for the most part a simple rehash of longer running centralization efforts, we need only look at the latter’s effects on society to gauge the potential consequences of what Draghi suggests. And what we then find is that the entire package has led to growth almost exclusively for large corporations and financial institutions. And even that growth is now elusive.
Neither reforms nor stimulus have done much, if anything, to alleviate the misery in Greece or Spain or Italy, and Portugal is not doing much better, as the rise of the Socialist Party makes clear. The reforms that Draghi touts for Lisbon consist mainly of cuts to wages and pensions. How that is progress, or how it has made the Portuguese economy ‘more resilient’, is anybody’s guess.
Resilience cannot mean that a system makes it easier to force you to leave your home to find work, but that is exactly what Draghi advocates. Instead, resilience must mean that it is easier for you to find properly rewarded work right where you are, preferably producing your own society’s basic necessities. That is what would make your society more capable of withstanding economic shocks.
Still, it’s the direct opposite of what Draghi has in mind. Draghi states that [structural reforms] “.. make economies more resilient to economic shocks by facilitating price and wage flexibility and the swift reallocation of resources within and across sectors.”
That obviously and simply means that, if it pleases the economic elites who own a society’s assets, your wages can more easily be lowered, prices for basic necessities can be raised, and you yourself can be ‘swiftly reallocated’ far from where you live, and into industries you may not want to work in that don’t do anything to lift your society.
Whether such kinds of changes to your society’s framework are desirable is manifestly a political theme, and an ideological one. They may make it easier for corporations to raise their bottom line, but they come at a substantial cost for everyone else.
Draghi tries to push a neoliberal agenda even further, and that’s a decidedly political agenda, not an economic one.
There was a panel discussion on Saturday in which Draghi defended his forays into politics, and he was called on them:
Draghi and Fischer Reject Claim Central Banks Are Too Politicised
The ECB president on Saturday said his calls were appropriate in a monetary union where growth prospects had been badly damaged by governments’ resistance to economic reforms. Mr Draghi said it was the central bank’s responsibility to comment if governments’ inaction on structural reforms was creating divergence in growth and unemployment within the eurozone, which undermined the existence of the currency area. “In a monetary union you can’t afford to have large and increasing structural divergences,” the ECB president said. “They tend to become explosive.”
He even claims it’s his responsibility to make political remarks….
Mr Draghi’s defence of the central bank came after Paul De Grauwe, an academic at the London School of Economics, challenged his calls for structural reforms earlier in the week. Mr De Grauwe said central banks’ push for governments to take steps that removed people’s job protection would expose monetary policy makers to criticism over their independence to set interest rates.
The ECB president [..] said central banks had been wrong to keep quiet on the deregulation of the financial sector. “We all wish central bankers had spoken out more when regulation was dismantled before the crisis,” Mr Draghi said. A lack of structural reform was having much more of an impact on poor European growth than in the US, he added.
De Grauwe is half right in his criticism, but only half. It’s not just about the independence to set interest rates, it’s about independence, period. A central bank cannot promote a political ideology disguised as economic measures. It’s bad enough if political parties do this, or corporations, but for central banks it’s an absolute no-go area.
Pressure towards a closer economic and monetary union in Europe is doomed to fail because it cannot be done without a closer political union at the same time. They’re all the same thing. They’re all about giving up sovereignty, about giving away the power to decide about your own country, society, economy, your own life. And Greeks don’t want the same things as Germans, nor do Italians want to become Dutch.
Because of Greece, many EU nations are now increasingly waking up to what a ‘close monetary union’ would mean, namely that Germany would be increasingly calling the shots all over Europe. No matter how many technocrats Brussels manages to sneak into member countries, there’s no way all of them would agree, and it would have to be a unanimous decision.
Draghi’s remarks therefore precipitate the disintegration of Europe, and it would be good if more people would recognize and acknowledge that. Europe are a bunch of fairweather friends, and if everyone is not very careful, they’re not going to part ways in a peaceful manner. The danger that this would lead to the exact opposite of what the EU was meant to achieve, is clear and present.
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what is wrong with Germany calling the shots for everyone? after all they have working ethics, hard workers, fiscally responsible. Look at how they changes germany in a few short decades after World War II, do not know of any other country who has been able to do that.
I think they should call the shots in the US and UK too.
"There has to be a clear line between governments & central banks"
How about a clear line between the ,criminal, private, for profit, cartel of bankers who own, staff, and run central banks you fucking retards?
https://youtu.be/kgoFcyttk-s
The girl who jumped onto Draghi’s table should’ve smothered him with her Va-jay-jay ;-)
Looney
Draghi is a clown faced fuck puppet. Tar & feather him, then BBQ
Yeah, green sheen, that was the line that jumped out at me regarding the superficial stupidity of the article above. I started listening to the video you linked, but then skipped through it, because I had heard that all before many, many times in dozens of previously watched Excellent Videos on Money Systems.
The degree to which ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are is impossible to exaggerate! The REAL "slippery slope" is the way that civilization is NECESSARILY controlled by the principles and methods of organized crime. The basic structure of social pyramid systems is the ability to back up lies with violence, which have developed at an exponential rate through the history of Neolithic Civilizations to become the currently established systems of legalized lies, backed by legalized violence, which are primarily the ENFORCED FRAUDS that operate through the financial systems, which are debt slavery that have generated numbers which has become debt insanities.
THE BASIC PROBLEM IS THAT MONEY MUST BE MEASUREMENT BACKED BY MURDER. There is nothing but the dynamic equilibria between different systems of organized lies operating robberies. That PROBLEM necessarily exists because human beings and civilizations ARE entropic pumps of energy flows. The PARADOX is that the concept of entropy was inverted, which reflects the ways that everything else was inverted by the triumphs of the biggest bullies' bullshit social stories dominating the ways that people think and communicate.
Governments are NECESSARILY the biggest form of organized crime, controlled by the best organized gang of criminals (which currently happen to be the international bankers, or the banksters.) Of course, that is based on the PARADOXES that those who are the biggest and best organized gang of criminals are able to promote the view that there is a fundamental dichotomy between them and everyone else. The battles between organized crime versus government, or terrorists versus government, etc., are ALWAYS that the governments are the biggest and best organized criminals and terrorists (and that is especially the case regarding those who most effectively control the government.)
The ONLY thing that has deeply changed during human history has been progress in physical sciences, which has enabled developing technologies which are trillions of times more powerful and capable, to be primarily applied to become better at controlling civilization through backing up lies with violence, with the same old human psychology and political processes. The GREAT PARADOX is that there must necessarily be some death control systems (which back up the debt control systems), however, the actual history of the development of those artificial selection systems was that those were driven by natural selection pressures to become based on the maximum possible deceits (which back up the financial affairs based on the maximum possible frauds.) The MAD Money As Debt system is backed by the MAD Mutual Assured Destruction system, which have become globalized systems of electronic monkey money frauds, backed by threat of force from apes with atomic bombs. THAT MADNESS BECAME ASTRONOMICALLY AMPLIFIED TO BECOME BIGGER THAN CAN BE FULLY COMPREHENDED.
Anyway, the point of my response to both this article, as well as the video that you linked, green sheen, is that "public banks" can not work unless the public also operates the public murder system to back up the public money system. That is the correct overview both in the shorter term, as well as in the longer term. In the shorter term, the reasons who and why the banksters were able to capture control over the public money supply was that they were the best organized gangs of criminals, which were able to persistently apply the methods of organized crime to the political processes, such as bribery, intimidation, and assassination of those who could not otherwise be bribed or intimidated. Those are the REAL REASONS how and why we ended up having Central Banks which are the Fraud Kings, that effectively control, or have effectively privatized, the powers of sovereign states, that the history of War Kings originally made and maintained.
Your comments, green sheen, were another typical example of continuing to presume that there should be some "clear line between" the biggest and best organized gangs of criminals, versus everyone else. Actually, everyone has some power to rob, and power to kill to back that up. Governments assembled and channeled those powers, while then those who were the best at doing that were able to effectively capture control over the powers of governments, so that today the international banksters are the Kings of Fraud, that are able to legally counterfeit the public "money" supply in ways where that is enforced by governments, as a runaway system of enforced frauds, which are symbolic forms of robbery, which transfer ownership and wealth to those who are closer to the SOURCE OF THAT "MONEY" SUPPLY.
In the shorter term, the problems with the political economy could not be resolved unless the public was able to recapture control over the public money supply. That would require that enough people understand better how and why human beings live as entropic pumps of energy flows, where the biggest bullies' bullshit was able to invert the concept of entropy, similar to how the bullies' bullshit was able to invert the concept of pretty well everything else (such as the words "money" and "dollar" now mean nothing like those words used to mean, but rather, have tended towards meaning the opposite of what they used to mean.)
In the longer term, the political economy is inside of the human ecology, which means that in the longer term there also could not be any better longer term resolutions of the problems without the central feature of that being the development of better death control systems. What I am proposing is that one should go through a deeper analysis of how and why we ended up with the current systems of artificial selection being driven by natural selection, to become that governments are the biggest forms of organized crime, controlled by the best organized gangs of criminals, which then indicates that the only realistic resolutions of those problems requires that there be developed better organized crime, so that better debt controls could be backed by better death controls.
That is NECESSARILY what would be behind the success of "public banking" or the development of a public money supply being controlled by the public. That is not possible unless enough of the public went through enough of the paradigms shifts in the ways that they perceive politics to not only understand how the Central Banks are the Fraud Kings, but also to understand how and why that was possible, which would mean that enough "citizens" would understand that they were members of an organized crime gang called their country. In that context, at the present time, our biggest problems are that the vast majority of people have been brainwashed to believe in the biggest bullies' bullshit world view, which is as backwards and absurd as it can possibly be, in every way, or every level! I REPEAT: the degree to which ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are is impossible to exaggerate!
To move through the notions regarding "public banking" more thoroughly and adequately requires facing the fundamental facts that MONEY IS MEASUREMENT BACKED BY MURDER. The currently existing systems, with the Central Banks being the Fraud Kings are due to the long history of those sociopolitical facts developing to take the form that they take now. Given that, it is RIDICULOUS to propose that: "There has to be a very clear line between central banks and governments."
That is the kind of backwards absurdity that the controlled opposition of reactionary revolutionaries promotes. That represents the same old-fashioned false fundamental dichotomies and related impossible ideals that the biggest bullies originally promoted. There is nothing but the core of organized crime, which today is especially the Central Banks, as the Kings of Fraud, surrounded by controlled opposition groups, which are about the only publicly significant opposition to that organized crime.
The GRAND PARADOXES revolve around human beings and civilizations necessarily operating as entropic pumps of energy flows, which have developed artificial selection systems based upon the maximum possible deceits and frauds, which includes the most sublimely abstract manifestation of that as the concept of entropy having been inverted. (An arbitrary minus sign was inserted into the entropy equations of thermodynamics and information theory.) The GRAND PARADOXES are that the realistic solutions to the real problems within systems based upon backwards absurdities are intensely following that same pattern! That is to say, almost everyone who superficially begins to understand that the banksters have created systems wherein the Central Banks are the Kings of Fraud, then collapse back to the same old-fashioned false fundamental dichotomies, and related impossible ideals, as the basis for proposing their solutions to those problems, but those "solutions" are bogus, backwards and absurd, because they stay within the same frame of reference of the biggest bullies' bullshit world view.
The deeper analyses reveal not only that governments are the biggest forms of organized crime, controlled by the best organized gangs of criminals, but also that they must necessarily be. Therefore, any better government must necessarily be based upon better organized crime, which is the only ways that there could actually be better debt controls backed by better death controls. Furthermore, that is correct both in the short-term, as well as in the longer term.
In the shorter term, the problem is that the monetary system has become a thoroughly metastasized cancer, wherein the ways that everyone must live as some sort of system of organized lies operating robberies has become the extremely unbalanced forms of the banksters dominating everything to the degree that ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are!
In the longer term, the goal would be to develop better integrated systems of human, industrial and natural ecologies, which necessarily would have to have their death control systems be central to everything else. The ESSENTIAL PROBLEMS that the human species faces are that progress in physical science has not been surpassed by progress in political science. The ESSENTIAL SOLUTIONS (if there are going to be any) are for political science to develop. However, in order to do that, it would be necessary to go through series of intellectual scientific revolutions to correct the ways that the biggest bullies' bullshit world view has dominated the languages that people use to think and communicate, including the philosophy of science that they tend to take for granted.
We already have globalized electronic frauds, backed by the force of atomic bombs! Of course, that is a seriously "downward slippery slope" of frauds being enforced, which never stops those frauds from being false, but rather drives the entire civilization to become more psychotic and criminally insane! Recognizing that the Central Banks are the Kings of Fraud is merely a baby step towards what the longer term resolutions for those problems may be. "Public banking" is one half a step towards that, perhaps, but if and only if enough of the public understood that money is necessarily measurement backed by murder. There is no way to have a better money system without a better murder system to back that up. However, that faces the GRAND PARADOX that natural selection has driven the existing artificial selection systems operated through the combined money/murder systems to be based on the maximum possible frauds and deceits.
Of course, that is what the central banks are the prime examples of, as the most extreme forms of the best organized gang of criminals being able to control governments, so that there are runaway frauds, which are symbolic robberies. However, so far, the relatively small minority of people who become aware of that continue to promote bogus "solutions," which do not admit that whatever "monetary reforms" they propose could not actually exist without "revolutions" in the ways that the murder systems backed up that monetary system. At the present time, ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are, BECAUSE THEY CONTINUE TO DELIBERATELY IGNORE ALL OF THAT, AS MUCH AS THEY CAN, AND INDEED, FEEL THAT THEY WANT TO!
But Congress supplements their pay with FED inside information and are not accountable for using it? How do you separate that? That is the tacit agreement since the Act was created.
Not just the FED, but all markets. After all, they wrote themselves an exemption to the law. For the good of the people, don'cha know....
"A central bank cannot promote a political ideology disguised as economic measures." Actually, every economic measure a central bank takes is firmly anchored in its political ideology. Saving the banks by forcing everyone into QE and ZIRP was a political decision, not an economic one.
"Fairweather friends", my Mom used to say that well before i knew what it meant. Excellent post, one of many.
this:
"Draghi states that [structural reforms] “.. make economies more resilient to economic shocks by facilitating price and wage flexibility and the swift reallocation of resources within and across sectors.”
That obviously and simply means that, if it pleases the economic elites who own a society’s assets, your wages can more easily be lowered, prices for basic necessities can be raised, and you yourself can be ‘swiftly reallocated’ far from where you live, and into industries you may not want to work in that don’t do anything to lift your society.
Whether such kinds of changes to your society’s framework are desirable is manifestly a political theme, and an ideological one. They may make it easier for corporations to raise their bottom line, but they come at a substantial cost for everyone else."
There has to be a very clear line between central banks and governments. The latter should never be able to influence the former, because it would risk making economic policy serve only short term interests (until the next election). Likewise the former should stay out of the latter’s decisions, because that would tend to make political processes skewed disproportionally towards finance and the economy, at the potential cost of other interests in a society.
Bankster Rap. Arrest them.
Another Keynesian mad man.
Print ever more until it causes massive inflation and blows up.
Believe it or not it seems they all hate each other within the EU - they are just posers for the cameras and media but for sure put them all inside a boxing ring and they will all fight for survivor. The Brits are really in isolation to the rest of the EU and that makes them the most hated nation within the EU - what a shame!!!
The dictator is coming ....https://www.youtube.com/watch?v=juFxBhDSK9s
"The way the eurozone is treating Greece has already shown that it’s highly improbable the union can and will last forever. Too many -sovereign- boundaries have been crossed"
The unofficial intention of the EU is not to keep the nations sovereign but to enslave them. Just in the way Europe is a vassal to USA EU countries must bow for their young master. A nice way to do that is to ruin them with debt.
The question is now: Who is next ? A small country..will do. Belgium, The Netherlands, Denmark... Small and rich.
In the Netherlands a referendum was held. result 70% against the EU.
The response of the facsists, christian in this case, was: Rename the treaty, change some little unimportant things and let it signed by the governments: The treaty of lisbon ! That was the first warning !
Draghi and Fischer Reject Claim Central Banks Are Too Politicised
The reason for having a central bank is because of kings wish. The central bank system is nothing else but political !
Economically one is far better off without central banks.
The best tool to suppress the people is via the central bank. Kings demanded their coin to be the only legal one. The birth of the central banks lis ong before the medievals .
What a tiny little faggot of a man. Did you see how small and terrified he looked when that perfectly normal sized German (or was it Danish or Dutch?) girl ran up and threw glitter on him?
Draghi couldn't get laid even if he had to pay for it by raping little boys in Thailand.