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Bundesbank's Weidmann Likens Draghi's OMT To "Devil's Work"

Tyler Durden's picture




 

Ongoing grand plans to flood the economy market with money have reminded Bundesbank's Jens Weidmann of the scene in the play Faust - when the devil (Mephistopheles) 'disguised as a fool', convinces an emperor to issue large amounts of paper money - which solves the kingdom's financial problems in the short-term but ends rather badly in rampant inflation.

As The Telegraph notes, without specifically mentioning Mario Draghi’s bond-buying programme, he said: “If a central bank can potentially create unlimited money from nothing, how can it ensure that money is sufficiently scarce to retain its value?” He added: “Yes, this temptation certainly exists, and many in monetary history have succumbed to it,” Mr Weidmann warned.

Although the remarks were in context - Frankfurt is currently marking the 180th anniversary of the death of Goethe - they defy calls by leaders for Mr Weidmann to tone down his criticism of the ECB, particularly at a febrile moment in the crisis.

 

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Tue, 09/18/2012 - 23:07 | 2809655 eurusdog
eurusdog's picture

Getting rather short tempered, yet somewhat civil over there!

Tue, 09/18/2012 - 23:42 | 2809757 Chris Jusset
Chris Jusset's picture

Herr Weidmann is 100% CORRECT!  At least someone over in Euroland can connect the dots.

Wed, 09/19/2012 - 00:02 | 2809799 vast-dom
vast-dom's picture

hey ty let's get some coverage for BIT COIN

 

http://www.youtube.com/watch?v=OtN9YUvh_XM

 

cryptocurrencies

 

https://www.coindl.com

http://www.bitmit.net

Wed, 09/19/2012 - 03:47 | 2810047 Western
Western's picture

+1

 

Users here often get junked for any bitcoin talk. This just means the trolls don't work past 6pm western.

Thu, 09/20/2012 - 05:02 | 2814143 Western
Western's picture

yep.

Wed, 09/19/2012 - 00:45 | 2809893 walküre
walküre's picture

At min. 2/3 of the population is connecting the dots in Germany.

"money from nothing" is worth nothing.

The question on most German's mind is why are the politicians HELL BENT on subjecting the nation to these policies?

Surely they're not foolish to believe this will actually FIX anything, so what is their agenda?

The Drain from Spain has no bottom...

Wed, 09/19/2012 - 01:53 | 2809957 Terp
Terp's picture

so what is their agenda?

 

Selling out the country to their squid masters, like they do for almost 70 years now.

 

 

Wed, 09/19/2012 - 04:25 | 2810090 Just Ice
Just Ice's picture

Sad that Mr. Weidmann seems to be the only ethical banker with integrity left.  Also says something about those sniping for him to quiet down.

Wed, 09/19/2012 - 05:30 | 2810142 noses
noses's picture

"money from nothing" is worth nothing.

As long as the chicks are for free...

 

While we're simulating education by quoting Goethe we might also read The Sorceror's Apprentice

Back now, Draghi

Into the closet!"


Wed, 09/19/2012 - 07:06 | 2810214 Curtis LeMay
Curtis LeMay's picture

The question on most German's mind is why are the politicians HELL BENT on subjecting the nation to these policies?

Simple: So that Heinze and Lotti can dream of pretending that they are EUnuchs, as opposed to Germans...

Yet, the only rational soultion is that Germans simply grow up - and smell the roses ;)

Tschüss!

Wed, 09/19/2012 - 07:35 | 2810250 Zero Debt
Zero Debt's picture

No way 2/3 in Germany knows what is going on. The figure is less than 1%.

If the Germans had connected any dots, they would have voted and debated to stop Target2 imbalances from growing, stopped ECB monetization, stopped LTRO, stopped the ESM treaty and perhaps even avoided creating and joining the Euro in the first place.

As of now, the German constitutional court is a rubber stamping institution of the banks. If they can approve the ESM, whose treaty is nothing less than the establishment of a sovereign country, they will approve anything.

The limit they put on the ESM funding is just going to be as effective as the Euro currency deficit limit, and the prohibition of outright ECB monetization, which means the limit is a piece of laughable rubbish.

By their deeds you shall know them. The people think they have a lot of time to argue and complain. In reality, considering the magnitude and scale of the issue and the total lack of action to resolve the root causes, they are nowhere near of showing a realistic understanding and time is working against them every day.

Wed, 09/19/2012 - 08:42 | 2810444 falak pema
falak pema's picture

after the horse has bolted from the barn he suddenly sees the light; All the while Mutti sang : 999!

Since London 2009! And did nothing in Eurozone to right wrong and kill the private bank derivatives storm, socialising debt into sovereign bond sprees. THose Club MEd shills saw the debt/gdp ratio double OVERNIGHT!

I have a feeling that German and French banks did a deal then in 2009 : we save OUR skins first even if it means letting those Club-Med shills burn under Anglo HF speculation; once they realise we are not joint and several to defend Euro SOLIDARITY continent wide! 

The one eyed leading the blind. Now the print to infinity tsunami tide.

Wed, 09/19/2012 - 02:14 | 2809973 Silver Bug
Silver Bug's picture

Flooding the market with fiat money is most definitely akin to devils work.

 

http://ericsprott.blogspot.ca/2012/09/eric-sprott-gold-and-silver-outlook.html

Wed, 09/19/2012 - 03:05 | 2810006 Urban Redneck
Urban Redneck's picture

Literacy can do that

Tue, 09/18/2012 - 23:08 | 2809656 GOSPLAN HERO
GOSPLAN HERO's picture

Comrade Obama will save the USSA.

Tue, 09/18/2012 - 23:45 | 2809765 LMAOLORI
LMAOLORI's picture

 

 

Comrades in Arms

Das Gift How Angela Merkel's bold plan to save Europe may have just saved Barack Obama.

http://www.foreignpolicy.com/articles/2012/09/17/das_gift?page=full

Tue, 09/18/2012 - 23:09 | 2809659 Agent P
Agent P's picture

So to recap...at Goldman = God's work...post Goldman = Devil's work.  Got it.

Wed, 09/19/2012 - 02:05 | 2809966 Id fight Gandhi
Id fight Gandhi's picture

Watch an old movie on YouTube with an open mind called "jud süß." Yes it's WWII propaganda but a very interesting tale of how the king sold out the roads financed his assets and such.

Exactly the same thing. History repeats.

Wed, 09/19/2012 - 06:33 | 2810186 StandardDeviant
StandardDeviant's picture

Yes, it does.  But if it's a cautionary tale about the dangers of fiat currency inflation that we want, surely we can do better than a nasty bit of propaganda produced at the request of Joseph Goebbels?

(I do encourage ZH readers to take the opportunity to read Umberto Eco's "The Prague Cemetery" -- though some will no doubt take away the wrong message...)

For a better example, see http://mises.org/daily/1504 for a good summary of Edmund Burke's analysis of the 18th-century French hyperinflation, in which Louis XIV's debts were diluted by massive money printing on the part of the Revolution's "National Assembly".

This finally stopped when gold coinage was reintroduced, by one Napoleon Bonaparte.  Is that the way that things will have to go in order to stop it this time around?

Tue, 09/18/2012 - 23:15 | 2809677 tony bonn
tony bonn's picture

despite all of official germany's pompous misgivings about the fiscally irresponsible among the eurozone, they are so in love with the eu that they will give whatever is required to save it, in order to dominate it, including massive inflation.......paris vaux bien une hyperinflation....

Tue, 09/18/2012 - 23:21 | 2809696 Sandmann
Sandmann's picture

Dominate it ? You are mad. Schauble and his iilke loathe Germans and want Germany dispersed into "Europe" so it no longer exists as a nation. They are the brainwashed fed propaganda about the evil nature of being German and that it can only be atoned for by self-abnegation. It was the Anglo-American Morgenthau Propaganda that Germans were to be Guilt Slaves used by the victors to haul their plough.....it has simply created another generation of Politicos with Neo-Fascist Greens and CDU-Zentrum Politicians in league with Socialists to eradicate German national identity.

Weidmann is showing backbone - a rare occurrence, but he is 44 and grew up in a different era

 

Wed, 09/19/2012 - 00:51 | 2809900 walküre
walküre's picture

Weidmann's generation has come full circle.

FINALLY

The US lied about 9/11 and lied about going to war with IRAQ.

Are we supposed to believe this was the first time in history the US went to war under false pretenses and lied to the world and their own people?

 

Tue, 09/18/2012 - 23:17 | 2809688 chump666
chump666's picture

And i though Mario was a god fearing catholic.

Tue, 09/18/2012 - 23:22 | 2809698 Sandmann
Sandmann's picture

I doubt he knows any other god but the one in the mirror

Tue, 09/18/2012 - 23:28 | 2809717 chump666
chump666's picture

Yes, vanity.  He looks vain.  But of late Bernanke looks worried.  Interesting.

But Europe is filled with neurosis.

Wed, 09/19/2012 - 05:07 | 2810129 Sandmann
Sandmann's picture

Didn't the Zero Hedge Chart show the Winning Line Up of Bankrupt Nations with Japan holding Gold; Greece holding Silver, and US holding Bronze ?

 

I don't know if Bronze is acceptable collateral !

Tue, 09/18/2012 - 23:55 | 2809785 Peter Pan
Peter Pan's picture

The god in the mirror may turn out to be Dorian Gray and the day will come when Draghi will not have the nerve to look at himself in the mirror.

Tue, 09/18/2012 - 23:27 | 2809714 AUD
AUD's picture

he said: “If a central bank can potentially create unlimited money from nothing, how can it ensure that money is sufficiently scarce to retain its value?”

If he said that then he is full of shit, value is not determined by quantity.

Value is determined by quality. The reason Draghi's OMT is "Devil's Work" is because Draghi is buying a load of junk from insolvent banks, thus devaluing the Euro. Junk is junk no matter how much of it you buy.

Tue, 09/18/2012 - 23:47 | 2809773 jimmyjames
jimmyjames's picture

If he said that then he is full of shit, value is not determined by quantity.

Value is determined by quality.

*************

In a fiat money system-quantity does count-as the supply is increased-the less value of each newly added one-

Quality must speak for itself and be recognizable as superior value-

 

Wed, 09/19/2012 - 01:49 | 2809947 AUD
AUD's picture

In a fiat money system-quantity does count-as the supply is increased-the less value of each newly added one

Not if each newly added one is the same quality as the one before it, & so on & on. One dud cheque is not more valuable than 1 trillion dud cheques, they are all dud cheques & all of no value.

Wed, 09/19/2012 - 13:28 | 2811808 geekgrrl
geekgrrl's picture

I'm not following your point. Fiat money doesn't have inherent quality. Although it is sometimes made with metals or cloth, it is its symbolic quality that carries its value in commerce. As a symbol that represents present claims on future goods and services, if its quantity is increased, the same future goods and services will be more expensive, since a larger amount of money is chasing the same goods and services. And the first people to get that newly created money get the biggest bang for the buck, since they get to spend the money before it is devalued. I've seen this theme over and over on ZH and it seems to make a lot of sense to me.

Wed, 09/19/2012 - 00:23 | 2809848 geekgrrl
geekgrrl's picture

It seems to me he is asking a rhetorical question that is more of a warning. I think it's a pretty clever thing to say, using the context of Faust and Goethe's death anniversary to make the larger point about the perils of printing.

Wed, 09/19/2012 - 01:52 | 2809955 AUD
AUD's picture

Whatever, but it's also wrong. Scarcity, or abundance, does not determine value, quality does. He is either incredibly ignorant or he is deliberately obfuscating. As he is head of the Bundesbank, I'll go with the latter.

Wed, 09/19/2012 - 02:20 | 2809976 Poor Grogman
Poor Grogman's picture

Dude just chill you are on the wrong side on this one...

Tue, 09/18/2012 - 23:30 | 2809722 Unbezahlbar
Unbezahlbar's picture

"His outlook has been characterized as conservative[1]"

 

http://en.wikipedia.org/wiki/Jens_Weidmann

Tue, 09/18/2012 - 23:31 | 2809724 Bennie Noakes
Bennie Noakes's picture

when the devil (Mephistopheles) 'disguised as a fool', convinces an emperor to issue large amounts of paper money

Hmmm. A picture of a particular Nobel prize-winning economist suddenly pops into my mind.

Wed, 09/19/2012 - 00:00 | 2809795 Peter Pan
Peter Pan's picture

Emperor Draghi knows he has no clothes on (i.e. no real money) but resolutely continues to strut across the stage with great bravado. It is remarakable how these old stories (e.g. The Emperor's New Clothes) are now finding real life situations to attach themselves to.

Tue, 09/18/2012 - 23:31 | 2809726 kevinearick
kevinearick's picture

This is exactly the problem the einsteins thought they were going to solve, at least until they could escape under the guise of war, or were long dead.

let's turn up the dial again shall we?

Tue, 09/18/2012 - 23:43 | 2809761 worbsid
worbsid's picture

Is it not the relative scarcity of gold that gives it value?

Wed, 09/19/2012 - 02:03 | 2809965 AUD
AUD's picture

No. Gold is an inert metal that has been mined for thousands of years. Almost every ounce of gold that has been mined still exists.

Gold is not scarce. It does however have a certain quality that makes it eternal.

Tue, 09/18/2012 - 23:48 | 2809774 Cosimo de Medici
Cosimo de Medici's picture

Hey Tyler, you mixed up the picture.  That's me and Henry Kissinger at Bohemian Grove in '92.  Damn, I was young back then!

Wed, 09/19/2012 - 08:33 | 2810419 falak pema
falak pema's picture

did he tell you over scotch and a three foot putt that "power was life's best aphrodisiac?"

Thu, 09/20/2012 - 02:21 | 2814035 Cosimo de Medici
Cosimo de Medici's picture

No, but he did say something about marrying a woman a foot taller than him being the best.  Sadly, that narrowed down the field for one such as me, so I'll never know.  By the way, on the course, anything shorter than a 'Henry' was a gimme.  That sure helped in the wind at Cypress Point, especially on the 16th.  Guy's barely 5'1" now, so it's yips all around.

Wed, 09/19/2012 - 00:40 | 2809822 ArrestBobRubin
ArrestBobRubin's picture

And while we're on the topic of Devil's Work.... boy are his Chosen minions busy busy busy:

Anti-Amerikan Protests Exposed
Wed, 09/19/2012 - 00:24 | 2809850 gwar5
gwar5's picture

They all know what the dangers are but they are going to do it anyway. German pussy riot.

 

 

Wed, 09/19/2012 - 00:27 | 2809858 grid-b-gone
grid-b-gone's picture

scarce, fungible, durable, divisible, portable

Printable doesn't make the list.

If one rules out carved seashells and a few other historical options, follow the lead of central banks and a couple thousand years of history and stick with the two choices that always make the list.   

Wed, 09/19/2012 - 02:51 | 2809994 Nobody For President
Nobody For President's picture

OMT = One More Time

Wed, 09/19/2012 - 08:31 | 2810408 falak pema
falak pema's picture

draghi drag queen and nymphomaniacal foreplay! 

Wed, 09/19/2012 - 03:16 | 2810013 Colonel Klink
Colonel Klink's picture

Seig smile!  At least someone is calling BS on Draghi's scheme.  Outting him for the printing shitfuck he is.  I believe he has an American traitorous twin.

Wed, 09/19/2012 - 09:49 | 2810735 Zero Govt
Zero Govt's picture

don't forget the English triplet and Japanese quandtruplet (!)

bastard brats one and all

Wed, 09/19/2012 - 05:15 | 2810135 sUccRAM
sUccRAM's picture

Money supply scarce? Why does no one understand that money is not being printed out of (thin or thick) air, but rather it reflects a debt on the other side. People do not just wait outside to receive their demanded money supply and it is just a matter of print and distribute. All this monetarian theory is nonsense.  No debt (credit), no money. Is this too difficult to understand?

The central banks can print and print...if there is nobody who presents a debt, no money will be issued. The basements can be full of worthless paper, nothing will happens.

Hyperinflation is just going together with massive credit expansion, mostly initiated of course by - the state. If central banks are going to issue money to some entity without (theoretical) limit, without  the negative side of credit, debt, then this would be initiate hyperinflation. Otherwise this is a zero sum game.

Again: No fresh credits, no fresh money, no inflation. Money can "flee" from one type of asset to others or being concentrated (in the hands of just a few people or a specific asset (bubble)).

Do you want to see hyperinflation? Then ask Obama to start the helicopters throwing money down to the plebs... Otherwise: Deflation and depression. Not Fed nor ECB will change anything with their "unlimited" money supply policy. It is not just because the warehouse is full, people will come and buy...

 

Wed, 09/19/2012 - 06:02 | 2810164 Silberadler
Silberadler's picture

Faust ! Bitchez.

 

FAUST II

In Faust II Johann Wolfgang von Goethe eloquently
describes the 'virtues' of paper money.
Goethe, one of the greatest philosophers/writers of all times had closely followed the paper
money experiments of John Law in France as well as the Assignat scandal during the French Revolution.
He understood the workings of a paper money system.

Here is further proof of his astute knowledge about economics:

Chancellor

In my old days my happiness how great!
Hear, then and see this fateful scroll, for this
Has turned our woe and wailing to bliss.

Be it to all whom it concerneth known,
This not is worth a thousand crowns alone,
And for a guarantee, the wealth untold,
Throughout the empire buried, it hath hold.
Means are on foot this treasure bare to lay.
And out of it the guarantee to pay.

Emperor

Crime I surmise, some monstrous fraud.
Oh shame!
Who dared to counterfeit the Emperor's
name?

A few strokes of thy pen, and so thou.lt seal,
This revels crowning joy, - thy people's weal.
These strokes thou mad'st, which were ere
morning-tide.

By thousand hands in thousands multiplied.
That all alike the benefit might reap,
We stamped the whole impression in a heap;
Tens, thirties, fifties, hundreds, off they flew .
You can.t conceive the good they were to do.
Look at your town, - t'was mouldering and half
dead.
Now all alive, and full of lustihead!
High as thy name stood with the world, somehow
T'was never looked so kindly as now.
The list of applicants fill to excess;
This scrip is rushed at as a thing to bless..

 

Wed, 09/19/2012 - 06:32 | 2810173 Urban Redneck
Urban Redneck's picture

We could also dredge up a more complete context of Machiavelli's Prince...

However, which specific side he was taking is less significant than the foundation and background the work provides for subsequent debate.

Wed, 09/19/2012 - 08:37 | 2810436 CitizenPete
CitizenPete's picture

 

 

 

There are none so hopelessly enslaved than those who falsely believe they are free.  Goethe

Wed, 09/19/2012 - 06:51 | 2810199 nmewn
nmewn's picture

Faustian Bargains bitchez.

Wed, 09/19/2012 - 08:35 | 2810428 CitizenPete
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