Thursday 5 February 2015

Who asked the ECB to kill Greece?

Why is the world so dominated by Central Banks?

It is a strange phenomenen that we live in the West in 'deomcracies' but virtually every country has a central bank. The key for all central banks is that they are private- they are not state owned nor even state managed. This is a legacy from their establishment by the Rothschilds and other wealthy families a couple of centuries ago when money was desperately needed to fight wars (these families never founded the banks, but they rather helpfully at the ime put up all the money!).

Countries with independent central banks are generally held to be more stable in the international political economy. The Banks act as a buffer against populist or crazed politicians.

However, this means they can also do things that are themselves risky and there is little oversight. The Federal Reserve in the US decided to expand its balance sheet by $5 trillion during the 2008/9 crisis - five times what Congress approved on the 'bailout' which was the main political discussion at the time.

Just today we can see the effects of central bank. Greece has been making conciliatory noises for the past week about debt restructuring and playing nicely with the EU and Germans, despite Syriza sweeping to power.

In London the new finance minister got a good reception, less good in Germany but they did hear him out. Yet today he has met with Mario Draghi at the European Central Bank. Things have not gone well, straight after the meeting the ECB has withdrawn the right to use Greek bonds as collateral for Greek Banks which has meant a 300% increase in their borrowing costs.

Clearly, Draghi is sending a message that the Greeks need to negotiate in good faith with the ECB and EU.

But who elected Draghi? Why should the ECB be allowed to take actions that are not sanctioned by the Euro nations?

Central banks, although independent are situated in a Country. It is hard to imagine the Bank of England really acting against the best interests of the UK economy - of course, we know it makes makes mistakes the whole time, but there is no intent here, just incompetence.

The ECB is a more dangerous institution, it is not beholden to anyone or anything and yet is the most powerful institution in the EU. How powerful and monomaniacal we will find out in the next few months as the new Greek debt crisis unfolds.


John in Cheshire said...

I'd suggest that even though many of us are experiencing schadenfreude over Greece's response to the EU,it is worth remembering that this spat is amongst the various kinds of socialists. So,no matter the outcome it will be bad for normal people.

Budgie said...

"But who elected Draghi?" Well, who elected the EU? Come on CU, the ECB is about as independent of the EU as my left cheek is from my right. And as I have warned for more than 15 years the EU intends to be a country, in fact already is now. Only the truly naive, or those with an agenda, think the EU is just a trading bloc.

BE said...

The Bank of England was nationalised in 1946. It's "independence" in monetary and regulatory policy derives from parliamentary statute. It would take about ten minutes to bring control of any or all instruments back to the cabinet/Parliament/the relevant Secretary of State.

It's a bit different in the Eurozone because, without sounding like I am being patronising, there are several different independent nations signed up. Thus, it's a bit more complicated. Who would control cede to otherwise, the President of Europe? Which one?

As for the ECB turning the taps off, this was predictable and indeed predicted.

Who elected Draghi? Really?

I am interested in the constitutional and institutional development of the USA. The first US constitution went down in flames quite quickly, because the federal authorities had no power to levy tax. It took until 1913 to get a permanent central bank established in the USA. (They had several goes, and several long periods with no central bank at all.)

1776 - 1913. And we are getting worked up because a federal European currency doesn't work perfectly after about twenty-ish years of the European Union?

James Higham said...

Who asked the ECB to kill Greece?

Them of course.

Jan said...

There is no real's just about whoever has the power and influence which in effect means whoever has the money has it all.

We have allowed money to become a false god.

hovis said...

THe ECB's Mandate is not to turn off the liquidity taps -that it does is predicatable exercise if power.

The Greek did not ask the ECB to kill Greece, nor

So good stuff via Alphaville

As to CBanks - remember in the US case Andrew Jackson saw them as a threat to individual liberty and violated state sovereignty. He thus vetoed the creation of the "Bank of the United States"

think he was kinda right...

hovis said...

my normal kinda typos when I'm typing fast - you get the drift.

Demetrius said...

Restore the Habsburgs.

Budgie said...

"Otto von Habsburg was Vice President (1957–1973) and President (1973–2004) of the International Paneuropean Union, and served as a Member of the European Parliament for the Christian Social Union of Bavaria (CSU) 1979–1999." (Wiki)

"Since 20 January, a truly European radio station is broadcasting in Ukraine, its main sponsor, Karl-Habsburg Lothringen, told EurActiv in an exclusive interview. Karl Habsburg-Lothringen is an Austrian politician and head of the House of Habsburg. Since 1986, he has served as President of the Austrian branch of the Paneuropean Union. Habsburg-Lothringen was an MEP between 1996 to 1999." (EurActiv)

dearieme said...

You must know the old Otto von Habsburg joke? A friend says to him "Otto, are you going to watch the Austria - Hungary game tonight?" He replies "Who are we playing?"

Suffragent said...

Jan nailed it.
The new god but like the Jehovah's witnesses only a few will benefit
Without money being pegged to something (usually the gold standard, thanks Gordon) it always spirals out of control until its worthless and people loose faith in it. (black Wednesday cost the city 10 Billion, shock and awe, Major pledges to pump 9 billion into the economy to stave off recession and labour says this is irresponsible, USA has borrowed 1.5 TRILLION from the Chinese, what the feck's a trillion?, so FED prints 5 Trillion to keep stock market afloat and stop the Chinese bailiff , thanks, Japan pledges to double money supply to ward off deflation, but that means stuff gets cheaper right?
Reality bites Money crashes and assets like food, fuel and labour/skills come back into fashion. Productive industry is nationalised and personal assets are seized (this is why I'm not a gold bug) and the currency is re-pegged for stability.Things eventually get better so these assets aren't performing to market expectations. Sell off, remove the peg. All ways down Josephine Blogs gets a kick in. Rinse and repeat.
There is a currency war going on and London is one of the Big players?
I say let slip the dogs of war but hit them with a newspaper if they do toilet in the back garden.

Suffragent said...

Sorry should have said " after a couple of wars and fifty years things get better. Productive industry is nationalised........."
Danm you ND I'm still on the balvenie.

sluf.... said...

Lost it going to bed