After reading years of barely decipherable nonsense from ‘The Editors’ of Bloomberg.com, I was astounded to read this article by the same: Give the ECB the Power to Save Europe’s Economy. It’s about the legal case against the ECB filed by our pal Jens Weidmann that has been winding its way through the German courts. It has been referred to the European Court of Justice, where it likely should have been taken up in the first place.
One interesting thing to note is about the article is this:
At issue is the ECB’s ability to buy government debt in support of financial stability and economic activity.
I wonder what that means, to support both financial stability AND economic activity. Could it possibly mean that there really is a time and place for everything – even printing money? Are they conceding that M doesn’t equal P, and when M shrinks, both P and Y have to as well?
It doesn’t go far enough, but at least it’s something better than going on about how people can’t be trusted with money and exercise of their economic freedom, so they should have neither.
One other thing that fascinates me about this is that it is about the ECB rather than the Fed; and it appears to be consistent with a propensity of pointing out a splinter in someone else’s eye while a log is firmly jammed on one’s own. I am nearly positive that my friends ‘The Editors’ don’t get the connection between what’s been said about American market participants and the American central bank, and what is currently going on in Europe. Both sets of conditions have the same roots – throwing the baby out with the bathwater in the name of some nebulous thing called price stability that appears, facially, to mean only prevention of prices rising beyond a short term limit of 2%, with little or no attendance to the downward direction. Such a policy does not rise to any reasonable definition of stability in my opinion, and the appearance of deflation should come as no surprise.
Even in Bernanke’s own definition of explicit inflation targeting from 2005 he says “First you say it, then you do it.” Where’s the doing? Even more to the point, it should be the press asking that question or at least asking “Since you are not doing what you said you were doing, what ARE you doing?” After all, the Fed chose the target, and only God knows what obsessive compulsive behavior regarding inflation will drive central bankers to do – like maybe sterilize increased lending and implement policies that exacerbate an already extraordinary increase in the demand for money. Oh but they would never do that and can be trusted with regulating financial stability – to ensure that the bad actors don’t spoil the bunch. Perhaps I have found a new appreciation for the meaning of scripture where it says that the meek shall inherit the earth.