TYR 12 December 2012 reads

Inside the Risky Bets of Central Banks @ The Wall Street Journal In this article the unofficial spokesman of the Federal Reserve explains how unelected central bankers, in secret meetings at the offices of the Bank of International Settlements (BIS) in Basel, Switzerland, control and play with the world’s economy, wield more power than any elected official, including the president of the USA, and under the cover of “keynesian economics” are taking the world closer and closer to an inflationary crisis: “Since 2007, central banks have flooded the world financial system with more than $11 trillion.”…and they are not finished.

Mark Carney hints at need for radical action to boost ailing economies @ The Telegraph The present governor of the Bank of Canada and next governor, from mid 2013, of the Bank of England has stated that “If yet further stimulus were required, the policy framework itself would likely have to be changed. For example, adopting a nominal GDP level target could in many respects be more powerful than employing thresholds under flexible inflation targeting.” The seemingly technical and neutral expression “NGDP targeting” hides a radical change in monetary policy. In plain language it means that monetary policy will aim at a precise number of NOMINAL GDPgrowth in the economy. Nominal GDP has a real component and an inflation component, that is NGDP = real GDP + inflation. In practice this change in monetary policy would aim at increasing inflation until the NGDP target was reached, regardless whether that number was achieved simply by increasing the inflation rate, devaluing the currency, impoverishing savers, citizen.

“How so? Breaking the law has now become a sort of routine”

In an interview with Die Presse, the former chief economist of the European Central Bank (ECB) discusses the latest decisions taken by this institution and asserts that from 2010 on, the ECB has given in to pressure from the outside (“Sie hat dem Druck von außen nachgegeben”). Asked about whether this pressure originated in the USA, he answered simply that it came from outside of Europe (“Druck von außerhalb Europas”).

Mr. Stark discusses the process by which the ECB, with the acquiescence of Euro zone governments has gradually loosened and finally broken its mandate, the preservation of price stability, and the huge inflationary dangers contained in its latest decisions, most specially the announcement on September the 6th of its Outright Monetary Transactions (OMT) program.

Zerohedge  comments the same interview: “…the former banker said what everyone without a PhD understands quite well: “The break came in 2010. Until then everything went well…”Then the ECB began to take on a new role, to fall into panic…. Together with other central banks, the ECB is flooding the market, posing the question not only about how the ECB will get its money back, but also how the excess liquidity created can be absorbed globally. “It can’t be solved by pressing a button. If the global economy stabilises, the potential for inflation has grown enormously… It gave in to outside pressure …pressure from outside Europe” Why, whichever bank headquartered at 200 West, NY, NY might he be referring to?”

At the end of the interview Mr. Stark, when asked about for how much longer can Germany oppose the ECB’s policies, answers: “The German Constitutional Court (GCC) has declared that the purchase of government bonds by the ECB [OMT program] collides with the rule that forbids state financing by the ECB. This leaves the Bundesbank in a conflicting position. A very difficult situation “:

Both the last question by the journalist and Mr. Stark’s answer are the most interesting part of the interview. The question goes like this: “How so? Breaking the law has now become a sort of routine”…

…and Mr. Stark’s answer: “…I would also see it this way: there is a continued collective breaking of the law”.

Did the GCC torpedo the ECB?

In The German Constitutional Court Torpedoes The ECB’s OMT @ Fibs & Waves Blankfeind argues that the apparently bland resolution of the GCC yesterday does include some provisions that would torpedo the OMT’s effectiveness, even its existence. Please see Die wirkliche Wirklichkeit (DwW) where such provisions are discussed, but reaching a different conclusion from the one elaborated by Blankfeind. Can Blackfeind and TYR be both right?. We think so. Blankfeind, in his excellent article, explores the aspects in the GCC’s resolution that would make life difficult for the new Draghi-ECB, namely, the illegality of the ESM’s capital being levered (financing at the ECB, like a bank), and the illegality of the ECB’s buying government bonds on the secondary market aiming at financing the member’s budgets (which is what the  OMT is supposed to do). These are very strong limitations that, if applied, would effectively torpedo the ECB’s plans. DwW, while acknowledging the potential in the GCC’s ruling to abort the ECB’s plans, sustains that the “real reality” is one or several layers deeper than even a constitutional court’s ruling. In its last paragraph, DwW rethorically asks  “In whose hands does Germany’s sovereignty lay?”, hinting at the possibility that even GCC’s resolutions would, one way or another, be superseded by the real owners of Germany’s sovereignty, whose identity would certainly not be the German People. In plain words, Blankfeind is right in recognizing that with its ruling the GCC (up to a point, since it could have stopped the process of ratification of the ESM and chose not to) is preparing for a fight with the ECB, Germany will fight for its sovereignty and it might be a bitter fight. DwW fears though, that, in the end, that sovereignty was lost long ago.

“The tears I have cried over Germany have dried. I have washed my face.” – Marlene Dietrich

As 54% of Germans Want Constitutional Court to Kill the ESM doubts about next wednesday’s resolution of the German Constitutional Court (GCC) increase in the financial community

Germans could be consigned to serfdom to save the Euro @ The Guardian In this article Mr. Gunnar Beck argues that the ISM might ruin Germany and leave the country in a sutuation of practical serfdom

“Don’t Count Your Hahnchen”: 40% Chance German Court Does Not Ratify ESM @ Zerohedge Even among the anglosaxon financial communtiy, doubts arise as to the resolution of the GCC on wednesday. A “yes” to the ESM no longer seems a done deal, according to Morgan Stanley

Are The Krimson Karlsruhe Knights About To Say Ni-en? @ Zerohedge Bank of America, Berenberg and Daiwa Capital also have some doubts about the GCC`s resolution