LHStarAlliance
Topic Author
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Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 7:27 pm

Hi guys !

Now we see how the American Central Bank is reacting , how it should be , following the Keynesian economics .
In Europe we've done a complete nonsense with the construction of the ECB , which is bound to the stability of the money but not to support the economic growth . As Helmut Schmidt said one day : It's better for someone to have a Job and have 4% of inflation than unemployed with 2% . This is so logical ! All the world does it , just we in Europe have this stupid construction !

We need a strong regulation of the financial transactions and a monetary policy that supports the economic growth , with the regulations it'd be able to avoid bubbles as they have happened in America , and have 4+% of growth .


Constantin



Edit : Very good Article (just in German)

http://www.ftd.de/meinung/kommentare...iges%20Nichtstun%20EZB/307382.html

[Edited 2008-01-25 11:30:25]
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Klaus
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 7:33 pm

Sure. Who wants stable money value anyway...?  crazy 
 
Banco
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 7:39 pm



Quoting Klaus (Reply 1):
Sure. Who wants stable money value anyway...?

Shock, horror; me and you are going to agree on this Klaus. The ECB can only do what it is doing. Loosening the purse strings to help one country doesn't remotely help in the long term if it screws up everyone else. And actually, the only possible (whether desirable or not) way it could do anything else is with a central European government.
She's as nervous as a very small nun at a penguin shoot.
 
Klaus
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 7:47 pm



Quoting Banco (Reply 2):
Shock, horror; me and you are going to agree on this Klaus.

 faint 

Well, at least we disagree about some things:

Quoting Banco (Reply 2):
Loosening the purse strings to help one country doesn't remotely help in the long term if it screws up everyone else.

With the common market that aspect is receding anyway. The Euro, the ECB and the common market are intrinsically linked. Neither can exist without the others.

Quoting Banco (Reply 2):
And actually, the only possible (whether desirable or not) way it could do anything else is with a central European government.

I don't see much sense in currency manipulations trying to salvage a flawed economical or financial policy. Keep the currency value stable (which is also important for a major global reserve currency) and then put sensible economical and fiscal policies on top of that foundation.

Maybe it's just a matter of preference to a degree, but from a german perspective it's a well-proven approach.
 
PPVRA
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 7:55 pm



Quoting LHStarAlliance (Thread starter):
Keynesian economics

Largely discredited.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
Banco
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 8:04 pm



Quoting Klaus (Reply 3):
With the common market that aspect is receding anyway.

Um. I think that's pure wishful thinking. You'd like it to be true, but it isn't.

Quoting Klaus (Reply 3):
I don't see much sense in currency manipulations trying to salvage a flawed economical or financial policy. Keep the currency value stable (which is also important for a major global reserve currency) and then put sensible economical and fiscal policies on top of that foundation.

I agree. It's not something I was advocating, I was just saying that an intervensionist policy in the way that a lot of French politicians would like to see would require a central authority to implement it.

Quoting Klaus (Reply 3):
Maybe it's just a matter of preference to a degree, but from a german perspective it's a well-proven approach.

To an extent. German economic patterns over the last 20 years or so have been less than stellar in terms of performance. The German "economic miracle" is now being reassessed in the light of some severe structural problems that became highlighted. Nevertheless, the British certainly adopted it, and it has worked well enough for us over the past decade, though with a rather different economic base and structure to begin with.

Even so, the most successful central bank over the last half century is not the German or the British one, but the Federal Reserve.
She's as nervous as a very small nun at a penguin shoot.
 
Banco
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 8:08 pm



Quoting PPVRA (Reply 4):
Quoting LHStarAlliance (Thread starter):
Keynesian economics

Largely discredited.

Ahhhh, ummmm....sort of. Keynesian economic theory seemed to work perfectly well for 30 years or more, before stagflation seemed to blow a hole in it. Monetarism of the kind espoused by Friedman became the new thing, but that too became discredited when the British (of all people!) adopted it in the early years of the 1980s. Money supply rocketed and inflation plunged, wrecking the central tenet of the theory. Over the last 20 years elements of both theories have been adopted, and other discarded. But to say it's "largely discredited" goes a bit too far in dismissing the work of a great economist whose theories remain extremely valuable. It's a bit like saying Newton's theories are largely discredited because of the arrival of Einstein, when they remain true for a given value of truth.
She's as nervous as a very small nun at a penguin shoot.
 
N1120A
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 8:15 pm



Quoting LHStarAlliance (Thread starter):


Now we see how the American Central Bank is reacting , how it should be , following the Keynesian economics .

Actually, if we were following a true Keynsian model, that money would be spent creating job programs and on infrastructure. Which is actually something we need desperately in the US right now.
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Dougloid
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 8:25 pm



Quoting N1120A (Reply 7):
Actually, if we were following a true Keynsian model, that money would be spent creating job programs and on infrastructure. Which is actually something we need desperately in the US right now.

the best social program is a job you can support a family on.
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
LHStarAlliance
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 9:14 pm



Quoting Dougloid (Reply 8):
the best social program is a job you can support a family on.

exactly , and this is far better than unemployment and just 2% inflation !
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LHStarAlliance
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 9:21 pm



Quoting N1120A (Reply 7):
Actually, if we were following a true Keynsian model, that money would be spent creating job programs and on infrastructure. Which is actually something we need desperately in the US right now.

by sinking the base rate the credits are cheaper this makes that Companies invest more which produces more jobs . If you keep the base rate high , less companies will invest what will produce less economic growth and higher unemployment .
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Pyrex
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 9:57 pm



Quoting LHStarAlliance (Thread starter):
This is so logical ! All the world does it , just we in Europe have this stupid construction !

If it's so logical and the whole world sees it then why does the current Chairman of the Fed, Ben Bernanke, has been quoted saying he would like to have a single mandate to control inflation as the ECB has rather than the dual mandate imposed by Congress?

Quoting N1120A (Reply 7):
and on infrastructure. Which is actually something we need desperately in the US right now.

 checkmark  Though actually to be fare the US desperately needs a lot of investment in infrastructure not so much to stimulate growth (that is just a bonus side effect) but because its infrastructure is crumbling under a ridiculous notion that government spending money = bad - it would be necessary even in a booming economy. But I am sure if the Congress and the President finally manage to get their heads out of the sand and start digging a lot of people will bring in the "New Deal" slanders as if it was a bad thing.
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PPVRA
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 10:49 pm



Quoting Banco (Reply 6):
Keynesian economic theory seemed to work perfectly well for 30 years or more

Ehh, sort of.  Smile Frederic Bastiat blew a hole on Keynesian theory before Keynes was even born:

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

With that you have to wonder if things would have been better off without Keynes's ideas, without even taking stagflation into consideration. However, you are right that he was very influential and an important figure.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
N1120A
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RE: Why The Construction Of The ECB Is Nonsense

Fri Jan 25, 2008 11:14 pm



Quoting Dougloid (Reply 8):

the best social program is a job you can support a family on.

Precisely. And infrastructure building jobs would kill many birds with one stone there.
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
 
pelican
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RE: Why The Construction Of The ECB Is Nonsense

Sat Jan 26, 2008 12:22 am



Quoting Banco (Reply 5):
To an extent. German economic patterns over the last 20 years or so have been less than stellar in terms of performance. The German "economic miracle" is now being reassessed in the light of some severe structural problems that became highlighted. Nevertheless, the British certainly adopted it, and it has worked well enough for us over the past decade, though with a rather different economic base and structure to begin with.

Even so, the most successful central bank over the last half century is not the German or the British one, but the Federal Reserve.

Indeed. Sometimes I wonder whether the German central bank could sell itself better than any other central bank. The approach of the ECB is too fixed on monetary stability especially when compared to the Fed. Inflexible monetary politics have cost Germany dearly.

Quoting Klaus (Reply 3):
I don't see much sense in currency manipulations trying to salvage a flawed economical or financial policy.

What do you call currency manipulations? The ECB does it all the time with the goal to achieve monetary stability... It's called monetary policy and it's at as important as economical policy and financial policy.

pelican
 
Klaus
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RE: Why The Construction Of The ECB Is Nonsense

Sat Jan 26, 2008 12:46 am



Quoting Banco (Reply 5):
Quoting Klaus (Reply 3):
With the common market that aspect is receding anyway.

Um. I think that's pure wishful thinking. You'd like it to be true, but it isn't.

So you're saying that the coordinated economic policies, the common market and the common currency have increased the disparities and the friction between the member countries?

Oookay...!

Quoting Banco (Reply 5):
I agree. It's not something I was advocating, I was just saying that an intervensionist policy in the way that a lot of French politicians would like to see would require a central authority to implement it.

Not going to happen either way. Sometimes french politicians are chafing at the necessities, sometimes ours, sometimes others. But necessities are still necessities nevertheless.

Quoting Banco (Reply 5):
To an extent. German economic patterns over the last 20 years or so have been less than stellar in terms of performance.

We're standing pretty solidly. We've got certain domestic problems which have nothing to do with currency or the common market, such as the lingering aftermath of the unification, lagging immigrant integration and various education difficulties.

We're under way paying off many sins of the past and at the same time investing in our infrastructure. Not flashy, spectacular or "sexy" in any way, but definitely necessary for sustainable development.

Among all that, we're one of the biggest sponsors but also one of the biggest beneficiaries of the common market and of the enlarging EU, with an excellent competitive position in various industrial and consumer markets.

We could definitely do much, much worse under the circumstances.

Quoting Banco (Reply 5):
Nevertheless, the British certainly adopted it, and it has worked well enough for us over the past decade,

If you just narrow down the period enough, you can "prove" pretty much anything.  mischievous 

Too bad that a large part of that "success" seems to have been based on exactly that same bubble we're now seeing deflate again - basically a mortgage on the future which still needs to be repaid after all.

And while the bizarrely inflated real estate prices in Britain apparently propped up the Pound, I don't see the monetary policy of the Bank of England as the main driver of the bubble - nor as the culprit for the normalization that seems to be under way now (with a corresponding decline of the Pound).

I've said it before and I repeat: When that predicted normalization will be complete in several months, I expect the Euro to be on the british agenda again, under more realistic conditions than before. But we can expand on that in the usual separate thread(s).

Quoting Banco (Reply 5):
though with a rather different economic base and structure to begin with.

One could say that.

The question is where and how the respective central banks and their monetary strategies really figure into that. Looking at the completely different backgrounds, circumstances and political approaches, I don't think that they really made that much of a difference besides providing a foundation for the respective path.

Quoting Banco (Reply 5):
Even so, the most successful central bank over the last half century is not the German or the British one, but the Federal Reserve.

That probably depends on the metric one applies.
 
AverageUser
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RE: Why The Construction Of The ECB Is Nonsense

Sat Jan 26, 2008 1:02 am



Quoting Klaus (Reply 15):
So you're saying that the coordinated economic policies, the common market and the common currency have increased the disparities and the friction between the member countries?

I think you're right. When the common market area has been enlarged, and the states will be out of sync economically, then out of sheer necessity the friction will grow. A country like Finland is increasingly trading truly globally, external to the EU, while some states are by their industry structure more bound to intra-EU trade.
 
Klaus
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RE: Why The Construction Of The ECB Is Nonsense

Sat Jan 26, 2008 1:02 am



Quoting Pelican (Reply 14):
What do you call currency manipulations?

Abandoning monetary stability in order to satisfy political demands.
 
Klaus
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RE: Why The Construction Of The ECB Is Nonsense

Sat Jan 26, 2008 1:07 am



Quoting AverageUser (Reply 16):
A country like Finland is increasingly trading truly globally, external to the EU, while some states are by their industry structure more bound to intra-EU trade.

An internally stable home currency is an asset in that case as well, especially when it serves as a major global reserve currency at the same time.
 
AverageUser
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RE: Why The Construction Of The ECB Is Nonsense

Sat Jan 26, 2008 1:17 am



Quoting Pyrex (Reply 11):
Quoting N1120A (Reply 7):
and on infrastructure. Which is actually something we need desperately in the US right now.

Though actually to be fare the US desperately needs a lot of investment in infrastructure not so much to stimulate growth (that is just a bonus side effect) but because its infrastructure is crumbling under a ridiculous notion that government spending money = bad - it would be necessary even in a booming economy.

Agreed. There was one spectacular accident not long ago -- I think you know what I'm talking about -- that underlines an urgent need to shift priorities within the U.S. state and federal spending towards a major infrastructure overhaul.
 
Banco
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RE: Why The Construction Of The ECB Is Nonsense

Sat Jan 26, 2008 2:55 am



Quoting Klaus (Reply 15):
So you're saying that the coordinated economic policies, the common market and the common currency have increased the disparities and the friction between the member countries?

Oookay...!

I didn't say any such thing. Your desire to see things as you wish them to be rather than they are is leading you to make claims about me that aren't there. I simply said that your claim that that aspect is receding to be wishful thinking. Not the same at all.

Quoting Klaus (Reply 15):
Not going to happen either way

No it isn't. Again, I didn't say it was. I just said that's what would be needed IF that approach was felt desirable.

Quoting Klaus (Reply 15):
If you just narrow down the period enough, you can "prove" pretty much anything.

No. That is the only period you can choose for a meaningful comparison. The Bank of England has only been independent for the last decade. No selectivity there.

Quoting Klaus (Reply 15):
I've said it before and I repeat: When that predicted normalization will be complete in several months, I expect the Euro to be on the british agenda again, under more realistic conditions than before. But we can expand on that in the usual separate thread(s).

Er...no. I know you'd love it to be like that, but it isn't going to be. Not for the forseeable future, and absolutely definitely, 100% not in "several months". You quite simply do not understand the reality in Britain.

Quoting Klaus (Reply 15):
Too bad that a large part of that "success" seems to have been based on exactly that same bubble we're now seeing deflate again - basically a mortgage on the future which still needs to be repaid after all.

What is it with you? Why are you trying to pick an argument about something where the German model was actually being praised? I referred to the independence given to the Bank of England in 1997 under German lines having been a good move by Britain, yet you now try to pick holes in something that you actually believe in!

Quoting Klaus (Reply 15):
I don't think that they really made that much of a difference besides providing a foundation for the respective path.

Of course. But the foundation was the critical factor.

Quoting Klaus (Reply 15):
That probably depends on the metric one applies.

Perhaps the one I was applying was the one with the US being the most successful economy on the planet over that time period.
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