Draghi: ECB to counter ‘unfounded fears’ with unlimited cash

Mario Draghi, ECB president

Yesterday, the ECB pronounced itself the official lender-of-last resort to all Euro-Zone governments. To assure that the state can always borrow at conveniently low rates has been declared an essential component of 'maintaining financial stability' and thus a standard plank of modern central banking. Despite all their professed differences and divergent legal frameworks, all major central banks have now become their respective governments' inexhaustible ATMs. - Coincidence? At the press conference yesterday Draghi declared … [Read more...]

Happy interventionists: The economists’ attack on your property

Brueghel's painting "Paying the tax"

Last week, the Deutsches Institut für Wirtschaftsforschung (DIW), or German Institute for Economic Research, an influential think tank, proposed an ingenious solution to the Euro Zone debt crisis. The German government should issue a Zwangsanleihe, a compulsory bond that every German with savings of EUR250,000 or more should be compelled to underwrite with 10 percent of his or her own money. Such measures could help the German state grab another EUR230 billion in resources from the private sector to support its bailout … [Read more...]

Germany’s economy is only king in the blind valley of the Eurozone

Photo of Angela Merkel

On Tuesday, July 3, London business paper City A.M. ran an editorial I wrote on Germany. The text is below. In the present debate on the Euro crisis, Germany is frequently portrayed as a model of economic strength, a beacon of fiscal prudence and a proponent of structural reform. Her resources seem endless and her government debt an indisputable 'safe-haven'. If only Germany shared her strength and resources more generously, the Euro debt crisis could be solved. But this is an optical illusion. Sooner or later, markets will … [Read more...]

Thoughts on the Greek crisis and the politicization of economics

Mosaic of Plato's Academy

 Should the Greeks have a referendum on whether they want to stay in the euro? Are the upcoming elections such a referendum? Would it be better for the Greeks if they left the euro? - Are you, like me, sick and tired of hearing these questions and then the answers based on the same stale and superficial logic? Most commentators assume that it was a mistake of 'the Greeks' to enter European Monetary Union and that they would do better outside of it. I suspect some undue generalization behind such verdicts. For who do these … [Read more...]

Europe’s voters say ‘No’ to economic reality

Balls of euro banknotes

"Europe fights back against austerity" was how The Daily Telegraph headlined its weekend election coverage. "Anti-austerity movements are gathering pace across Europe following political earthquakes in France and Greece. A total of 12 European governments have now been dismissed in three years." As the European welfare state is officially in its death-throes none of us should be surprised if political strife gets cranked up to eleven. I firmly expect that we will see much more of this in the future. While I can understand … [Read more...]

Please don’t call this capitalism!

Eurotower in Frankfurt

Surprise, surprise, the Euro Zone debt crisis is back. Or was it never gone? As yields on Spanish and Italian government bonds are heading higher once again, I am reminded of the old saying, you can't fool all of the people all of the time. Not even with a trillion euros. I previously described the relationship between banks and states as that of two drowning sailors who desperately cling to one another, and I still think it is an apt description of the charade that is being orchestrated in Europe and that is already … [Read more...]

My big fat Greek bailout

Parthenon

Greece was bailed out for the second time in four months. Or did it default? Well, a bit of both, I guess. All bondholders are equal. But some are more equal than others. If you are the ECB, your Greek bonds were exchanged, par for par, for new Greek bonds, and you can go on pretending that they are worth their principal amount. You won't have to report a loss for now. But if you are a 'private' entity - and that is a rather loosely used term these days as it includes the banking industry which is either now partially owned … [Read more...]

Infinite stupidity

dollar notes falling from sky

"The unlimited resources" of the European Central Bank (ECB) is quickly becoming the new magic mantra in political commentary and financial market analysis, now that the bigger euro-dominos are beginning to wobble and everybody realizes that nobody has the firepower to bailout Italy, or to 'recapitalize' (i.e. bailout again) all the banks that lent to the country. So the chorus that demands that the printing press finally be put to good use is getting louder by the day. Robert Peston, the BBC economics expert, last week … [Read more...]

What should Obama do? – Interview with Detlev on ValueWalk.com

Picture of Detlev Schlichter

Jacob Wolinsky of the US website ValueWalk.com conducted an extensive interview with me that covered a wide range of topics, from my own background and the appeal of Austrian School Economics to what I think Obama and Bernanke should do. You can read it here or here. … [Read more...]