Video: Germany will leave the euro unless the ECB is reformed
My friend Lars Schall sent me this link. I think you have to put this in context by looking at what Der Spiegel was saying about a Greek exit. What is clear is that the taboo that Angela Merkel broke in responding to the proposed Greek referendum has put a lot of things in motion that weren’t previoulsy in motion. Everyone is talking about the end of the euro. That tells you something.
The video from GoldMoney below takes Marshall Auerback’s tack that the Germans (and the Dutch) leaving the euro zone may be the best solution, but for reasons of preserving the German desire for price stability.
GoldMoney writes below the video:
Prof. Markus C. Kerber, Professor at TU Berlin, and James Turk, Director of the GoldMoney Foundation, talk about the lack of accountability of the ECB and how it compares to the Bundesbank. Prof. Kerber explains that the system of checks and balances is broken down when it comes to the ECB and tells of the public outcry in Germany when the Bundesbank tried to sell its gold. He explains that Germans are committed to sound money and stable monetary policy and are outraged by the lack of faith to the rules of the treaty, especially in May 2011 when the ECB started buying bonds on the secondary markets.
The resignation of Stark is seen as a wake up call to the Germans, as he was one of the founding fathers of monetary union. The last straw was the buying of Italian and Spanish bonds. Everybody understood then that the ECB was not the Bundesbank.
This interview was recorded on September 30th 2011 in Vienna.
The theme of nationalism that you’ve been highlighting for a while now continues to dominate.
As it dawns on all the actors just how much sovereignity they’ve surrendered, it stings. Whether you’re a German like Stark realizing the ECB isn’t simply a branch of German government or a Greek citizen coming to terms with austerity handed down from an authority you can’t vote out of office.
There’s just no constituency anywhere desiring to become a citizen of europe.
The theme of nationalism that you’ve been highlighting for a while now continues to dominate.
As it dawns on all the actors just how much sovereignity they’ve surrendered, it stings. Whether you’re a German like Stark realizing the ECB isn’t simply a branch of German government or a Greek citizen coming to terms with austerity handed down from an authority you can’t vote out of office.
There’s just no constituency anywhere desiring to become a citizen of europe.
The problem is that many political parties believe in subsidiarity and will not support a reduction in sovereignty. The problem for them is that in the European parliament individual national parties influence is so diluted that they feel impotent. They are not used to having to negotiate deals. The fact that you cannot vote them out as easily also makes things worse.
The problem is that many political parties believe in subsidiarity and will not support a reduction in sovereignty. The problem for them is that in the European parliament individual national parties influence is so diluted that they feel impotent. They are not used to having to negotiate deals. The fact that you cannot vote them out as easily also makes things worse.
I wonder if it’s a good time to start investing in German Holiday companies.
I wonder if it’s a good time to start investing in German Holiday companies.
There appears to be a serious misunderstanding outside of Germany as to the attitudes of Germans towards their central bank. The Germans are prodigious savers. They will never allow the central bank which controls their currency to put the purchasing power of those savings at risk. Never. They had a bad brush with that possibility once before, and one which was brought upon them by external factors then too- it was called the Wiemar Republic and it didn’t end too well as we all know. The long term result was the uber-prudent policies of the Bundesbank in the days of the D Mark.
For the ECB to become “the lender of last resort” and thus “save” Europe likely means that given the fragile nature of the Med Club economies, the ECB would eventually have to take a big hit to its balance sheet on those “save Europe loans”. In other words – print money. Lots of money. Anyone who thinks that’s a possibility that the German people would be willing to entertain obviously doesn’t understand the mentality of Germans themselves.
It appears to me that any solution which doesn’t allow the indebted countries to assert monetary policy to their own accord domestically is likely to fail. This also means obviously that the Euro, at least in current form will not survive. I believe there is no solution that European leaders can implement with regards to this crisis that won’t run into serious political, sovereignty, or even simple mathematical roadblocks.
For Europeans it is well known the problems of the Weimar Republic and the problems that created. So yes we have a lot of sympathy for their position.
The problem is that if the euro collapses then the debts issued in that currency will be devalued considerably. That could mean the bankruptcy of the German banks. That said unless the ECB prints trillions the German banks are ultimately doomed. They have lent so egregiously that the losses that they are facing either way will destroy the banks. That is why the banking solvency crisis was always described as a liquidity crisis and why it has morphed into a sovereign crisis.
The fundamental problem at the heart of the crisis is that regulated banks lent outside the country and took on far greater risk than they realised. Regulators could have no idea how risky the loans were. Governments and regulators across the continent failed to appreciate the massive credit bubble that has been built up over the last couple of decades, ignoring the asset bubbles along the way.
There appears to be a serious misunderstanding outside of Germany as to the attitudes of Germans towards their central bank. The Germans are prodigious savers. They will never allow the central bank which controls their currency to put the purchasing power of those savings at risk. Never. They had a bad brush with that possibility once before, and one which was brought upon them by external factors then too- it was called the Wiemar Republic and it didn’t end too well as we all know. The long term result was the uber-prudent policies of the Bundesbank in the days of the D Mark.
For the ECB to become “the lender of last resort” and thus “save” Europe likely means that given the fragile nature of the Med Club economies, the ECB would eventually have to take a big hit to its balance sheet on those “save Europe loans”. In other words – print money. Lots of money. Anyone who thinks that’s a possibility that the German people would be willing to entertain obviously doesn’t understand the mentality of Germans themselves.
It appears to me that any solution which doesn’t allow the indebted countries to assert monetary policy to their own accord domestically is likely to fail. This also means obviously that the Euro, at least in current form will not survive. I believe there is no solution that European leaders can implement with regards to this crisis that won’t run into serious political, sovereignty, or even simple mathematical roadblocks.
For Europeans it is well known the problems of the Weimar Republic and the problems that created. So yes we have a lot of sympathy for their position.
The problem is that if the euro collapses then the debts issued in that currency will be devalued considerably. That could mean the bankruptcy of the German banks. That said unless the ECB prints trillions the German banks are ultimately doomed. They have lent so egregiously that the losses that they are facing either way will destroy the banks. That is why the banking solvency crisis was always described as a liquidity crisis and why it has morphed into a sovereign crisis.
The fundamental problem at the heart of the crisis is that regulated banks lent outside the country and took on far greater risk than they realised. Regulators could have no idea how risky the loans were. Governments and regulators across the continent failed to appreciate the massive credit bubble that has been built up over the last couple of decades, ignoring the asset bubbles along the way.