Georgi Kadiev
Николай Александров Няма го онлайн. Ето ти целия текст: Lev - the old new Mark
At its unscheduled meeting on 15 June, the ECB Governing Council decided to swiftly introduce a new instrument to control interest rate differentials between euro government bonds. No one is under any illusions about the intention: The aim is to push Italian interest rates close to the lower German rates so that the Italian state does not go bankrupt. Now tension is rising in the markets and in political circles about what this instrument might look like.
The obvious procedure of neutralising purchases of Italian bonds by selling German bonds is unlikely to be politically and legally possible. This would mean that the ECB would directly redistribute taxpayers' money from Germany to Italy to finance interest expenditures. Even the German Constitutional Court and the sleepy-eyed German Michel, who otherwise have a high tolerance threshold for behaviour by the ECB that violates the treaty, might find this too much. On the other hand, the ECB cannot simply buy Italian government bonds, as this would increase the money supply and pour more oil on the already blazing inflation flames. If cheap money is to be created for the Italian state, it must be taken from someone else.
At the last conference in the Portuguese luxury resort of Sintra, where the ECB grandees and their entourage like to have a good time, it was rumoured that the money supply effects of the bond purchases to prop up over-indebted states could be neutralised by withdrawing bank credit. Of course, for every euro spent on bond purchases, more than one euro of bank credit would have to be withdrawn, as the flood of money of the past few years would have to be turned into an ebb in the face of record inflation. In this approach, however, the entire loan portfolio of the banks and the ECB shifts from lending to creditworthy private debtors to lending to less creditworthy over-indebted states. The quality of the cover pool of the euro money supply declines. As soon as the foreign exchange market smells a rat, a further depreciation of the euro against the US dollar and gold is likely to be the result.
For some contemporaries, these prospects may awaken wistful memories of the D-Mark times. I felt the same way when I recently visited the Bulgarian National Bank in Sofia. The Bulgarian currency, the lev, was pegged directly to the D-mark in July 1997. To make the peg unbreakable, the National Bank kept as many D-marks in stock as it issued levs. When the D-mark was converted into the euro, Bulgaria transferred the peg to the euro at the exchange rate at which the D-mark was converted into the euro. In the Bulgarian lev, the D-mark now lives on. And this applies not only to the exchange rate of 1.95583 lev per euro, but also to the lev's cover pool. The Bulgarian National Bank mainly holds short-dated euro government bonds of the highest quality, i.e. preferably German government bonds.
For D-Mark nostalgics like me, this is a comforting thought. If the quality of the euro continues to deteriorate rapidly, we could introduce the Bulgarian lev here. Who knows, maybe the Bulgarians would dare to abandon the fixed exchange rate to the euro together with us. Then the lev would appreciate against the euro and inflation would fall. And another thought: perhaps we could agree to then simply call the successor to the lev the "mark".
Thomas Mayer is the founding director of the Flossbach von Storch Research Institute.
Николай Александров Няма го онлайн. Ето ти целия текст: Lev - the old new Mark
At its unscheduled meeting on 15 June, the ECB Governing Council decided to swiftly introduce a new instrument to control interest rate differentials between euro government bonds. No one is under any illusions about the intention: The aim is to push Italian interest rates close to the lower German rates so that the Italian state does not go bankrupt. Now tension is rising in the markets and in political circles about what this instrument might look like.
The obvious procedure of neutralising purchases of Italian bonds by selling German bonds is unlikely to be politically and legally possible. This would mean that the ECB would directly redistribute taxpayers' money from Germany to Italy to finance interest expenditures. Even the German Constitutional Court and the sleepy-eyed German Michel, who otherwise have a high tolerance threshold for behaviour by the ECB that violates the treaty, might find this too much. On the other hand, the ECB cannot simply buy Italian government bonds, as this would increase the money supply and pour more oil on the already blazing inflation flames. If cheap money is to be created for the Italian state, it must be taken from someone else.
At the last conference in the Portuguese luxury resort of Sintra, where the ECB grandees and their entourage like to have a good time, it was rumoured that the money supply effects of the bond purchases to prop up over-indebted states could be neutralised by withdrawing bank credit. Of course, for every euro spent on bond purchases, more than one euro of bank credit would have to be withdrawn, as the flood of money of the past few years would have to be turned into an ebb in the face of record inflation. In this approach, however, the entire loan portfolio of the banks and the ECB shifts from lending to creditworthy private debtors to lending to less creditworthy over-indebted states. The quality of the cover pool of the euro money supply declines. As soon as the foreign exchange market smells a rat, a further depreciation of the euro against the US dollar and gold is likely to be the result.
For some contemporaries, these prospects may awaken wistful memories of the D-Mark times. I felt the same way when I recently visited the Bulgarian National Bank in Sofia. The Bulgarian currency, the lev, was pegged directly to the D-mark in July 1997. To make the peg unbreakable, the National Bank kept as many D-marks in stock as it issued levs. When the D-mark was converted into the euro, Bulgaria transferred the peg to the euro at the exchange rate at which the D-mark was converted into the euro. In the Bulgarian lev, the D-mark now lives on. And this applies not only to the exchange rate of 1.95583 lev per euro, but also to the lev's cover pool. The Bulgarian National Bank mainly holds short-dated euro government bonds of the highest quality, i.e. preferably German government bonds.
For D-Mark nostalgics like me, this is a comforting thought. If the quality of the euro continues to deteriorate rapidly, we could introduce the Bulgarian lev here. Who knows, maybe the Bulgarians would dare to abandon the fixed exchange rate to the euro together with us. Then the lev would appreciate against the euro and inflation would fall. And another thought: perhaps we could agree to then simply call the successor to the lev the "mark".
Thomas Mayer is the founding director of the Flossbach von Storch Research Institute.
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