And also very, very depressing. This constant bias against anything that is based in the collective is terrible (I have a diary in mind about something related but probably no time until the 28th to write it).

Just as someone who doesn't believe in government shouldn't run for it, so a central bank (a public institution) should not favour the private sector against the public one. Of course, in that case you are right, it's to force an agenda on governments. Which probably reeks even more.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

in fact the ECB has engaged in a massive program of private bond purchases.

What sort of private bonds are purchased? Big corporate stuff, financing productive investment in the EU? What are the criteria, are they transparent?

Just some ignorant musing (please slap me down if I'm barking up the wrong tree) : I suppose the ECB, in this way, is contributing to the investment capacity of big companies within the EU, who might otherwise find it hard to raise money (from banks, or by issuing stock, notably).

This would seem, intrinsically, to favour the companies which are big enough to issue bonds, biasing the economic climate against the rest (it's a very bad time to try to obtain investment money through IPOs, for example).

_{It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II}

The EFSF is also being hamstrung by the recently discovered requirement that sovereign bond purchases in the secondary market must be approved by the Bundestag

How can the actions of an EU institution be explicitly subject to the control of the Parliament of one member state? Is the ESFS an EU or a German institution, or technically, neither?

Index of Frank's Diaries

Also at the October 2001 board meeting the ECB decided to expand its existing Covered Bond purchase program by €40bn which, together with the purchases undertaken in 2009, brings the total volume to €100bn with primary market purchases explicitly allowed.

Should this not read October 2011?

Index of Frank's Diaries

On the other hand, the ECB's open ended support of virtually insolvent private Irish banks is in stark contrast to its treatment of the Irish Sovereign - who it has demanded must reimburse bondholders in Anglo Irish Bank in full despite the fact that those bonds are not secured or covered by Government guarantee in any way. These potential costs to the Irish state -I have seen figures as high as 70 Billion Euro mentioned (after interest) - which are sufficient to create a very significant risk of Irish Sovereign default.

The mantra appears to be: all private debts must be repaid, by the taxpayer if necessary if the relevant private banks are insolvent. And if, as is currently the case with Greece, this proves to be impossible, they must be punished egregiously as a warning to all others.

What we may be seeing is EU integration by the back door.  The EU is now directly imposing its people - ex commissioners and ECB vice Presidents) Monti and Papademos (father of the people!?!) on national polities without regard to popular democracy.

This is only doing in public what they have been doing behind closed doors in countries such as Ireland, where the government was directly threatened with a withdrawal of all ECB liquidity - resulting in  shut down of the banks and ATMs) if approved austerity measures and the bail-out of private bondholders was not sanctioned.

The result of this ideological bias against public vs. private debt is that private economic interests (chiefly German and "core" EU elite) can override public political interests - chiefly peripheral and the 99% non-elite popular interests. It is neo-liberal ideological in origin, but also explicitly globalising and anti-national in effect. Perhaps the intention is that electorates will become so disgusted with their national politicians, they will welcome direct EU rule by comparison.

Index of Frank's Diaries

Since the crisis begun the ECB has grabbed the power to set national policy in attacked states and used it to destory the welfare system and demand that creditors always shall be paid in import-countries. Perhaps they simply see this as an opportunity to bypass the populistic democracy and finally get to turn those countries "competitive" - which as always means low wages, lower economic activity and power to the owners?

This of course does not mean that they prefer the export-countries to have a welfare system, just that they can not attack export-countries welfare systems right now. The Shock Doctrine does include a large amount of opportunism when it comes to crisis.

In short: if the ECB is proven not to be stupid can we assume they are evil and doing this intentionally?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

http://michael-hudson.com/2011/10/simon-patten-on-public-infrastructure-and-economic-rent-capture/

Worth reading.

My colleague Andrew Sparrow has also been watching the Mervyn King press conference, and reports that the Governor issued a rebuke to those (including the media) who suggest the European Central Bank should simply act as a "lender of last resort".

King said:

This phrase lender of last resort has been bandied around by people who, it seems to me, have no idea what lender of last resort actually means, to be perfectly honest. It is very clear from its origin that lender of last resort by a central bank is intended to be lending to individual banking institutions and to institutions that are clearly regarded as solvent. And it is done against good collateral, and at a penalty rate. That's what lender of last resort means.

That is a million miles away from the ECB buying sovereign debt of national countries, which is used and seen as a mechanism for financing the current account deficit of those countries, which inevitably, if things go wrong, will create liabilities for the surplus countries. In other words, it would be a mechanism of transfers from the surplus to the deficit countries. That's why the European Central Bank feels, and with total justification, that it is not the job of a central bank to do something which a government could perfectly well do itself but doesn't particularly want to admit to doing.

I think it's very important to recognise that there are circumstances where governments will try and put pressure on central banks to do things that they would like central banks to do in order to avoid their having to own up to the actions that they actually would like someone else to carry out. So I have every sympathy with the European Central Bank in this predicament ...

The only circumstance in which looking at the data for the euro area as a whole has merit is in realising that actually the euro area does have the resources, if you were to regard it as a single country, to make appropriate transfers within itself. It doesn't actually need transfers from the rest of the world. But the whole issue is, do they wish to make transfers within the euro area or not? That is not something that a central bank can decide for itself. It is something that only the governments of the euro area can come to a conclusion on. And that is the big challenge that they face.

On why the ECB hasn't acted yet:

"Because [being the heir?] of the Bundesbank, they consider central banks purchasing sovereign debt outright to be like swearing in church.  It's just not done.  This has been in fact to a certain extent embedded in the treaty which forbids the ECB from lending directly to governments or buying stuff in the primary market.  But there is no restriction at all on them buying any amount of sovereign debt at any time in the secondary market, so they can do it."

"This crisis is the result of the failure to provide the minimal institutional underpinning for a monetary union in the euro area and also a result of the ECB unfortunately being the heir of the Bundesbank and therefore not understanding and rejecting the role of central bank as lenders' last resort to sovereigns.  They certainly are a central bank.  They just are a central bank that prefers to fight with both hands behind their back.  If they just let go of one hand, that would be enough."

We could be living through the last days of the euro.
...The current low inflation rate in Germany requires that Spain, Italy and other peripheral countries actually have deflation to improve their competitiveness.
...While the basic logic of the situation should be apparent even to people without formal training in economics, the ECB seems oblivious to it. The preferred path from the ECB, along with its partners the International Monetary Fund (IMF) and the European Union, is to require that the heavily indebted countries just keep cutting their deficits. This leads to further reductions in demand, which causes higher unemployment. As the unemployment rate rises, tax collections fall and payment for transfer programmes like unemployment benefits increase. The result is that the deficits get larger and the debt to GDP ratio rises.
...Support from the BRICs?

This is truly a remarkable story since the per capita income of all of these countries is far below the average in the ECB. In Russia, the richest of the group, per capita income is just under $17,000 per year - slightly more than half of the eurozone average. In India, per capita income is under $4,000 - less than 15 per cent of the average for the EU. In short, we have a confederation that includes many of the richest countries on the planet asking for handouts from countries that are much poorer.

This fate need not be a self-fulfilling prophecy for several reasons. With respect to bank funding pressures, in the presence of persistent market illiquidity, the ECB can act to improve the situation. The weekend comment by Bundesbank President Weidman offered a novel dual definition of the ECB mandate, stating: "I will just confirm to you that we will act according to our mandate and provide liquidity to solvent banks and ensure price stability--this is our task."

The ECB can, for instance, offer unlimited liquidity beyond one year, expanding further its covered bond purchase program or adjusting the eligibility criteria for ECB collateral. Meanwhile euro area governments must enforce gradually higher capital requirements and that this be achieved not merely by reduced lending.

In the sovereign bond markets, however, the market's unwillingness to fund peripheral euro area governments at lower interest rates, despite reform implementation and euro area institutional integration, will clearly not be alleviated by the ECB--even as it remains ready to prevent yields from rising to catastrophic levels for "good reformers."

'Some discussions on this have taken place . . . It could be one way of getting around the legal restrictions on the ECB,' a official with knowledge of the talks said. A second official said that ECB lending to the IMF was being explored.

The idea appears as the rising severity of the eurozone debt crisis, which now threatens to engulf Italy, or even France, makes policymakers desperate to get the ECB, with its limitless resources as a central bank, more involved in the rescue efforts to buy governments time for reforms.

Economists say that only the ECB now can offer a credible guarantee to markets, as plans to leverage the firepower of the eurozone bailout European Financial Stability Facility (EFSF) to one trillion euros (S$1.7 trillion) were unlikely to fully materialise or, even if they do, to be sufficient.

Now, what was that about the IMF not getting its ugly hands on Germany's gold reserves that we heard after the latest G20 summit?

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

If Ackermann and Schauble agree, then ideology not only plays a role, but it's all and only about ideology.