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That's what I want to know.

Trichet could stop this nonsense in a heartbeat. He can set an arbitrary floor on the price of Greek bonds by buying them in the open market, at no cost since the ECB has the authority to create euros and since the size of the Greek GDP is just 3% of the Eurozone's, and without announcing that he's done it since open market operations are anonymous.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 04:16:03 AM EST
[ Parent ]
Who doesn't want him to do that?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 04:22:42 AM EST
[ Parent ]
Questions:

  1. Does this kind of market intervention even fit in Trichet's marketista/monetarist brain? Does it fit in the marketista/neoliberal brains of the Ecofin? How about the Commission?
  2. Has he proposed it to the marketista/neoliberal Ecofin? Does he need to do it?
  3. Has the idea occurred to anyone in the merketista/neoliberal Ecofin? Have they proposed it to Trichet?


En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 04:27:12 AM EST
[ Parent ]
Migeru:
the merketista/neoliberal Ecofin

I assume it's a typo, but I like it.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 04:55:52 AM EST
[ Parent ]
It is a typo, but I'm trying to decide whether the right spelling is Marketista or Merkelista.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 07:01:56 AM EST
[ Parent ]
Perhaps you in Europe too have your Obamanations. Can or will the EP bring any pressure on any of these people?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 12th, 2010 at 12:44:42 PM EST
[ Parent ]
The ECB is the most politically indepedent central bank out there. And unlike the Fed, whose price stability mandate is on a par with other goals such as macroeconomic stability and employment, the ECB is only charged with price stability.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 02:19:04 PM EST
[ Parent ]
But would not putting the burn on manipulators and pirates such as GS serve to insulate the euro from volatility, thus aiding the ECB's sole directive?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 12th, 2010 at 05:17:23 PM EST
[ Parent ]
Not if you labour under the delusion that volatility is just measurement noise, not a real effect of economic significance.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 12th, 2010 at 05:22:22 PM EST
[ Parent ]
Volatility is noise, but not measurement noise :P

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 05:25:17 PM EST
[ Parent ]
For any who think it is "just noise" I would suggest that they try standing within half a kilometer of the launch pad of the Space Shuttle--without ear protection, or, more mercifully, within a meter on axis of a large speaker array being swept with 1/3 octave noise at 130 dB SPL. Indeed, I have wondered how much of the electro-magnetic component of the Big Bang can be accounted for by 1/f noise. A large part of the detonation of a thermonuclear device is "just noise". Idiots.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 12th, 2010 at 05:56:33 PM EST
[ Parent ]
As I have argued in another comment, sovereign Euro debt is part of the money supply and so managing the debt markets falls within the purview of the ECB's monetary policy mandate, narrow though it is.

But anyway, I think it's obvious by now I'm too unserious to be central banker.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 05:27:33 PM EST
[ Parent ]
So we continue to suffer at the hands of blind regulators, whatever the cause of the blindness.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 12th, 2010 at 05:59:00 PM EST
[ Parent ]
Quatremer yesterday:

L'Union ne fait pas la solidarité - Coulisses de Bruxelles, UE

a BCE accepte en dépôt de la dette étatique : lorsqu'une banque commerciale se refinance auprès d'elle, elle dépose en garantie des titres, dont des emprunts d'Etat. La BCE pourrait aussi parfaitement acheter des titres d'Etat que les investisseurs se revendent entre eux (c'est ce que l'on appelle le marché secondaire) : aucun article des traités ne l'interdit. Dans le cas grec, cela voudrait dire que la BCE achèterait la dette dont les investisseurs se débarrassent par peur du risque, contribuant ainsi à faire baisser les taux d'intérêt. Un excellent moyen de couler ceux qui spéculent sur une cessation de paiement de la Grèce... Mais la BCE est-elle prête à franchir ce pas ? Pas pour l'instant.

The same proposal, but nothing clear in his conclusion:

But is the ECB ready to take this step? Not for the moment.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 05:07:35 AM EST
[ Parent ]
Upstate NY has a theory why not.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 05:16:55 AM EST
[ Parent ]
Which implies Trichet can't buy Greek debt because other decisions have been taken for him (though he may also agree with them...).
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 05:51:32 AM EST
[ Parent ]
Hmm, Trichet can always buy Greek debt as a matter of monetary policy.

Fiscal policy is for the Ecofin and that's what the Council decides.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 06:17:27 AM EST
[ Parent ]
That's the theory, but will Trichet run a policy that will be frowned on by Germany?

Angela Merkel dashes Greek hopes of rescue bid | Business | The Guardian

Angela Merkel, the German chancellor, mounted stiff resistance tonight to any swift bailout of Greece, as a rift opened up between European capitals over how best to tackle the risks posed to the euro.

Despite a show of Franco-German unity on the crisis and the first statement from EU leaders pledging to safeguard the currency's stability, hopes on the markets of a German-led rescue plan to shore up Greece's critical public finances were dashed by Merkel, who repeatedly emphasised that Athens would need to put its own house in order and brushed aside all questions of financial support.

"Germany is stepping totally on the brakes on financial assistance," said a senior EU diplomat. "On legal grounds, on constitutional grounds and on principle."

"Financial assistance" may not be the term for an ECB debt-purchasing programme, but the German attitude seems abundantly clear on the whole.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 06:35:52 AM EST
[ Parent ]
"Germany is stepping totally on the brakes on financial assistance," said a senior EU diplomat. "On legal grounds, on constitutional grounds and on principle."

Legal grounds: do they mean the Lisbon Treaty?
Constitutional grounds: do they mean the German Constitution? Does it bind other EU states?
Principle: sure, Germans are monetarist hawks.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 06:47:34 AM EST
[ Parent ]
I'm sure Merkel and Sarko would be quite pleased if the euro drifted down to $1.20-1.25. What better way to accomplish that than a vague statement of support for Greece. (I would note that LEP would also be quite pleased.)

Hey, Grandma Moses started late!
by LEP on Fri Feb 12th, 2010 at 07:07:41 AM EST
[ Parent ]
Guillaume Duval, chief ed of Alternatives Economiques, says :

...la Banque centrale européenne (BCE) (...) n'a pas le droit d'acheter des titres de la dette publique d'un Etat membre.

(The ECB does not have the right to buy public debt issues of a member state).

What's the legal basis for what the ECB can or can't do?

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:02:47 AM EST
[ Parent ]
and presumably absorbed into the Lisbon Treaty now. I think the relevant articles are in the 100-125 range IIRC.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Feb 12th, 2010 at 10:18:03 AM EST
[ Parent ]
Nothing precise in those articles of Lisbon (different numbering, but Maastricht numbers are cited too) about ECB intervention on the open market, or the right to purchase member state debt.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:41:52 AM EST
[ Parent ]
See my parallel comment.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:44:43 AM EST
[ Parent ]
Gah. That's idiotic.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:29:34 AM EST
[ Parent ]
Is that at the time of issue or in the secondary market?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:33:33 AM EST
[ Parent ]
He doesn't say, just says the ECB can't help Greece by this means.

I'm looking at the General Documentation on Eurosystem Monetary Policy, Instruments and Procedures, The Implementation of Monetary Policy in the Euro Area (pdf), which has a chapter on Open Market Operations, summarised in this table:

The detailed description of the operations says they are carried out by national central banks, with the exception of "fine tuning operations", where it is also possible "the Governing Council of the ECB can decide" to authorize the ECB to carry them out.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:50:27 AM EST
[ Parent ]
Open market operations on public Euro debt are allowed.

Now, when he says "the ECB cannot help Greece" he's assuming that Greece is bankrupt and needs an ECB loan and there's nothing else that can be done to help Greece.

In fact, Greek traded debt instruments are being subject to speculative attack in the markets and the as part of a "pump-and-dump" operation in which market price volatility is talked up as a sign of insolvency. The ECB could kill the volatility stone dead and enforce a floor on the price, and possibly bankrupt the speculators, through open market operations. That would help the whole Eurozone.

And trading in sovereign debt is a part of monetary policy. Sovereign debt is a key component of the money supply, right after cash.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:56:48 AM EST
[ Parent ]
So how can we imagine this possibility doesn't occur to Trichet and others?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 11:02:50 AM EST
[ Parent ]
Ideological blinders.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 11:07:29 AM EST
[ Parent ]
Jean-Claude Juncker has a frank interview with Quatremer. I should do it as a diary.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 12:18:17 PM EST
[ Parent ]
[ET Moderation Technology™]

link

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 02:23:13 PM EST
[ Parent ]
let's see:

  1. "keeping their powder dry"?
  2. not going to war against their friends, partners and neihbors the Serious People?
  3. not going to war against the financiers who are absolutely needed to save us from a bigger crisis?
  4. it's probably socialisticky?


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Feb 12th, 2010 at 12:40:18 PM EST
[ Parent ]
I think they don't see a problem so they don't look for a solution.

If there is a problem, they think it's entirely Greece's fiscal position, and the solution is neoliberal reform.

The thought that the bond market might be the problem hasn't crossed their minds.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 02:21:27 PM EST
[ Parent ]
There is something called the European Investment Bank Group, made up of the EIB (aimed at integration and cohesion) and EIF, the European Investment Fund, which focuses on a creating a homogenous venture capital market in Europe. The European Investment Bank is a majority shareholder to endorse the role of the EIF as the exclusive vehicle for venture capital of the European Investment Bank (EIB). Other shareholders are the European Union, represented by the European Commission, and a number of European banks and financial institutions from the public and private sector.

EIF carries out its venture capital and guarantee activities using either its own funds or funds entrusted by mandates. The principal sources of mandated funds are the main shareholders, the EIB (EUR 4bn) and the European Union (EUR 1.1bn), whilst up to EUR 1bn is derived from EIF's partnerships with public and private bodies.

The ECB is the central bank for Europe's single currency, the euro. The ECB's main task is to maintain the euro's purchasing power and thus price stability in the Eurozone, made up of the 16 EU countries that have introduced the euro since 1999.

(my text for a website on the EP)

You can't be me, I'm taken

by Sven Triloqvist on Fri Feb 12th, 2010 at 11:04:58 AM EST
[ Parent ]
Article 123
(ex Article 101 TEC)
  1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as "national central banks") in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.

  2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.
Okay, so the ECB can intervene in the secondary market to prevent price speculation on Euro sovereign debt.

What the ECB cannot do is fund a public debt issue, and that makes some sense from certain ideological perspectives.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:42:42 AM EST
[ Parent ]
(source: consolidated EU treaties, PDF)

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:43:37 AM EST
[ Parent ]
I scanned that too quickly, just read "overdraft".
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:55:51 AM EST
[ Parent ]
What the ECB cannot do is fund a public debt issue, and that makes some sense from certain ideological perspectives.

Because by having passed through the bid-ask spread of a major investment bank, it is suddenly converted from a loan into a monetary instrument?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 12th, 2010 at 11:15:56 AM EST
[ Parent ]
Ideological blinders...

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 11:22:10 AM EST
[ Parent ]
LTE to alternatives économiques?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:57:49 AM EST
[ Parent ]
I tried to leave a comment but it doesn't seem to have worked - their site is a mess.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 11:03:39 AM EST
[ Parent ]
We should send them an op-ed :P

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 11:05:50 AM EST
[ Parent ]

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