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The worst thing is that you can't get rid of the ECB guys, no matter how stupidly they behave. You can't vote them out of office, and you can't vote the guys who name them out of office.

Is there even any democratic path to changing the inflation target, or adding a dual mandate?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Mar 17th, 2013 at 12:31:40 PM EST
[ Parent ]
Is there even any democratic path to changing the inflation target, or adding a dual mandate?
Treaty change.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Mar 17th, 2013 at 12:39:16 PM EST
[ Parent ]
As in multi-year watered down compromise which requires the Germans to get on board?

I suppose we can ignore that opportunity then. But it would be interesting having EZ-wide direct elections, if only to the ECB chairmanship.

How are the members of the ECB board named anyway?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Mar 17th, 2013 at 12:45:10 PM EST
[ Parent ]
How are the members of the ECB board named anyway?
By the Eurogroup. The European Parliament is allowed to voice an opinion to be duly ignored.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Mar 17th, 2013 at 12:47:13 PM EST
[ Parent ]
By the Eurogroup

Collectively? I suppose, if reasonable governments took power in Europe, they should be able to shift the composition of the ECB council over time.

Another thing I've been thinking about: the ECB inflation target is "close too but less than 2%". Does this mean "less than 2%" is a hard roof, or the center of a range?

The Riksbank target is 2%, plus or minus 1%, thus essentially an 1-3% range, but the closer to 2%, the better.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Mar 17th, 2013 at 12:56:48 PM EST
[ Parent ]
Inflation targeting is economic superstition.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Mar 17th, 2013 at 12:58:17 PM EST
[ Parent ]
It's worked well enough for us, but let's stay on topic.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Mar 17th, 2013 at 01:00:13 PM EST
[ Parent ]
The central bank should not telegraph its intentions.  Ideally you'd like to have a steady inflation rate and a solid economy.  In good times that's fine.

In the times in which we live, the central bank ought to maintain flexibility to do what it needs to do to help put the economy back on track and people back to work.  If that means higher inflation for a while, so be it.  Hence the shouts from the Krugmans of the world at Bernanke in recent years.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Mar 17th, 2013 at 01:06:18 PM EST
[ Parent ]
Raising inflation above the target to lower the real interest rate is only needed if the government fails to launch aggressive fiscal policy at the zero lower bound.

That's when you get QE and "responsibly irresponsible" monetary policy. Keep the inflation target, but add a target (business cycle unemployment, or something) which means the central bank can deviate from the inflation goal if there are other pressing issues, like unemployment caused by excessive austerity.

As a matter of fact, the dual mandate of the Riksbank (inflation targeting and financial stability) is currently keeping the divided Riksbank board from cutting rates (currently at 1.25%). The reason being is that there are worries about a housing bubble and private sector overindebtedness. The Riksbank has even come straight out and told the government they will cut rates if certain laws are changed, like demanding bigger down-payments, stricter repayment schedules and an elimination of interest rate deductions for borrowers.

This in turn is making the export companies angry as the relatively high rates are strengthening the krona, making exports less competitive. It would be fun if the Riksbank instead of cutting rates instituted a Swiss-style limit on the appreciation of the krona.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Mar 17th, 2013 at 01:27:33 PM EST
[ Parent ]
As in multi-year watered down compromise which requires the Germans to get on board?
Unless it's Merkel and Sarkozy pushing it, in which case everyone else scrambles to amend their constitutions.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Mar 17th, 2013 at 12:49:37 PM EST
[ Parent ]
Starvid:
How are the members of the ECB board named anyway?

ECB: Executive Board

The Executive Board consists of
  • the President
  • Vice-President and
  • four other members
All members are appointed by the European Council, acting by a qualified majority.

But policy is decided by:

ECB: Governing Council

The Governing Council is the main decision-making body of the ECB. It consists of
  • the six members of the Executive Board, plus
  • the governors of the national central banks of the 17 euro area countries.

And according to the treaties, the governors are appointed by the state CB board that is appointed by parliament.

So:
People -> parliament -> CB board -> governor
And:
People -> parliament and/or president -> finance minister -> ECB executive board

Yes, direct elections would be preferable.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Mar 17th, 2013 at 03:59:03 PM EST
[ Parent ]
you can't vote the guys who name them out of office.

You can't? Why?

by IM on Sun Mar 17th, 2013 at 02:57:30 PM EST
[ Parent ]
Apparently, you can (?), as they seem to be the heads of the national central banks. But there is an extra level of resistance. In the pre-EZ time, the leadership of the national central banks changed whenever the mandate of someone on the board ran out. Now not only need the composition of the national central bank change, but the composition of the ECB governing council as well. This creates a more rigid system.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Mar 17th, 2013 at 03:04:00 PM EST
[ Parent ]
Well, as long as the ECB senior people can be vetoed by Germany, and all German parties support "hard euro" policies, there will be little change in practice.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Mar 17th, 2013 at 03:13:00 PM EST
[ Parent ]
Situation may be slipping out of human control.  There comes a time, and I have no idea if it has arrived (and neither does anybody else,) when a system moves into a phase transition seeking a new state.  When and as that happens, human intervention is as likely to mess things up worse as to make it better.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Sun Mar 17th, 2013 at 03:26:03 PM EST
[ Parent ]
"Well, as long as the ECB senior people can be vetoed by Germany,"

But they constitute only small part of the governing council. The national governments can appoint whom they want to head their national banks.

by IM on Sun Mar 17th, 2013 at 03:40:03 PM EST
[ Parent ]

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