Tue Nov 15th, 2011 at 02:41:25 AM EST
Eurointelligence has published a new article of mine: The role of ideology in this crisis
The eurozone has a pervasive bias against the public sector, from the level of policy down to its institutional makeup. If it does not allow itself common action in the public interest, then crisis resolution efforts are either wasted or a cover for national goals or special interests.
You can read the full article there, and comment here.
... ideology drives bad central banking and crisis response. The evidence is overwhelming that the ECB has not (despite recent expert commentary to the contrary) shied away from its role as lender of last resort and even as market maker of last resort in a wide array of markets and asset classes. Already in 2007, when the US Fed and the Bank of England dithered, the ECB shocked the world with unprecedented liquidity injections, which were only a harbinger of what was to come. But the approach to the sovereign debt market has been markedly different. Apart from the deep and longstanding ideological roots of this position, it appears that the point of such an approach to sovereign debt is to bring pressure to bear on European governments to inflict a partisan political agenda upon their citizens, outside the ordinary rules of democratic procedure. Economically, this "expansionary austerity" has produced two full years of failure, to the point where the survival of the Eurozone itself is in question.
The recent intervention of the Swiss Central Bank in the Swiss Franc's exchange rate provides an illustration of how the mere statement of intent to enforce a lower bound on asset prices, and a token show of force, are enough to cheaply stabilize a market. Perhaps it is time for the ECB to abandon its ideological distinction between public and private assets and engage in proper central banking across all markets.