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Palace Revolt at ECB, Legitimacy of Policy out the Window



Dragon's desperate shenanigans are thickening.

ECB President Mario Draghi, on his way out, will, as we learn more and more, do whatever to push his agenda and make it stick to the ECB for a long time after leaving, but no matter what agenda he may be, it is clearly unrelated to the European economy that has curled up under the consequences of his agenda: the devastating weight of negative interest rates and QE. And in the process, he destroys the legitimacy of the ECB's policies.

The last incident was Thursday. During the press conference following the ECB's political meeting, he lied to reporters, claiming that "consensus was so wide that there was no need to vote," when he actually had a riot at hand during the meeting of national central bank presidents representing half the economy in the eurozone, and by members of the Executive Board.

Among the key policy changes announced by the ECB on Thursday were the restart of QE to the tune of $ 20 billion a month and a small cut of 1

0 basis points in deposit rates, from the old negative -0.4% to the new negative – 0.5%.

The announcement also included a provision to help banks – which have been shattered by these idiotic negative interest rates – to survive the negative interest rates: the ECB would exempt some of its banks' deposits on the ECB from negative interest rates in a two-stage system.

It was the QE portion of the decision that had triggered the unprecedented riot during the meeting. "Officials with knowledge of the matter" told Bloomberg that the members of the Governing Council and the Executive Board who strongly opposed the re-launch of the QE during the disputed meeting included, but were not limited to:

  • Jens Weidmann, President of the Bundesbank
  • Francois Villeroy de Galhau, Governor of the Bank of France
  • Klaas Knot, President of the Dutch Central Bank
  • Ewald Nowotny, Governor of the Austrian Central Bank
  • Ardo Hansson, Governor of the Bank of Bank Estonia
  • Sabine Lautenschlaeger, Member of the Executive Board [19659008] Benoit Coeure, Member of the Executive Board

The countries of the five leaders of the national central banks, from Weidmann to Hansson, account for about half of the economy in the eurozone.

They were opposed to the QE restart, but there was no vote – which is common in ECB case processing when there is agreement. But there was no agreement. And Draghi simply laid down his agenda.

"Such disagreement over a major monetary policy measure has never been seen during Draghi's eight years," according to Bloomberg sources.

Among the main reasons cited for relaunching QE now, according to the sources, was that there is no emergency, and it is better to save QE for an emergency, such as some major unrest in the Eurozone following a Brexit without deal.

Nevertheless, during the press conference following the contentious meeting, Draghi lied to reporters about it when he ridiculously stated:

“There was more diversity of views on APP [asset purchase program]. But in the end, a consensus was so broad that there was no need to take a vote. So the decision eventually showed a very broad consensus. That said, there was no reason to vote. There was such a clear majority. "

But this was not the first time that Draghi was exposed for lying openly about what had happened during the policy meeting.

In a June speech on an unrelated historical topic, he said that "additional stimulus" would be required, in the form of "further cut in key interest rates" and additional bond purchases, and that "all of these options were raised and discussed at our last meeting. "

But they were obvious lies. also. Sources that were part of the ECB meeting in June told Reuters that no such options were discussed. Draghi had simply gossiped on his own, pressed his agenda and tried to force the ECB's hand [read… No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters]

The fact that both of these obvious and manipulative lies – concerning the Thursday meeting and the June meeting – were leaked by everything indicates that Draghi internally in the ECB goes down in flames and the rebels offer little things about his shenanigans for public consumption, even though he tries to force the ECB on a track it can't get off after he leaves. [19659003] The ECB already has two mega problems at hand: Recognizing that negative interest rates are a devastating experiment that is now blowing up in their faces and from which they somehow need to return; and recognizes that QE as a standard monetary policy is an economic failure that creates all sorts of wild distortions – even though it stuck to the eurozone by preventing several sovereign defaults following Greece's default, especially one from Italy.

But the ECB now has a third problem at hand: The legitimacy of political decisions has been revealed as a joke; and that this circus has become a one-man show run by Draghi's own agenda.

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