Friday, April 8, 2016

Spiegel International — Mario Bothers: Germany Takes Aim at the European Central Bank

There was a time when the German chancellor and the head of the European Central Bank had nice things to say about each other. Mario Draghi spoke of a "good working relationship," while Angela Merkel noted "broad agreement." Draghi, said Merkel, is extremely supportive "when it comes to European competitiveness."
These days, though, meetings between the two most powerful politicians in the euro zone are often no different than their face-to-face at the most recent summit in Brussels. She observed that his forced policy of cheap money is endangering the business model of Germany's Sparkassen savings banks and retirement insurance companies. He snarled back that the sectors would simply have to adapt, just as the American financial sector has.
The alienation between Germany and the ECB has reached a new level. Back in deutsche mark times, Europeans often joked that the Germans "may not believe in God, but they believe in the Bundesbank," as Germany's central bank is called. Today, though, when it comes to relations between the ECB and the German population, people are more likely to speak of "parallel universes."
ECB head Draghi doesn't understand why he is getting so much resistance from the country that has profited from the euro more than any other. Yet Germans blame Draghi for miniscule yields on savings accounts and life/retirement insurance policies. Frustration is growing.…
Spiegel International
Mario Bothers: Germany Takes Aim at the European Central Bank
Martin Hesse, Ralf Neukirch, René Pfister, Christian Reiermann and Michael Sauga

16 comments:

Matt Franko said...

ZIRP here again can be seen as a big problem...

Tom Hickey said...

ZIRP here again can be seen as a big problem...

For the rentiers, excuse me, "savers."

Notice there is nothing in the German complaints to indicate that they are are aware they are destroying the EZ by exporting unemployment, or that they care. They are self-centered and clueless, and it is blowing up the monetary union.

Morans!

Matt Franko said...

"Yet Germans blame Draghi for miniscule yields on savings accounts and life/retirement insurance policies. "

What are people supposed to work till theyre 90 and crumbled over with arthritis?

C'mon Tom this ZIRP thing is more MMT top-ender political idiocy.... it flies in the face of over 40 years of REAL WORLD retirement planning law/policy... its a big part of the current problems as savers are not getting the interest income they have been trained to expect...

Auburn Parks said...

-Thank goodness for ZIRP, its about damn time the Govt stop subsidizing the already wealthy with unnecessary free interest giveaways. Much better to have the democratically elected Govt choose to provide retirement income for society than an unelected bureaucrat at the CB determining a huge part of fiscal policy

Auburn Parks said...

"C'mon Tom this ZIRP thing is more MMT top-ender political idiocy.... it flies in the face of over 40 years of REAL WORLD retirement planning law/policy... its a big part of the current problems as savers are not getting the interest income they have been trained to expect...
"

So what, we are supposed to continue with neo-liberal policy forever just because its been that way for 40 years? What a useless, nihilistic POV.


Single payer?
Nope, we've built this system over 40 years and we cant change it now because all those healtch care industry folks are going to lose their incomes

Tom Hickey said...

What are people supposed to work till theyre 90 and crumbled over with arthritis?

Hey, this is capitalism, isn't it. Let them buy corporates or equities.

Why should governments subsidize the saver class. Much more direct and efficient to directly subsidize all pensioners rather than just the savers, which is the MMT solution.

Capitalism is run for the bourgeoisie rather than the workers. That why it is antithetical to real democracy, where workers predominate numerically.

Ryan Harris said...
This comment has been removed by the author.
Tom Hickey said...

The purpose of governments paying interest began with governments borrowing from the private sector (rich people) largely to finance wars. Later, interest rates were used with convertible fixed rate currency to control conversion of currency into the real good that backed it — copper, silver or gold.

Both of those reasons are now obsolete. There is no operational necessity or use for government or independent central bank control of the interest rate and there is operational need for the Treasury to issue bonds if the cb is not targeting the overnight rate.

It simply perpetuates an out of date system and create misunderstanding,. It also creates a command economy with the price of money set exogenously by a group of technocrats.

Under a capitalistic system, pensioners are supposed to provide for themselves. On the other hand, in a mixed economy, economic policy, involves political issues such as including, predistribution, redistribution, subsidies, etc., that should be debated on the merits of each case.

It seems to me that using interest rates as shotgun is not as effective or efficient as other design solutions to the different objectives that interest rate and government securities are supposed to accomplish.

Auburn Parks said...

Tom

everything you wrote there is true but it misses the larger point in my opinion, which is that interest spending by the government, by the very nature of who owns Tsy Cds being the already wealthier class, is some of the most regressive government spending possible. just look who owns us treasuries it's a third foreign, a third the government pays itself and the remaining third is mostly wealthy individuals and corporations. And the worst part is that it's so undemocratic it's craz. this non-elected Central Bank just determines how much free interest spending these people get and then they cover the whole ridiculous exercise behind models that state as a truism that markets determine interest rates and the govt is powerless against the inflation boogie man with only monetary policy to save us. the whole system is sick.

Tom Hickey said...

Capitalism is run for the owners (bourgeoisie) and not the workers (proles). The very wealthy (haute bourgeoisie) create an alliance with the "aspiring" wealthy (petite bourgeoisie) against the workers (proles). This manifests as privilege for the bourgeoisie, e.g., subsidies, tax relief, while transferring as much of the tax burden onto workers as possible.

The irony is that most of the petite bourgeoisie are also workers, for example, the "precariat." They need to be duped into voting as petite bourgeoisie (aspiring millionaires) rather than as workers.

Now the dynamic has changed after the financial crisis as the very wealthy put on the pressure to recoup their losses and the petite bourgeoisie/'precariat/workers were left hanging out to dry.

All the talk about interest rates and "savers" masks the real issue, which is why Sanders and Trump as doing so well. Cruz benefits, too, since he has convinced a lot of people that he is an outsider even though his wife was a Goldman exec while GS "loaned" Ted money for his campaign that he "forgot" to declare.

The situation is similar in then EZ with austerity resulting in record unemployment while "savers" complain that they are getting a raw deal from the cb.

Cui bono?

Simsalablunder said...

"So what, we are supposed to continue with neo-liberal policy forever"
Neo-liberal policy cannot exist because neo-liberals don't exist. It's just figure of speech. ZIRP force X+Y eat shit.
X = teachers Y = architects. No other policies can be added to change that. It's written in stone.

Matt Franko said...

" by the very nature of who owns Tsy Cds being the already wealthier class, "

You have NO EVIDENCE of this... NONE... neither does the MMT top-enders...

Propose your ZIRP policy and see where you get.... TIP: NOWHERE

Greg said...

Considering the wealthier class owns 90% of everything I don't see why Tsy Cds would be any different Matt, but you are correct that it is probably very hard to determine true ownership here. Many are owned by large institutions like Insurance Cos and comprise a backbone for many workers retirement portfolios to be sure, but I saw somewhere where the number of people with a retirement account over 75,000$ is small and vanishing.

It seems to me that just as easily as we advocate for a ZIRP, we could advocate for a permanent rate of 3.5%. The problems arise (I think) when we go jumping around with interest rates trying to micromanage output. One because interest aren't an effective tool and two because all changes have income affects which kind of counter the reasoning for interest rate changes. When CBs want more spending they lower rates to stimulate borrowing but they lower incomes. Vice versa during booms. Jacking up interest rates adds income and can fuel inflation. Set a reasonable number (2%-4%) and leave it forever.

Greg said...

editing above* "but I saw somewhere where the number of people with a retirement account over 75,000$ is small and vanishing. "

Should read to say" where the number of workers with retirement accounts less then $75,000 is growing"

Tom Hickey said...

@ Greg.

I don't see the rationale in subsidizing holders of government bonds as safe assets. If they want to hold such safe assets let them hold 90 day tays.

Capitalism is about profit from investment not interest on saving. Interest on saving is the antithesis of capitalism as based on investment and consumption.

Under capitalism, savers should not bank on safe assets provided by government but rather save in financial products created by investment.

And in a mixed economy, government should be targeting subsidies where they are most effective and efficient.

Of course "savers" demand safe assets provided by government. It's a free ride. Who doesn't like a free lunch?

Greg said...

I don't disagree with you Tom. My main point is more that I think it is more important that interest rates stop being moved around every three months. Pick a number ....0....1.5....2.75.....3.625 and go with it. Its less important what the exact number is and more important that it not move. Wherever it stays that will be the zero point.