Bundesbank boss Jens Weidemann knows his Goethe

Dr. Jens Weidemann knows his Goethe
(image by Bundesbank)

Jens Weidemann, the head of the German Bundesbank, is - fortunately - defying calls by politicians to tone down his criticism of the European Central Bank and its head Mario Draghi: 

Jens Weidmann said that efforts by central banks to pump money into the economy reminded him of the scene in Faust, when the devil Mephistopheles, “disguised as a fool”, convinces an emperor to issue large amounts of paper money. In Goethe’s classic, the money printing solves the kingdom’s financial problems but the tale ends badly with rampant inflation.

Without specifically mentioning Mario Draghi’s bond-buying programme, he said: “If a central bank can potentially create unlimited money from nothing, how can it ensure that money is sufficiently scarce to retain its value?” He added: “Yes, this temptation certainly exists, and many in monetary history have succumbed to it,” Mr Weidmann warned.

Although the remarks were in context - Frankfurt is currently marking the 180th anniversary of the death of Goethe - they defy calls by leaders for Mr Weidmann to tone down his criticism of the ECB, particularly at a febrile moment in the crisis. The launch by Mr Draghi of an unlimited bond-buying programme has boosted both confidence and markets.

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It is true that "Super Mario´s" money printing scheme may have "boosted confidence and markets", for the time being, but it will not take long before markets realize that the ECB boss  is not only "disguised as a fool" - he is a fool. However, the politicians now celebrating the money printing program are even bigger fools.