Friday, 7 September 2012

The ECB is playing with fire: Financing through the money presses

A brand new euro factory will soon open in Frankfurt, Gemany
"A euro commmunity based on one treaty breach after another is on shaky ground" 
Süddeutsche Zeitung

The European Central Bank has now agreed to unlimited bond purchases in order to prevent a further escalation of the euro crisis. Jens Weidemann, the head of the German Bundesbank, was the only ECB Governing Council member to vote against this plan which in reality means using the printing presses for creating "free" money:

Weidmann has been warning against the program for weeks now, and on Thursday he became the only member of the Governing Council to vote against the bond-buying program. In Weidmann's view, bond purchases through the ECB "are too close to state financing via the money presses," a Bundesbank spokesman said.

Weidemann and other critics understand that using the printing presses to create money out of nowhere is a recipe for disaster, creating inflation and relieving crisis-ridden countries of fiscal responsibility. Also, the bond buys will violate the mandate of the central bank, because it means financing states.

ECB President Mario Draghi may think that he has "saved the euro" with this new policy, but he is mistaken. His plan is just another step towards the final failure of the entire euro system.

There is also the possibility that Germany´s constitutional court will stop Draghi from carrying out his plan:

The answer is likely to come next week when, on Sept. 12, Germany's Federal Constitutional Court is expected to rule on complaints against the creation of the permanent ESM bailout fund. The ECB's bond buying program can only commence if Germany's highest court rules that the ESM is compatible with the German constitution. If the court rules against the ESM, those seeking to save the euro will have to go back to square one and drum up new ideas.

Read the entire article here
(image wiki)

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