Is The Great European Central Bank (ECB) Experiment Unraveling?
When the Fed was cutting rates and aggressively attempting to deal with the issues in the U.S. banking system, a near universal position was that the U.S. was in serious trouble while the Euro represented a save haven. That Trichet, the head of the ECB, was moving the right direction by keeping rates high for fear of great inflation threats.
Below is text taken from a post on here in May when dollar bears were roaring and some of the top investment minds were bullish on the Euro. And, applauded the ECB policy. Mind you, that was every one on Wall Street who could grab a microphone be it bears or bulls. I believe it was on Bloomberg that Marc Faber cited the Euro as a "sound currency" versus "Printing Press" Bernanke.
There are many who now cite the Euro as a sound currency versus the deleterious dollar. That's really quite funny. It shows much of the bias people have for current data. In other words, the Euro is strong while the dollar has been weak. Yet, there is very little intelligent discussion as to why or what future data would do to change that. The ECB is simply another elitist institution of incompetence that has contributed to much of the mess we now see around the globe. Much more so than the Federal Reserve by its direct action. The ECB's diligence against inflation while the world craters around them validates the roomful of bureaucrats don't see the train coming down the track. While the Federal Reserve does everything in its power to prepare America, whether you agree with their approach or not, the ECB comparatively looks like a deer in the headlights. This highlights why I have a significant disdain for bureaucratic institutions in whom the people entrust their future and livelihood. History is replete with examples of such folly. Your livelihood is best served by you, best understood by you and best tendered by you. Misplaced trust in elitists is the largest single contributor to what is now unfolding. I wouldn't be at all surprised to see an outcome to this cycle be an invalidation of a pan European central bank. Well, we'll watch and learn as the current environment unfolds.
Indeed Trichet was a deer in the headlights. How ironic that the shoe is now on the other foot. Trichet now looks like a fool. A bigger fool for jabbing a stick in Bernanke's solar plexus when he should have been cooperating. Europe's banking system is in dire trouble. In fact, likely in much more serious trouble than the U.S. The ECB has been completely and foolishly chasing its tail. And, who has been proven to be right again? Ben Bernanke. (Most bloggers, media and Wall Street criticizing Bernanke's every move are deer in the headlights as well. Bernanke will make mistakes as anyone in this environment would but he is qualified.) Not the first time I have written that sentence. The U.S. is attempting to hammer through problems left and right while the rest of the world remains in chaos. We aren't getting through this without taking our medicine but that doesn't mean we can't attempt to mitigate many solvable problems and creatively try solutions to others. Some moves will be second guessed and there will be more than one unintended consequence but I'm not ready to jump down the 'do nothing' rabbit hole and find out how deep it goes. It's pretty doggone deep because I can't even begin to see the bottom if we do nothing. (The $700 billion bailout is still a massive mistake.) If you are, hey, that's great. I'll see you in the post-cataclysmic Hooverville foraging for sticks and grubs if this fails on every level. But, I'd rather try something before guaranteeing a complete economic bust by doing nothing.
The ECB is in serious trouble as an institution. Could the ECB's future be in jeopardy? Might you see how its mandate and ability to deal with crisis is severely restricted? Even comical? More than a dozen economies and no mandate from any of them. The finest bureaucracy money can buy. Crises in the banking system and bickering amongst its members as to how to deal with the problems. Serious leverage and gargantuan monopoly banks with deep financial problems. Government complicity through banks with government ownership. And, how is the ECB going to deal with this? Who knows. Is France going to pay for a bailout in Spain? Is Germany going to pay for a bailout in Greece? And, the structural problems don't end with this crisis but may be even more difficult when trying to set the seeds of any recovery.
If the European economic or banking environment reaches a level of criticality, it would be most logical that member states will move on their own to protect sovereign interests. Possibly even dissolving the ECB charter. We are already seeing country-based moves today. What is the mindset of leaders in Europe that would lead to another layer of incompetence? Well, it's funny you would ask. Just as I typed last week - elitism. Interesting how the critical European commentary directed at the U.S. looks like dullards blowing donuts now, eh? (That's how us common folk like to express ourselves in America.) A little bit of schadenfreude mixed in with a dash of elitism makes a mighty tasty shit sandwich. Britain looks comparatively brilliant for refusing to join in this charade. Let's watch and learn as this mess unfolds.
Below is text taken from a post on here in May when dollar bears were roaring and some of the top investment minds were bullish on the Euro. And, applauded the ECB policy. Mind you, that was every one on Wall Street who could grab a microphone be it bears or bulls. I believe it was on Bloomberg that Marc Faber cited the Euro as a "sound currency" versus "Printing Press" Bernanke.
There are many who now cite the Euro as a sound currency versus the deleterious dollar. That's really quite funny. It shows much of the bias people have for current data. In other words, the Euro is strong while the dollar has been weak. Yet, there is very little intelligent discussion as to why or what future data would do to change that. The ECB is simply another elitist institution of incompetence that has contributed to much of the mess we now see around the globe. Much more so than the Federal Reserve by its direct action. The ECB's diligence against inflation while the world craters around them validates the roomful of bureaucrats don't see the train coming down the track. While the Federal Reserve does everything in its power to prepare America, whether you agree with their approach or not, the ECB comparatively looks like a deer in the headlights. This highlights why I have a significant disdain for bureaucratic institutions in whom the people entrust their future and livelihood. History is replete with examples of such folly. Your livelihood is best served by you, best understood by you and best tendered by you. Misplaced trust in elitists is the largest single contributor to what is now unfolding. I wouldn't be at all surprised to see an outcome to this cycle be an invalidation of a pan European central bank. Well, we'll watch and learn as the current environment unfolds.
Indeed Trichet was a deer in the headlights. How ironic that the shoe is now on the other foot. Trichet now looks like a fool. A bigger fool for jabbing a stick in Bernanke's solar plexus when he should have been cooperating. Europe's banking system is in dire trouble. In fact, likely in much more serious trouble than the U.S. The ECB has been completely and foolishly chasing its tail. And, who has been proven to be right again? Ben Bernanke. (Most bloggers, media and Wall Street criticizing Bernanke's every move are deer in the headlights as well. Bernanke will make mistakes as anyone in this environment would but he is qualified.) Not the first time I have written that sentence. The U.S. is attempting to hammer through problems left and right while the rest of the world remains in chaos. We aren't getting through this without taking our medicine but that doesn't mean we can't attempt to mitigate many solvable problems and creatively try solutions to others. Some moves will be second guessed and there will be more than one unintended consequence but I'm not ready to jump down the 'do nothing' rabbit hole and find out how deep it goes. It's pretty doggone deep because I can't even begin to see the bottom if we do nothing. (The $700 billion bailout is still a massive mistake.) If you are, hey, that's great. I'll see you in the post-cataclysmic Hooverville foraging for sticks and grubs if this fails on every level. But, I'd rather try something before guaranteeing a complete economic bust by doing nothing.
The ECB is in serious trouble as an institution. Could the ECB's future be in jeopardy? Might you see how its mandate and ability to deal with crisis is severely restricted? Even comical? More than a dozen economies and no mandate from any of them. The finest bureaucracy money can buy. Crises in the banking system and bickering amongst its members as to how to deal with the problems. Serious leverage and gargantuan monopoly banks with deep financial problems. Government complicity through banks with government ownership. And, how is the ECB going to deal with this? Who knows. Is France going to pay for a bailout in Spain? Is Germany going to pay for a bailout in Greece? And, the structural problems don't end with this crisis but may be even more difficult when trying to set the seeds of any recovery.
If the European economic or banking environment reaches a level of criticality, it would be most logical that member states will move on their own to protect sovereign interests. Possibly even dissolving the ECB charter. We are already seeing country-based moves today. What is the mindset of leaders in Europe that would lead to another layer of incompetence? Well, it's funny you would ask. Just as I typed last week - elitism. Interesting how the critical European commentary directed at the U.S. looks like dullards blowing donuts now, eh? (That's how us common folk like to express ourselves in America.) A little bit of schadenfreude mixed in with a dash of elitism makes a mighty tasty shit sandwich. Britain looks comparatively brilliant for refusing to join in this charade. Let's watch and learn as this mess unfolds.
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