{"id":20920,"date":"2016-06-04T16:57:03","date_gmt":"2016-06-04T21:57:03","guid":{"rendered":"http:\/\/olduvai.ca\/?p=20920"},"modified":"2016-06-04T16:57:03","modified_gmt":"2016-06-04T21:57:03","slug":"the-ecbs-illusory-independence","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=20920","title":{"rendered":"The ECB\u2019s Illusory Independence"},"content":{"rendered":"
\n

The ECB\u2019s Illusory Independence<\/a><\/h3>\n

ATHENS \u2013 A commitment to the independence of central banks is a vital part of the creed that \u201cserious\u201d policymakers are expected to uphold (privatization, labor-market \u201cflexibility,\u201d and so on). But what are central banks meant to be independent of? The answer seems obvious: governments.<\/p>\n<\/header>\n

\n

In this sense, the European Central Bank is\u00a0the<\/i>\u00a0quintessentially independent central bank: No single government stands behind it, and it is expressly prohibited from standing behind any of the national governments whose central bank it is. And yet the ECB is the least independent central bank in the developed world.<\/p>\n

\"Graduation<\/a><\/p>\n

Generation Jobless<\/strong><\/p>\n

Italian economist\u00a0Edoardo Campanella\u00a0explains why Joseph Stiglitz, Jean Pisani-Ferry, Harold James, and other leading thinkers are so worried about youth marginalization.<\/strong><\/p>\n<\/section>\n

The key difficulty is the ECB\u2019s \u201cno bailout\u201d clause \u2013 the ban on aiding an insolvent member-state government. Because commercial banks are an essential source of funding for member governments, the ECB is forced to refuse liquidity to banks domiciled in insolvent members. Thus, the ECB is founded on rules that prevent it from serving as lender of last resort.<\/p>\n

The Achilles heel of this arrangement is the lack of insolvency procedures for euro members. When, for example, Greece became insolvent in 2010, the German and French governments denied its government the right to default on debt held by German and French banks. Greece\u2019s first \u201cbailout\u201d was used to make French and German banks whole. But doing so deepened Greece\u2019s insolvency.<\/p>\n

It was at this point that the ECB\u2019s lack of independence was fully exposed. Since 2010, the Greek government has been relying on a sequence of loans that it can never repay to maintain a fa\u00e7ade of solvency.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The ECB\u2019s Illusory Independence ATHENS \u2013 A commitment to the independence of central banks is a vital part of the creed that \u201cserious\u201d policymakers are expected to uphold (privatization, labor-market \u201cflexibility,\u201d and so on). But what are central banks meant to be independent of? The answer seems obvious: governments. In this sense, the European Central […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[233,281,282,8402,2921],"class_list":["post-20920","post","type-post","status-publish","format-standard","hentry","category-economics","tag-ecb","tag-europe","tag-european-central-bank","tag-project-syndicate","tag-yanis-varoufakis"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20920","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20920"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20920\/revisions"}],"predecessor-version":[{"id":20921,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20920\/revisions\/20921"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}