Re: Much ado about nothing?

I had suggested:

> >I think the European Bank is totally separate and
> >cannot be sacked by any government, is that
> >right?

Trond clarified:

>Yes. See excerpts from the 1997 Amsterdam treaty
>http://www.eurotreaties.com/emutreaty2.html
>[snipped]
> neither the ECB [European Central Bank], nor a
> >national central bank, nor any member of their decision-making bodies shall
> >seek or take instructions from Community institutions or bodies, from any
> >government of a Member State or from any other body.
[snipped]
> >ARTICLE 106 (ex Article 105 a)
>In addition to the right of issuing currency thus being completely removed
>from national governments, these governments are also bound by EU statutes
>to not run a deficit above 3% of GDP.
[snipped]
>So, concerning the name of this discussion thread, "Much ado about nothing",
>it seems to me that the issue of whether the CB is separated from the gvt.
>is an extremely important real-world economic issue, not only a question of
>how one chooses to talk about things. At least in the EU (and Norway, even
>if we -- thank god -- are not a member).

I don't know about thanking god but in this case ... independence under law
and influence
presents interesting issues for macroeconomics.

It is possible under this arrangement for the ECB to "bounce government
cheques" that were
issued by a "rogue" (to use terminology seemingly in vogue at present)
states who were intent
on pursuing full employment via appropriate levels of net government spending.

The possibility refers to there being little the Treasury in that state
could do.

It is an example of a voluntary restraint being imposed on states by
themselves (by entering
the agreement) to curb the power they hold as a result of being the
monopoly issuers of
their own currency. why they would do it is another question. totally
irrational in fact.
But it makes the pursuit of full employment very difficult if not impossible.

I would hope the voters in those states really understood that they were
handing over
their sovereignty to faceless bureaucrats in Frankfurt who in the research
output their institution
supports exhibit a failure to understand the reasons that the mass
unemployment that is all around
them arises.

best wishes
bill
William F. Mitchell
Professor of Economics
Director, Centre of Full Employment and Equity
University of Newcastle, NSW, Australia
E-mail: ecwfm@alinga.newcastle.edu.au
Phone: +61-2-4921 5065
Fax: +61-2-4921 6919
Mobile: 0419 422 410

http://e1.newcastle.edu.au/economics/bill/billeco.html
http://www.billmitchell.org
Received on Tue Feb 11 00:11:53 2003