Posted by: Tom Keene on January 15, 2012
…we have just introduced a new currency in eleven countries with different histories, cultures and backgrounds. Establishing and maintaining a European culture of stability is of the utmost importance. This also explains why central bankers regularly express their views on other policies, be it fiscal policies or structural reforms. I have done so in the past and shall continue to do so in the future - as always, on a constructive basis and in recognition of the fact that the central bank does not decide on these policies, but only gives its advice.
—Speech by the President of the European Central Bank, Dr W F Duisenberg at the 11th Frankfurt International Banking Evening in Frankfurt on 20 May 1999. Courtesy BIS.
We need to get beyond “advice” fast.
If we can assume the vigilantes (the “markets” among polite company) had and have priced in various and sundry debt downgrades, why the inconvenient move in the euro Friday.
Answer: certain things are, and I would advise are not, priced in.
President Duisenberg, two presidents and distant pre-crisis ago, desired a removed central bank giving advice but only advice.
Those days are over.
Once again, predicted events have occurred and led to advisedly predictable and unpredictable outcomes.
The unpredictable suggests Draghiesco action. (Think Madison.)
Davos beckons. 1.25 and 1.20 and 1.15? EUR-USD beckons. Iran, Nigeria and possibly higher petrol prices beckon. Austerity and its collective debris beckons.
Beckon this. Stop Dithering. Discuss.