Banking Cartel Pressures ECB to Expand QE

The banking cartel lobbies the European Central Bank [ECB] to engage in more Quantitative Easing [QE] or asset purchases by central banks funded by “money from thin air”

Here is the Wall Street Journal Blog,

The banking sector’s international lobbying group on Wednesday joined the campaign to boost the European Central Bank‘s role in the euro-zone rescue, calling for the ECB to backstop struggling bond markets while the currency bloc implements its latest debt deal.

The comments by the Washington-based Institute of International Finance, which represents more than 450 financial institutions in 70 countries, add another major voice for a heightened ECB role despite concerns from some European officials — particularly in Germany — about the central bank’s bond purchases.

As Europe develops details around its new debt deal, “it is essential that all parties come together behind the continued active role of the ECB in the secondary government bond market,” IIF Managing Director Charles Dallara wrote in a letter to officials from the Group of 20 industrial and developing economies meeting in Cannes, France, this week. “This will allow time for national authorities’ adjustment efforts to take hold, and help stabilize markets at this crucial juncture.”

The ECB’s new president, Mario Draghi, who took his post Tuesday, faces the question of whether to continue or increase ECB purchases of Italian government debt to push yields lower. The ECB has bought an estimated 70 billion euros in Italian debt since August, but that hasn’t been enough to keep the 10-year yield on Italian debt below 6%.

Direct lobbying might not be enough though. A wider range of publicity tools would be required to justify these actions to the public, especially given the du jour populist demonstrations

So the politically embattled banking and finance sector would have to employ the same set of tools used by central banks to manipulate the public’s expectations—signaling channel (a.k.a propaganda).

And a lot of these will come from the academe or from the mainstream media.

An example of which is an excerpt from a recent article of Telegraph’s Ambrose Pritchard Evans, who uses the stereotyped deflation bogeyman to argue for more of ECB’s QE.

The two halves are locked together in a broken marriage. To pretend otherwise is no longer responsible. The structural gap cannot be closed by debt-deflation in the South – the current default setting of EU policy. It could arguably be closed if Germany were to let the European Central Bank reflate the whole eurozone system.

Instead, the ECB has done the opposite, opting to blight the chances that Spain might just be able to claw its way back to viability within the constraints of EMU.

Paradoxically, Mr. Evans is a popular columnist whose opinions easily flip-flops, i.e. from mainstream views towards espousing the contrarian [end the Fed] and backsliding again to the mainstream.

Nevertheless I am reminded by the great Murray N. Rothbard who presciently wrote [modifications mine]

An "impartial" Central Bank, on the other hand, driven as it is by the public interest, could and would restrain the banks from their natural narrow and selfish tendency to make profits at the expense of the public weal. The stark fact that it was bankers themselves who were making this argument was supposed to attest to their nobility and altruism.

In fact, as we have seen, the banks desperately desired a Central Bank, not to place fetters on their own natural tendency to inflate, but, on the contrary, to enable them to inflate and expand together without incurring the penalties of market competition. As a lender of last resort, the Central Bank could permit and encourage them to inflate when they would ordinarily have to contract their loans in order to save themselves. In short, the real reason for the adoption of the Federal Reserve European Central Bank [strike through and italic insertion mine], and its promotion by the large banks, was the exact opposite of their loudly trumpeted motivations. Rather than create an institution to curb their own profits on behalf of the public interest, the banks sought a Central Bank to enhance their profits by permitting them to inflate far beyond the bounds set by free-market competition. [bold mine]

Seems like a case of sleeping with the enemy