From the Wall Street Journal Blog
One thing we all know about Mario Draghi now: he reads the papers.
The European Central Bank president used his monthly press conference to take issue with a recent Wall Street Journal article on the ECB’s balance sheet now exceeding three trillion euros after it pumped a total of one trillion euros in three-year loans into European banks.
The ECB’s balance sheet equals one-third of euro-zone GDP, a bigger share than the Federal Reserve’s balance sheet, which makes up 19% of U.S. GDP, and the Bank of England’s, which is 21% of U.K. GDP, the article noted.
“You conclude that the expansion in the euro area is bigger than it is in the U.S. or the U.K.,” Mr. Draghi said.
Mr. Draghi’s point was that looking at the total size of the balance sheet gives an incomplete view. The ECB holds large amounts of gold and currency reserves on its books that have nothing to do with monetary policy, he said. The Fed’s balance sheet, he said, “is very, very lean” in that regard, and “the Bank of England is also the same.”
Instead, Mr. Draghi said the share of assets related to monetary policy is the more relevant indicator of risk. By that measure the ECB’s balance sheet is at 15% of GDP compared to 19% for the Federal Reserve and 21% for the Bank of England, he said.
“At the present time to say the risks for the ECB balance sheet are now higher than what they are in the Fed and Bank of England is not correct,” he said.
Mr. Draghi does not deal with the merits or the essence and risk-reward or the consequences of the ECB’s actions, instead he applies the logical fallacy of two wrongs make a right—everybody is doing it, mine has been less than the others. This is also an example of a red herring (Ignoratio elenchi) argument which attempts to distract the public.
Yet the above is an illustration of the typical communications approach anchored on sophistry used by political authorities to justify their proposals or actions.
No comments:
Post a Comment