That Which the ECB Hath Separated, Let No Man Join Together Again!

In a recent post on the FT Money Supply Blog the ever perceptive Frank Atkins made the following, very interesting, observation which, I think, goes a long way towards helping us all understand what exactly the thinking is which lies behind the ECB’s current strategy for its handling of the Eurozone economy.

One of the subtleties of yesterday’s complex package from the European Central Bank was that it attempted to re-assert the principle of “separation”. When the financial storm broke in August 2007, the ECB insisted, doggedly, that emergency financial market liquidity injections were not related to its monetary policy. That remained firmly aimed at controlling inflation and still very much determined the level at which it set the main policy interest rate. Indeed, in July last year the ECB famously raised the interest rate to 4.25 per cent because inflation appeared to be getting out of control.

The separation that is being talked about here is not then a matrimonial one, nor is it a Montesquieu type notion of a necessary and sufficient separation of powers between Brussels and Frankfurt, rather what is involved is a separation, which is customarily made by the ECB, between monetary policy and liquidity provision. Now all of this may seem rather obscure, and it is, but it is also, I will argue here, rather central to understanding what the ECB is up to, or trying hard to be up to, at the present moment in time, and why what it seems to be giving with one hand it also seems to be taking away with the other.

Buiter: “It’s Five Minutes to Midnight for Greece”

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Global Growth Forecasts – Seeing is Believing?

As we move into year’s and perfectly in line with seasonal regularity we are flooded by a veritable tsunami of sell and buy side research on the big themes of 2009 and those to come in 2010. Now, we can add another to the list in the form of the latest quarterly review from BIS […]

It’s All Greek to Me

In the long run we are all dead. But as someone else famously put it: we ain’t dead yet, and in the space between these two undeniable truths move forex traders, financial markets and a host of other would be economic participants. The financial press is full right now of headline catching stories about how […]

Total Eclipse at the Heart of Dubai’s World

Back in the heady days of 2006 some 30,000 cranes, roughly a quarter of total global capacity, were busy whirring away in Dubai. Today most of these devices have either left to find service in other parts of the globe, or lie silent, unused and unloved. In what is only the latest sign of the […]

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