Monday, December 10, 2007

The ECB: Disenchanted (amv)

Here you find a nice FT Deutschland-article written by Wolfgang Münchau. It is written in German but here you find his own summary in English on eurointelligence. Both articles reveal Münchau's disenchantment with the ECB (the good thing about being a staunch non-believer in the Good Will of the power monopoly is that you are never disappointed). Unfortunately, both of Münchau's articles rest on the cost-push fallacy which is after Friedman's short lived contra-argument en vogue again (some arguments against this kind of reasoning you'll find here and here). But his one point on the ECB is correct. He claims in arguing why his inflation expectations have risen:
"The first, and most important reason is that the ECB is not a true price stability advocate, but a central bank whose first priority is financial stability. The reason I suspect is rooted in the national banking system, as national central bank governors - the majority on the ECB's governing council - are highly protective of their national banks. We all know that banking consolidation will eventually happen in the euro area, and that will invariably lead to the loss of dominant market shares by national financial institutions. But the custodians of the status-quo - many central bankers among them - will first put a battle."
So much for central bank independency!

BTW: In his German article Münchau makes a statement which perfectly fits my earlier post on minimum wages:
"Im Gegensatz zu den meisten konservativen deutschen Kommentatoren habe ich keine moralischen Bedenken gegen Gehaltserhöhungen - auch nicht gegen "unvernünftige". Ich habe auch nichts gegen Lohnsenkungen. Der Lohn ist ein Preis, der auf Signale reagiert. In den letzten Jahren gab es gute Gründe für eine moderate Lohnentwicklung in Deutschland. Jetzt gibt es gute Gründe für eine entgegengesetzte Entwicklung. Ich halte das für weder gut noch schlecht. Mein Verhältnis zum Arbeitsmarkt ist das des Entomologen zum Insekt."
Meines auch!