by Frank Thomas
Complexity, misunderstandings, frustration abound over ECB (European Central Bank), NCBs (National Central Banks) and EU policy approaches to debt and deficit crisis. Without getting too technical, this paper will address questions on how the EU banking system works.
Multiple factors must be taken into account when it comes to ECB, NCB and government handling of HIGH sovereign debt problems for Ireland, Greece, Portugal, Italy and HIGH private bank debt situations run amok in Ireland and Spain. In latter countries, booms were financed with unsustainable capital inflows – caused by profligate real estate bank loans and bank debt guaranteed by the Irish government, exploding its sovereign debt as well. Weak country local banks were funded by European banks with German and French banks having heavy exposure to Greek, Spanish, Portuguese and Irish bonds. Then there is the HIGH ±$1.5 trillion euro zone debt governments must repay in 2012 – in the first-half of 2012, $695 billion of debt matures for Italy, Germany and France alone! This has all led to an interlocked web of sovereign debt and banking crises, expanding risk exposure for banks and taxpayers across Europe.
Any workable solution requires a step-by-step, well-coordinated, multi-faceted action plan. This does NOT necessarily mean the ECB should ipso facto aggressively expand its balance sheet debt by large-scale purchases of euro zone government bonds. The EU Treaty of Maastricht and Statute of the Eurosystem of Central Banks (ESCB) prohibits the ECB to balance its single monetary objective of price stability against other aims such as growth stimulus, job creation or currency speculation. In contrast, the Federal Reserve's objectives are far more broadly defined taking into account output, growth stimulus and employment, in addition to inflation targets. The ECB and NCBs are prohibited from lending money to the public sector. [ed. note: Why? Could it be that they are influenced and/or controlled by private bankers who don't want to give up their vigorish?]
This shields central banks from pressure by governments to grant monetary financing using ECB and NCB bank money. [ed. note: Yes, but it doesn't shield governments from pressure by Goldman Sachs to take on more debt.] This prohibition covers the buying of sovereign debt – but not bank debt – on the primary market. Prohibited also are "backdoor" ECB funded bailouts as Congress and Federal Reserve did during the financial crisis and recession of 2008-09. Important, however, are the €750 billion of euro zone loan guarantees (€440 billion) and an IMF loan (€250 billion) for the European Financial Stability Fund (EFSF) to help bail out weak, debt-stressed countries under strict rescue conditions. Germany alone has contributed almost 50% of the total euro zone loan guarantees.
The ECB has circumvented the treaty rule on buying public debt by buying billions of weak country bad debt on the secondary market [ed. note: Yes, but the primary market still yields the vigorish to private bankers.], justified as part of its responsibility to stabilize monetary prices. Also, the ECB greatly eased the credit-squeeze of EU banks not lending to each other by a €489 billion ($639 billion) liquidity injection of cheap 1% interest, 3-year collateralized loans to 523 euro zone banks. Some see this as a "backdoor" way of supporting the government bonds of weak countries since much of this liquidity injection was placed in sovereign bonds [ed. note: at much higher interest rates yielding fantastic profits for the banks!]. However, the ECB will not lend to the IMF so it can manage the stabilization job from Washington. But, this is a possibility for the NCBs. For now, ECB and Merkel rule out selling Eurobonds guaranteed by euro zone members. Germany’s anti-Keynesian approach of fiscal discipline, price stability, and quasi-automatic rules governing future such crises has won out.
QUESTION 1: Who Are The Owners of The ECB and NCBs?
Owners and shareholders of the ECB are the ESCB (central banks) of the EU 27 Member States comprising 17 euro area and 10 non-euro area NCBs. Each country’s NCB is owned by that country’s government, thus making the taxpayers of each Member State indirectly the ultimate owners. Neither the ECB or NCBs nor any member of their decision-making bodies can ask for or accept instructions from any other body. [ed.note: Good, no lobbying!] EU institutions and governments must accept this principle and abstain from giving instructions or influencing the ECB and NCBs in the exercise of their exclusive functions and competence centered around monetary policy.
Since the financial crisis began in 2008, the ECB and NCBs have not joined the Federal Reserve and US Congressional bandwagon of printing and plowing back trillions of dollars to come out of the debt crisis …and they did this while unknown trillions of high-risk bank/hedge fund default swap contracts flooded markets, including insuring euro zone member bank loans as well. Is it any wonder some U.S economists have been urging the ECB to jump into the quantitative easing, money creation game. Since 2008, the scale of U.S. money creation and bank/hedge fund gambling in derivatives has been mind-boggling. Ellen Brown, research author of “Web of Debt,” found that government bailout funds for the financial institution culprits who caused the financial crisis started with $700 billion in Sept. 2008; rose to $800 billion in Oct. 2008; exploded to $8.5 trillion in Nov. 2008 including all guarantees, commitments, and loans, and leaped exponentially to a potential $24 trillion in July 2011! In Brown’s words, “This mountain of U.S. debt risk exposure is TWICE the Federal Debt and TWICE GDP! BUT, concerning Q1/Q2 quantitative easing actions, one can legitimately ask where would the U.S. be today in terms of a DEFLATION MENACE with global scale implications if the Federal Reserve had not aggressively increased the money supply by quantitative easing while federal and state authorities have been slashing government budgets? (ed. note: there doesn't seem to be any inflation as a result of all the quantitative easing in the US as a result, so what is the downside? It may be that the huge quantity of dollars owned by foreign governments and individuals will eventually be used to by up large amounts of real assets in the US. In fact that is already happening.)
Still, Germany has never been in love with the Anglo-Saxon model of short-term finance capitalism versus its model of robust export growth, strict budget discipline, innovative manufacturing, and long-term investment in the real economy. In my opinion, I don’t believe Europe will, nor should, walk down a pyramid money creation lane as the magical answer for stabilizing and resolving serious short/long-term deficit and debt problems in the weak euro zone countries. [ed. note: This is important as the US Fed's expansion of the money supply was an expansion of the money supply in the financial economy and not in the real economy. I speculate that this is why it was non-inflationary as well as contributing to increased casino speculative gambling which will possibly some day lead to another major financial crisis.)
QUESTION 2: How Does the ECB, an NCB, and an EU Member Country Taxpayer Share in Profits/Losses of Eurosystem Banking Today?
The ECB's capital to cover costs includes: (1) Paid-up Capital by 27 Eurosystem NCBs; (2) ECB limited transfers to General Reserve Fund. As of Dec. 29, 2010, Paid-up Capital was doubled from €5.76 billion to €10.76 billion by Dec. 31, 2012, increasing in two steps. ECB Paid-up Capital and Net Profits are shared by NCBs based on "capital key" percentages for each state. These are determined by the weighted share each Member State has in total EU population and GDP. Currently, "capital keys" for euro area and non-euro area national central banks are as follows:
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TABLE 1 CAPITAL KEY PAID-UP CAPITAL
(Percentages) (Euro Millions)
BELGIUM 2.43% 220.6
GERMANY 18.94% 1,722.2
FRANCE 14.22% 1,283.3
ITALY 12.50% 1,136.4
NETHERLANDS 3.99% 362.7
IRELAND 1.11% 101.0
GREECE 1.96% 178.7
SPAIN 8.30% 755.2
PORTUGAL 1.75% 159.2
ALL OTHER 4.77% 433.8
TOTAL EURO AREA 69.97% €6,363.3
TOTAL NON-EURO AREA 30.03% €2,731.0 __________________________________________________________________
ECB's Net Profits – reduced by a quarterly dividend distribution of its monetary income to NCBs and by a possible transfer to the general reserve fund – are distributed to euro and non-euro area NCBs in proportion to their Paid-Up Capital shares or “capital key” percentages in Table 1. Monetary income consists mainly of “seigniorage” income. This is the interest income from the liquidity-providing operations as result of refinancing needs of banking system. Eurosystem bank income is tied to the interest rate on liquidity-providing operations. This rate is called the marginal MRO (Main Refinancing Operations interest rate) and is usually slightly higher than the ECB’s policy rate. ECB and NCBs monetary income is thus correlated with banknote demand and the existing MRO rate.
High banknote demand and high marginal MRO interest rates increase seigniorage income and vice versa. The ECB receives its MRO interest on its 8% share of total euro zone banknote issuance. It authorizes banknote issuance by the NCBs. As noted, the ECB’s share of monetary (seigniorage income) is distributed to the NCBs. Profit maximization does Not play a role in ECB’s operations. Management of ECB policy and MRO rates is done in a way to insure fulfillment of ECB’s Primary Objective of Price Stability. The overriding aim is to insure the ECB’s complete independence An NCB’s earnings on its own financial resources for non-monetary related functions remain with the NCB.
ECB financial results are much affected by exchange rates and interest rate variations. For example: a depreciation of the U.S. dollar against the euro by only 100 basis points reduces ECB's Net Profits by some €300 million. In event of such an ECB loss, the shortfall may be offset against the general reserve fund and, if necessary, against the monetary income up to certain limits, and then finally allocated to the NCBs. Any losses absorbed by the NCBs ultimately accrue to each Member Country's taxpayers since NCBs are 100% owned by their state governments.
Here's a current virtual reality illustration of the ownership risk chain and how it affects the Netherlands Central Bank and Dutch taxpayers. Since May last year, the ECB has bought €208 billion in distressed European sovereign debt under the Securities Market Program. As the market value of Italian, Greek, Spanish, Portuguese, and Irish bonds has been decreasing since last year, ECB shareholders (the NCBs) may likely have to fill the gap in ECB's balance sheet. So, the Netherlands Central Bank has just last week announced plans to cancel its €575 million interim dividend to the Dutch government. This means the government is faced with an increase in its budget deficit from 4.5% to 4.6% of GDP. This is a huge amount of money that must come from Dutch taxpayers in some way in 2012 and/or thereafter ... perhaps in the form of a reduced home mortgage interest deduction. As noted, the Netherlands, like all euro zone governments, are shareholders of the ECB. Taxpayers of the wealthy countries are thus at risk for any related Eurosystem losses from ECB’s bailing out actions of distressed Member Countries.
The ECB has come up with the convenient argument that the Securities Market Program is needed to help it execute a monetary policy now obstructed by dysfunctional markets. ECB's very low-cost credit line of €489 billion ($639 billion) for EU banks, the limited but significant ECB purchases of sovereign bad debt, ECB reduction of short-term interest rates to near zero, the smooth government and bank tapping of short-term funds in recent bond auction markets are all steps to stabilize and break the credit squeeze. All this BUYS TIME to come up with a sensible, innovative, long-term solution to the debt crisis problem haunting weak and strong EU countries. Some options – up to now opposed by Germany – are for euro zone to issue Eurobonds or organize centralized borrowing backed collectively by EU members, or for the ECB to undertake massive bond buying. Another idea is to set up a “European mini IMF” to fund weak countries during austerity/reform transition phase to acceptable solvency and fiscal disciplines. Meanwhile, euro zone countries are evaluating writing caps on deficits and debt into their constitutions. Spain has already done just that!
QUESTION 3: How Does the Economic Model Affect Social/Financial Stability?
I have faith the daunting debt/deficit adjustments necessary will be undertaken in a way that does not turn Europe’s banking system into a money printing press … a pyramid debt growth dependent nation that the U.S has become. Making U.S. matters worse is a social-economic model founded on an inherently out-of-balance, financially destabilizing GDP growth formula:
1. a 70% Consumption dependence with wage/benefit stagnation driving massive buying of imports and unsustainable credit debt levels
2. low to near zero Savings rates driven by a Consumption buy-buy-buy economic model with low wages and unaffordable health care costs
3. weak Private and Public Investments (except in Defense), financial firms still promoting derivative gambling and obscene bonuses
4. sky-high Trade Deficits driven by unfair trade practices, currency manipulation, e.g. undervalued Chinese renminbi, causing continuing loss of manufacturing base knowhow and jobs
5. declining Federal and State Tax Receipts driven by high regressive payroll taxes, very low progressive income taxes, global tax haven avoidance
This GDP growth formula has been a recipe for ever higher and more costly debt and deficit levels, laying the basis for the next more severe financial crisis along with an economic and job contraction … a GDP growth formula, that has one out of three Americans in poverty or near poverty while enriching the insider money casino power-players in top income and wealth classes. In short, we are choking on a culture of institutionalized inequality that is destroying the American Dream of shared prosperity in a fair playing field for all. This is an inequality where the rich amass more and more money and power as the ignored middle-class struggles with debt just to keep up and make ends meet.
Europe is certainly not going down this neo-liberal, “winner takes all” class polarizing, pauperizing plutocracy that’s – “imprisoning people in the circumstances of their birth,” … set in motion by an ineffective, “polarized political system drowning in its own bile” – a partisan ideological paralysis preventing solutions to our most basic problems in the sharing egalitarian culture underscoring our “mixed economy” of the 1940s through the late 1970s. These words come from an excellent essay by George Parker in Foreign Affairs entitled, “The Broken Contract,” (Dec. 2011 issue).
Despite criticism of EU’s excessive adherence to short-term budget discipline, current austerity and rescue policy is all about getting the financial house in order first and pursuing Keynesian expansionary fiscal policies second … while continuing ongoing critical investments in education, entrepreneurship and innovation. The premise is that near-term deficit and debt stabilization are necessary conditions for sustained economic growth.
One Asian commentator’s summary of EU priorities is not far off :
Paul Krugman, in “Keynes Was Right,” ridicules the waves of austerity sweeping across Europe and the U.S., saying that, "slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is under way." Krugman fails to mention that Japan has been trying to stimulate (since 2002 when national debt hit 170% of GDP and is even higher today) its way out of an economic funk for over two decades but doesn't have much to show for it. It does no good to try to revive an economy with greater stimulus if it needs structural reform first. Whether in Japan, the U.S. or Europe, an economy must first be built on a foundation that encourages investment, risk-taking and innovation -- and thereby economic growth and jobs.
QUESTION 4: How Have Mature EU Countries Been Doing Without Turning on the Money Creation Printing Press?
A Congressional Research Service report for Congress, “Sovereign Debt in Advance Economies: Overview & Issues for Congress,” by R.M. Nelson updates actual trends in euro zone and U.S. government debt as a % of GDP:
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TABLE 2
Net Gross Government Debt Among Advanced Economies
1990 2000 2010 2011 2015 STRONG COUNTRIES Forecast
AUSTRIA 56.1 66.5 69.9 75.5(a) 75.1(a)
BELGIUM 125.8 107.9 97.1 97.3 98.3
FRANCE 35.2 57.3 84.3 87.6 88.5
GERMANY 42.0 59.7 80.0 80.1 73.8
NETHERLANDS 97.0 53.8 63.7 65.6 65.7
DENMARK N.A. 60.4 44.3 45.6 43.0
FINLAND 13.9 43.8 43.4 50.8 59.2
NORWAY 28.9 34.2 54.3 54.3 54.3
SWEDEN N.A. 53.2 39.6 37.3 26.2
UK 32.6 40.9 77.2 83.0 84.4
US 63.9 54.8 91.6 99.5 109.4
(a) Adjusted for exposure to Hungary’s debt crisis
WEAK COUNTRIES
GREECE 73.3 103.4 142.0 152.3 149.4
ITALY 94.7 109.2 119.0 120.3 118.7
IRELAND 93.5 37.8 96.1 114.1 123.5
PORTUGAL 57.3 48.5 83.3 90.6 103.7
SPAIN 42.5 59.3 63.7 65.6 65.7
It’s clear that Greece, Italy, Ireland, Portugal, Belgium, and the U.S. have very worrisome Debt to GDP levels, the highest of all advanced western economies. Collapsing government tax revenues during the recession, large stimulus efforts, immediate and continuing high unemployment costs, and added cost of government absorption of toxic private and bank debt have brought deficits and sovereign debt to new dangerously unstable plateaus. Even Japan has not escaped this process and a painful lesson in the shortcomings of “financialized capitalism.” It has the worst Debt to GDP ratio at 180 -200% of GDP. Only the Japanese extraordinary innovation, high quality products, hard-working culture, and positive trade balances have saved their country from serious solvency threats in this financial crisis. The Netherlands and especially Scandinavian countries have rather sound Debt to GDP levels, although Dutch household debt is too high (TABLE 2 ,“High Levels of Debt Threaten World Economy”).
The euro zone debt crisis is concentrated in 5 countries making up about 34% of total EA 17 GDP with Italy and Spain accounting for 28%. Greece is teetering on bankruptcy, prompting some to say the Greeks should get out of the euro. But Germany well understands that the failure of one EU economy can have an extremely costly cascading effect on the health of the other economies. Germany’s major role in saving Greece to date is not a product of selfless altruism. Saving Greece, for Germany, is a matter of saving itself and other euro zone members. Of course, there are limits to how far countries like Germany, the Netherlands, and Finland will go.
In a May 26 Report by Rebecca M. Nelson, "Sovereign Debt in Advanced Countries: Overview and Issues for Congress," Table 1 shows countries with the highest and lowest risk of debt default. Data rankings indicate the likelihood of default on sovereign gross debt over the next five years. First, I should add that the U.S. historical record of debt repaying is excellent and this supports its strong reputation in world capital markets. Higher bond spreads also indicate investors’ views of debt level risk. The higher the spreads, the higher the perceived risk of unsustainable debt levels. From this perspective, investors clearly do not put U.S. debt risk in the same class as that of Greece or Ireland. Greece has been in a state of default for close to 50% of the time since its independence 175 years ago!
Not surprisingly, therefore, it is rated with a very high default probability as TABLE 3 shows. Greece has a 58% chance of defaulting on its public debt over next five years versus U.S’s 6th lowest risk rating of 3.7% similar to very low 3.4% rating for the Netherlands. ____________________________________________________________________
TABLE 3
HIGHEST PROBABILITY OF GROSS SOVEREIGN DEBT DEFAULTS
Q1—2011 Highest Lowest
Greece……..57.7% Norway……….1.6%
Ireland……..43.0% Sweden……….2.5%
Portugal…..40.1% Finland………..2.6%
Switzerland…...3.1%
Netherlands......3.4%
Denmark……....3.4%
U.S……………..3.7%
Germany……....4.0%
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Empirical evidence shows that countries with high debt levels have trouble growing out of debt in the intermediate-term as structural reforms take time to manifest themselves. That’s why fiscal cuts and budget discipline are quickly necessary as lengthy austerity measures can make matters worse as Japan learned the hard way during its 1992-2002 stagnation. It’s also why euro zone countries have injected billions more to fund insolvent Greece’s transition to durable fiscal stability (if possible) – in addition to billions provided to troubled economies like Ireland and Portugal. Italy was solvent before the interest rate jump. (ed. note: this makes my point that it's the bond market that is causing the crisis. If loans were advanced by central banks instead of the bond market interest rates could be controlled directly instead of by indirect measures.) Recent aggressive ECB buying of Italian bonds is expected to lower rates to acceptable levels. So Italy’s risk of debt default is not ranked in the high range.
The debt/deficit crisis of the euro zone 5 weak countries parallels that in 48 of 50 U.S. states that cannot meet their budgets. California alone, the world’s 8th largest economy, is ±$26 billion in the red. It receives no Federal government help, not even a small $5 billion guarantee … a Fed that didn’t hesitate to bail out banks which got $15-25 billion each in taxpayer TARP money. Unless grass- root forces in California come up with some creative rebalancing actions and the leverage to execute them, whacky conservative anti-government forces will continue down the road of selling state assets, cutting down public sector jobs, safety nets (which are already BAREBONE) and taxes – intensifying tax revenue and unemployment lows and entrenching deficit highs. In contrast, Greece’s tough austerity, reforms, and debt-restructuring pressures are being somewhat offset by large injections of financial support by ECB and euro zone taxpayers of well-managed countries to help pay the daily bills and ward off bankruptcy.
Of course, strong and weak euro zone nations must eliminate budget waste and reform accelerating costs of social nets due to the aging of society and people living longer. Fortunately, most EA 17 countries have their social-economic models tied to GDP component growth factors – Consumption, Private and Public Investment, and Net Export Balance – that are in reasonably sound financial balance for making the necessary painful debt/deficit reductions while supporting the distressed economies. Economic recovery might be slower than that of the U.S., but the mature euro zone countries are going through the austerity phase with “some financial cushion” to mitigate the pain.
Progressive taxation, high personal savings, and ample social nets keep money flowing directly to people suffering hard times through no fault of their own. Also, unlike the U.S., each EU member country has a national central bank (NCB) that oversees the local commercial banking system – while also coordinating ECB monetary policy. The NCB is nationally tightly committed to protecting the financial health and welfare of its home-base commercial banking system, including people’s pensions. This structure fosters a “hands-on” relationship and local service orientation for optimum lending services to communities. In contrast, the bigger and more arrogant the global banks become, the bigger their embedded neglect of the real local community economy becomes as does the scale of their bonuses – encouraged by serving shareholder interests first with the supreme confidence taxpayers will underwrite their next bailout crisis. As one person said, “You give them your money and they think it’s theirs.”
QUESTION 5: How Does the EU Economic Model Affect Social/Financial Stability?
For decades, the EU social-economic model has worked rather well in stimulating innovation, steady-state economic progress and decent incomes for the vast majority of citizens – without gyrating the obscene inequality income and wealth gaps of the U.S. system of deregulated capitalism in overdrive. In contrast, Europe has been forging a “social capitalism” that serves free markets, the risk takers, and the middle class. This is reflected in the following GDP growth formula:
1. Consumption at 60% of GDP with very low credit card debt, reasonable wage rates, more generous social benefits helping those hurt by a downturn
2. Savings rates at 10-12% of disposable income providing a passive, low-return cash reserve cushion for difficult times
3. Very strong rates of Private and Public Investment, with Defense expenditures at 1.8% of GDP vs. +5% for the U.S., and state-of-the-art infrastructure systems
4. Modest trade deficits
5. Progressive taxation, 18-20% VAT taxes, the effective recycling of which is visibly felt and seen as improving quality of life, e.g., extended vacations, affordable quality health care for all without curtailing opportunities for innovative, entrepreneurial initiatives and state-of-the-art infrastructure
6. Sane and well-managed economic social nets, acting as economic stabilizers in down times and contributing to much less prolonged unemployment
This GDP growth formula has produced EA 17 GDP average growth rates of ±2.5% over the last two decades (excluding 2009, the worst GDP growth year) versus a U.S average of ±3.0%. It has also produced moderate unemployment especially for smaller Scandinavian countries, the Netherlands, Austria and, of course, Germany. In fact, despite stronger unions, higher minimum wages, more generous social benefits, higher taxes, the European employment to population ratio (EPOP) for the prime age group 25-54 EQUALED the U.S. between 2007-10! Between 2007-10, the U.S. EPOP for men actually dropped much more significantly than that for Europe. In 2010, the European EPOP for men was 84.5% and for women 71.4%, or 3.5 to 2 percentage points HIGHER than U.S. employment ratios. So much for the wisdom of U.S. economists constantly urging Europe to emulate the more flexible U.S. labor market!
With the exception of UK’s hedge fund manipulators (the Goldman Sachs types) and copying of U.S. easy money and credit expansion policies thus intensifying current financial difficulties, generally conservative euro zone countries have had economies growing on a balanced path – not too dissimilar from the U.S. post WWII unwritten social contract among labor, business, labor and government where the benefits of economic growth were broadly distributed, … a principle of “SHARED PROSPERITY,” in George Parker´s words.
The modus operandi of banking systems in continental Europe has been neither to print money by quantitative easing nor to flood financial markets with non-transparent, risk-intensive products like CDOs and CDSs (with notable exception of UBS of Switzerland).
Individual euro zone countries issue debt denominated in euros. But they do not have control over monetary policy and cannot use inflation to reduce the real value of their debt, known as, “a government running the printing presses.” Using inflation allows a government to repay its debt without having to implement austerity measures, thereby reducing pressures on governments to implement necessary reforms. (ed. note: if the ECB and NCBs could buy up existing debt directly, this would not be inflationary as no new money will have been created. Furthermore, future rates for rolling over existing debt would not be subject to the machinations of the bond market, and, therefore, new debt will not be created by virtue of the fact that interest rates will have gone up. Reforms can be instituted simultaneously to insure that new debt is not incurred.) This Moral Hazard potential is why the ECB is not at all enamored with idea of large scale bond purchases or printing money by quantitative easing as the Federal Reserve does. Europe will have to provide the bulk of the euro zone rescue money through the ECB, the European Financial Stability Fund, transfers from fiscally healthy countries like Germany, with limited financial assistance from the IMF. Ideally, over time, banks need to be recapitalized with more equity.
Finally, the support for a Financial Transactions Tax is getting stronger and stronger and, when implemented correctly (see essay, “Join Europe in Passing a Financial Transactions Tax”) will tame ruthless commodity, currency and stock/bond speculators as well as producing interesting tax revenue.
Out of the current financial mess, the goal for the euro zone is to emerge strong, to enforce fiscal deficit and debt rules and to avoid similar crises of profligate spending and lending in weak and strong countries from happening again. This means insuring that financial institutions return to being the prudent servant to and not the gambling master of their clients' money.
Best wishes,
Frank Thomas
"European Banking System Is Not Seen As A Money Printing Press" continues here
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REFERENCES: European Banking System Is Not Seen As A Money Printing Press
1. “The European Central Bank, History, Role and Functions,” by Hanspeter K. Scheller, 2004
2. “Germany’s Role in Crafting a Solution to the 2010 EMU Sovereign Debt Crisis: Persuading With Power or The Power of Persuasion,” by Matthias M. Matthijs, American University – Boston, Massachusetts, March 2011
3. “Sovereign Debt in Advanced Countries: Overview and Issues for Congress,” by Rebecca M. Nelson – May 26,2011
4. “The Value of Seigniorage,” by Brian Lang of Currency News – December 2008 “Consolidated International Claims of BIS Reporting Banks,” by Bank for International Settlements – April 28, 2011
5. “Consolidated International Claims of BIS Reporting Banks,” by Bank for International Settlements – April 28, 2011
6. ‘Changing of the Guard,” – Monetary Dialogue – Directorate General for International Policies, Policy Dept. A – Economic & Scientific Policy, Oct. 2011
7. “Main Drivers of the ECB Financial Accounts & ECB Financial Strength Over the First 11 Years,” by European Central Bank, Occupational Paper Services No. 111, May 2010
