Ambrose Evans-Pritchard (AEP) is out with a new post, entitled “ECB's treatment of Ireland and Italy is a constitutional scandal, yet nobody held to account.” What’s the connection of this scandalous conduct by a central bank and the Austrian school of economics? Patience, my friends, patience.
First, the scandalous conduct:
So the truth comes out at last. The EU/IMF Troika – actually the ECB – compelled the Irish state to take on the vast liabilities of Anglo-Irish and other banks in the white heat of the financial crisis.
It threatened to pull the plug on ECB support for the Irish banking system, in breach of its own core duty to act as a lender-of-last resort, unless the Irish taxpayer took the full losses.
This protected bondholders from their condign fate, even though these creditors were fully complicit in Ireland’s credit bubble.
Where are the Austrians? Most call for an end to monopoly backing of the banking system – I have yet to read of an Austrian economist who suggested improving central banking via blackmail. Is there a Peter Schiff video on this?
AEP has known about this for some time:
Patrick Honohan, Ireland's central bank governor, told a group of foreign journalists in Dublin some time ago that this had occurred. We knew, but were sworn to silence, forced to bite our tongues every time we had to listen to the usual pack of lies from certain quarters.
Is it the Austrians that recommended lies and silence? I don’t recall reading or hearing such a thing.
Honohan has now written a book, spelling it all out; hence, AEP feels free to come clean.
"The Troika staff told Brian in categorical terms that burning the bondholders would mean no programme and, accordingly, could not be countenanced," he said. "For whatever reason, they waited until after this showdown to inform me of this decision, which had apparently been taken at a very high-level teleconference to which no Irish representative was invited."
Blackmail by the Fed doesn’t sound much like End the Fed (I know, it’s the ECB, but give me a bit of creative license here). Where’s Ron Paul?
As another aside, AEP defends the ECB’s ends in these actions; he just doesn’t like the means.
The Irish, having publicly learned of this scandal, want answers:
There is now pressure to haul former ECB-chief Jean-Claude Trichet before an inquiry in Ireland, chiefly to determine exactly what he wrote in a confidential letter to the Irish finance minister in November 2010.
Jean-Claude Trichet…did I miss his latest presentation at the Austrian Economics Research Conference?
The ECB, despite having “no legal or constitutional mandate” for such actions, gave Italy and Spain the same treatment in 2011.
If you were charitable, you might say that the ECB was forced into this role because there was no other European institution capable of taking charge, but that is to admit that the EMU construct is by its nature an authoritarian monstrosity outside all democratic control, a form of soft monetary tyranny. If you admit that, how can you continue defending EMU at all?
This is what the Austrians say! Having come so far in exposing this reality, what does AEP conclude?
Mario Draghi has been a breath of fresh air at the ECB, a modern mind in the dank dungeon of Austrian School pedantry.