Skybird
11-21-11, 04:52 AM
Big surprise: not only has the Euro not led to all European national economies becoming equal, but it is now being demonstrated that the independence of the ECB - written down as a legal demand black on white - is just a bad joke. We saw it in Trichet'S breaking of the rules when he opened the gate for the massive buys by the ECB of bad papers. We saw it when the two German members of the directors' board gave up to the overwhelming majority of blood-suckers from Southern, debt-drowning countries, and quit, also because they got no support from the German government. We saws it when Italian Matio Draghi took over from trichet - and immediately lowered the interest rate, on the very same day, sending a strong signal of policy change by that timing and decision.
And now two studies have been released that illustrate with the tools of statistical analysis and econometrics that the decisions formed by these gangster are not in accordance with the demands to their joibs, but according to their own nation's financial interest.
http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/35-2011_hayo.pdf
Abstract: This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area's interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country's share of the zone's GDP.
(...)
5. Conclusion
In this paper, we inquire into how the ECB makes monetary policy decisions for the euro area. Given that there is no public information about how the ECB Governing Council makes decisions, we rely on a set of counterfactuals. Using Taylor rules estimated for the pre-euro period, we derive 13 interest-rate scenarios that vary with respect to the underlying decision rules and the assumed preferences of the members of the Governing Council. Five types of rules are considered: voting, consensus, bargaining, full chairman dominance, and voting with a chairman. We apply these rules to three sets of assumed preferences: a fully federalist Governing Council, a federalist Executive Board facing national governors in the Governing Council, and a fully nationalist Governing Council. Using a series of criteria, we assess how well each of the scenarios matches Eonia. Four main conclusions can be drawn.
First, the scenario that performs best is the one in which individual members of the Governing Council follow national objectives and bargain over interest-rate setting based on weights derived from their country's share in the euro area's GDP. This scenario produces a mean interest rate closest to the average of Eonia, with the lowest standard deviation around that mean. It also generates the smallest prediction errors measured by both RMSE and MAE. It even outperforms, in terms of its capacity to reproduce the observed interest rate's persistence, scenarios that yield periods of status quo.
Second, scenarios in which it is assumed that the members of the Governing Council bargain over interest rates generally perform better than scenarios in which it is assumed that decisions are made by consensus or by using various voting rules. This finding reveals that actual behaviour does not match that mandated in the ECB statutes, which stipulate that the Governing Council should make its decisions using a simple majority vote. The finding also throws some doubt on the credibility of the ECB's official position that all its decisions are based on consensus.
Third, scenarios in which the ECB president plays a key role generally perform poorly. These scenarios are especially outperformed by scenarios assuming collective decision-making procedures, whether by way of bargaining or through consensus.
Finally, scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting, at least partly, of members pursuing national objectives. This finding is also at odds with the ECB's official mandate that members of the Governing Council are to implement policies that best meet the needs of the euro area as a whole. It is, however, in line with previous studies that have unveiled regional influences in the United States as well as in the euro area.
In this paper, our sole aim was to discover how decisions are actually made in the Governing Council. A promising avenue for extending this research would be to determine whether the ECB's decision-making process changes when membership in the EU increases, as well as the effect of the rotating rule, when (or if) it becomes applicable. Another fruitful avenue for future research would be to derive the normative implications of the decision structures observed here. We hope that our findings will stimulate and guide those investigations.
And another study, showing how nationalistic networks bargain personell decisions so that not only qualification and loyalty to ECB rules, but maximising national influence at the cost of the ECB's original duty and set of rules dominate the choice of names for posts and offices.
http://www.cesifo-group.de/portal/pls/portal/docs/1/1211352.PDF
Abstract
Multinational institutions face an important trade-off when hiring personnel. On the one hand,
hiring decisions are based, as in most organizations, on a candidate***8217;s professional
qualifications. On the other hand, multinational institutions often aim for broad national
representation. Reviewing evidence from the European Central Bank, we show that
nationality is indeed relevant for both hiring and decision-making. Specifically, we identify
various country-specific features that determine national representation in the top
management of the ECB. Further, there is evidence for the existence of national networks
between adjacent management layers. Finally, monetary policy decisions seem to be linked to
national representation in the core business areas of the ECB. Examining a sample of 14
European countries over the period from 1999 to 2008, we estimate Taylor rules for
alternative sets of euro area aggregates derived from different weighting schemes of national
macroeconomic data. Our results indicate that weights based on national representation in the
mid-level management of the ECB's core business areas best describe the central bank's
interest-rate setting behavior.
(...)
VI. Conclusions
Multinational institutions face an important trade-off when hiring personnel. As in
most organizations, hiring decisions are mainly based on a candidate***8217;s professional
qualifications. In addition, however, multinational institutions often aim for broad national
representation, for various reasons. Potential benefits include greater diversity of personal
backgrounds and access to local knowledge which may help implement policies (potentially
leading to broader acceptance). At the same time, however, cultural issues may also become a
hindrance to organizational success. Possible costs include forgoing talent for geographic
variety, network effects and a national bias in decision-making.
Looking at the European Central Bank, we show that nationality is indeed relevant for
both hiring and decision-making. We identify various country-specific features that determine
national representation in the top management of the ECB. Further, there is evidence for the
existence of national networks between adjacent management layers. Finally, monetary policy
decisions seem to be linked to national representation in the core business areas of the ECB.
The German news magazine FOCUS wrote a week ago:
(...)
Die Macht der Schulden-Monster USA und Großbritannien
Doch was kommt als nächstes? Wir wissen es noch nicht. Klar ist nur: Deutschland und die anderen solide wirtschaftenden Euro-Staaten - wie Österreich und die Niederlande - werden nicht ewig Widerstand leisten können. Zu groß ist die Stimmen-Übermacht der Südeuropäer in den Gremien der EU. Diese Defizit-Sünder werden aber nicht nur bisweilen von Frankreich unterstützt. Sondern zu allem Überfluss auch noch von den Mega-Schulden-Monstern USA und Großbritannien, wie der aktuelle G20-Gipfel zeigte.
Selbst in der Europäischen Zentralbank ist Deutschland inzwischen weitgehend isoliert. Nur einige wenige der 16 anderen Notenbanken würden im Streitfall mit der Bundesbank stimmen - etwa gegen neue Käufe von italienischen Staatsanleihen oder gar die direkte Finanzierung überschuldeter Staaten. Das ist umso ärgerlicher, weil die EZB ursprünglich nach dem Vorbild des resoluten Stabilitätswächters Bundesbank geformt wurde.
Der Skandal mit den Stimmanteilen
Davon ist nicht allzu viel übrig geblieben. Der wahre Skandal verbirgt sich aber in der unfairen Gewichtung der Stimmrechte der 17 nationalen Notenbanken. Im Klartext: Deutschland stellt mit 27,1 Prozent den größten Teil des Kapitals der EZB, hat aber nur wenig zu sagen (zwei von insgesamt 23 Stimmen im EZB-Rat). Über genauso viele Stimmen verfügen gemeinsam schon die beiden Zwergstaaten Malta (eine) und Zypern (eine), sie haften aber nur für 0,3 Prozent des Kapitals der EZB.
Noch deutlicher wird dieses Missverhältnis, wenn man die beiden EU-Schwergewichte Deutschland und Frankreich betrachtet: Diese beiden Länder stemmen fast die Hälfte der Finanzmittel der EZB, haben aber zusammen nur vier Stimmen - sie könnten allein schon von Griechenland, Malta, Zypern, Slowenien und Estland (jeweils eine Stimme) an die Wand gedrückt werden.
(...)
It says that Germany, paying 27% of the ECB budget, still has just 2 votes in the ECB council which all in all has parties with 23 votes together. Cyprus and Malta alone could block the German vote - but together contributing just 0.3% of the budget. And Germany and second-biggest payer France together come up for one half of the budget - but could be voted down by Greece, Malta, Cyprus, Slovenia and Estland.
That is absurd. And a scandal. It puts the foxes in charge of the henhouse.
Germans were promised by their politicians that the ECB would be formed according to the example and self-definition of the German Bundesbank, an institution so much respected world-wiude that many other central banks were influenced or formed by its example of independence and guaranteeing currency stability.
Germans were promised by their politicians the Euro would be as stable as the hard, solid D-Mark.
We got lied to. We got betrayed, and sold away. We got stripped of these - with no compensation. To me, it equals high treason.
And one word on inflation and mega inflations and deflations, which to embrace the ECB is turning towards, and which the US demand so very much. It sounds like a cheap mechanism to get rid of debts. But it is not only cheap, but mean, because it means nothing else but a massive mass-expropriation of the ordinary people - everybody, the rich, the poor, just everybody. It destroys savings for the future. It destroys pensions. It destroys years- and decades-long savings and investements. Accepting it, is a crime, like going out and burning down the house of your neighbour or smashing a car intentionally or robbong a bank. It also violates those nations' constitutions that explicitly guarantee the protection of private property.
Political parties seem to be able to gain and stay in power only when they spend more than the economy creates in budget incomes (=taxes). Money gets wasted to bribe the voters, debts get build, because if the one party does not promise more than can be payed for, then the other will - and by that will win the election. Debts accumulate, debts reach high into the sky and finally enter stellar orbits. The system we live in - seems to be able to survive only when it constantly consumes the future, and rapes the chances of the next generation: financially, ecologically, ressource-wise.
The system we live in and that we are so proud of - is shortsighted, unscrupellous, inhumane and deeply rotten and criminal by design. And what is really depressing and desillusionising, is this : it cannot be any different, naturally.
The EU and the Euro-countries have broken so many of their own rules and laws and treaties and constantly violate those which formally are still valid - what does this record tell about the trustworthiness of any future laws and rules they may surprise us in the forseeable future?
Europe lies. Do not trust it.
And now two studies have been released that illustrate with the tools of statistical analysis and econometrics that the decisions formed by these gangster are not in accordance with the demands to their joibs, but according to their own nation's financial interest.
http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/35-2011_hayo.pdf
Abstract: This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area's interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country's share of the zone's GDP.
(...)
5. Conclusion
In this paper, we inquire into how the ECB makes monetary policy decisions for the euro area. Given that there is no public information about how the ECB Governing Council makes decisions, we rely on a set of counterfactuals. Using Taylor rules estimated for the pre-euro period, we derive 13 interest-rate scenarios that vary with respect to the underlying decision rules and the assumed preferences of the members of the Governing Council. Five types of rules are considered: voting, consensus, bargaining, full chairman dominance, and voting with a chairman. We apply these rules to three sets of assumed preferences: a fully federalist Governing Council, a federalist Executive Board facing national governors in the Governing Council, and a fully nationalist Governing Council. Using a series of criteria, we assess how well each of the scenarios matches Eonia. Four main conclusions can be drawn.
First, the scenario that performs best is the one in which individual members of the Governing Council follow national objectives and bargain over interest-rate setting based on weights derived from their country's share in the euro area's GDP. This scenario produces a mean interest rate closest to the average of Eonia, with the lowest standard deviation around that mean. It also generates the smallest prediction errors measured by both RMSE and MAE. It even outperforms, in terms of its capacity to reproduce the observed interest rate's persistence, scenarios that yield periods of status quo.
Second, scenarios in which it is assumed that the members of the Governing Council bargain over interest rates generally perform better than scenarios in which it is assumed that decisions are made by consensus or by using various voting rules. This finding reveals that actual behaviour does not match that mandated in the ECB statutes, which stipulate that the Governing Council should make its decisions using a simple majority vote. The finding also throws some doubt on the credibility of the ECB's official position that all its decisions are based on consensus.
Third, scenarios in which the ECB president plays a key role generally perform poorly. These scenarios are especially outperformed by scenarios assuming collective decision-making procedures, whether by way of bargaining or through consensus.
Finally, scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting, at least partly, of members pursuing national objectives. This finding is also at odds with the ECB's official mandate that members of the Governing Council are to implement policies that best meet the needs of the euro area as a whole. It is, however, in line with previous studies that have unveiled regional influences in the United States as well as in the euro area.
In this paper, our sole aim was to discover how decisions are actually made in the Governing Council. A promising avenue for extending this research would be to determine whether the ECB's decision-making process changes when membership in the EU increases, as well as the effect of the rotating rule, when (or if) it becomes applicable. Another fruitful avenue for future research would be to derive the normative implications of the decision structures observed here. We hope that our findings will stimulate and guide those investigations.
And another study, showing how nationalistic networks bargain personell decisions so that not only qualification and loyalty to ECB rules, but maximising national influence at the cost of the ECB's original duty and set of rules dominate the choice of names for posts and offices.
http://www.cesifo-group.de/portal/pls/portal/docs/1/1211352.PDF
Abstract
Multinational institutions face an important trade-off when hiring personnel. On the one hand,
hiring decisions are based, as in most organizations, on a candidate***8217;s professional
qualifications. On the other hand, multinational institutions often aim for broad national
representation. Reviewing evidence from the European Central Bank, we show that
nationality is indeed relevant for both hiring and decision-making. Specifically, we identify
various country-specific features that determine national representation in the top
management of the ECB. Further, there is evidence for the existence of national networks
between adjacent management layers. Finally, monetary policy decisions seem to be linked to
national representation in the core business areas of the ECB. Examining a sample of 14
European countries over the period from 1999 to 2008, we estimate Taylor rules for
alternative sets of euro area aggregates derived from different weighting schemes of national
macroeconomic data. Our results indicate that weights based on national representation in the
mid-level management of the ECB's core business areas best describe the central bank's
interest-rate setting behavior.
(...)
VI. Conclusions
Multinational institutions face an important trade-off when hiring personnel. As in
most organizations, hiring decisions are mainly based on a candidate***8217;s professional
qualifications. In addition, however, multinational institutions often aim for broad national
representation, for various reasons. Potential benefits include greater diversity of personal
backgrounds and access to local knowledge which may help implement policies (potentially
leading to broader acceptance). At the same time, however, cultural issues may also become a
hindrance to organizational success. Possible costs include forgoing talent for geographic
variety, network effects and a national bias in decision-making.
Looking at the European Central Bank, we show that nationality is indeed relevant for
both hiring and decision-making. We identify various country-specific features that determine
national representation in the top management of the ECB. Further, there is evidence for the
existence of national networks between adjacent management layers. Finally, monetary policy
decisions seem to be linked to national representation in the core business areas of the ECB.
The German news magazine FOCUS wrote a week ago:
(...)
Die Macht der Schulden-Monster USA und Großbritannien
Doch was kommt als nächstes? Wir wissen es noch nicht. Klar ist nur: Deutschland und die anderen solide wirtschaftenden Euro-Staaten - wie Österreich und die Niederlande - werden nicht ewig Widerstand leisten können. Zu groß ist die Stimmen-Übermacht der Südeuropäer in den Gremien der EU. Diese Defizit-Sünder werden aber nicht nur bisweilen von Frankreich unterstützt. Sondern zu allem Überfluss auch noch von den Mega-Schulden-Monstern USA und Großbritannien, wie der aktuelle G20-Gipfel zeigte.
Selbst in der Europäischen Zentralbank ist Deutschland inzwischen weitgehend isoliert. Nur einige wenige der 16 anderen Notenbanken würden im Streitfall mit der Bundesbank stimmen - etwa gegen neue Käufe von italienischen Staatsanleihen oder gar die direkte Finanzierung überschuldeter Staaten. Das ist umso ärgerlicher, weil die EZB ursprünglich nach dem Vorbild des resoluten Stabilitätswächters Bundesbank geformt wurde.
Der Skandal mit den Stimmanteilen
Davon ist nicht allzu viel übrig geblieben. Der wahre Skandal verbirgt sich aber in der unfairen Gewichtung der Stimmrechte der 17 nationalen Notenbanken. Im Klartext: Deutschland stellt mit 27,1 Prozent den größten Teil des Kapitals der EZB, hat aber nur wenig zu sagen (zwei von insgesamt 23 Stimmen im EZB-Rat). Über genauso viele Stimmen verfügen gemeinsam schon die beiden Zwergstaaten Malta (eine) und Zypern (eine), sie haften aber nur für 0,3 Prozent des Kapitals der EZB.
Noch deutlicher wird dieses Missverhältnis, wenn man die beiden EU-Schwergewichte Deutschland und Frankreich betrachtet: Diese beiden Länder stemmen fast die Hälfte der Finanzmittel der EZB, haben aber zusammen nur vier Stimmen - sie könnten allein schon von Griechenland, Malta, Zypern, Slowenien und Estland (jeweils eine Stimme) an die Wand gedrückt werden.
(...)
It says that Germany, paying 27% of the ECB budget, still has just 2 votes in the ECB council which all in all has parties with 23 votes together. Cyprus and Malta alone could block the German vote - but together contributing just 0.3% of the budget. And Germany and second-biggest payer France together come up for one half of the budget - but could be voted down by Greece, Malta, Cyprus, Slovenia and Estland.
That is absurd. And a scandal. It puts the foxes in charge of the henhouse.
Germans were promised by their politicians that the ECB would be formed according to the example and self-definition of the German Bundesbank, an institution so much respected world-wiude that many other central banks were influenced or formed by its example of independence and guaranteeing currency stability.
Germans were promised by their politicians the Euro would be as stable as the hard, solid D-Mark.
We got lied to. We got betrayed, and sold away. We got stripped of these - with no compensation. To me, it equals high treason.
And one word on inflation and mega inflations and deflations, which to embrace the ECB is turning towards, and which the US demand so very much. It sounds like a cheap mechanism to get rid of debts. But it is not only cheap, but mean, because it means nothing else but a massive mass-expropriation of the ordinary people - everybody, the rich, the poor, just everybody. It destroys savings for the future. It destroys pensions. It destroys years- and decades-long savings and investements. Accepting it, is a crime, like going out and burning down the house of your neighbour or smashing a car intentionally or robbong a bank. It also violates those nations' constitutions that explicitly guarantee the protection of private property.
Political parties seem to be able to gain and stay in power only when they spend more than the economy creates in budget incomes (=taxes). Money gets wasted to bribe the voters, debts get build, because if the one party does not promise more than can be payed for, then the other will - and by that will win the election. Debts accumulate, debts reach high into the sky and finally enter stellar orbits. The system we live in - seems to be able to survive only when it constantly consumes the future, and rapes the chances of the next generation: financially, ecologically, ressource-wise.
The system we live in and that we are so proud of - is shortsighted, unscrupellous, inhumane and deeply rotten and criminal by design. And what is really depressing and desillusionising, is this : it cannot be any different, naturally.
The EU and the Euro-countries have broken so many of their own rules and laws and treaties and constantly violate those which formally are still valid - what does this record tell about the trustworthiness of any future laws and rules they may surprise us in the forseeable future?
Europe lies. Do not trust it.