I saw an interview on PBS of Christine La Garde the erudite, obviously smart, Managing Director of the International Monetary Fund. This happened to come after news clips of Janet Yellen ‘s (Chair Women of the Federal Reserve) annual shindig with members of the US Congress during which she was supposed to lay out the intentions of the Federal Reserve in regard to monetary policy.
What struck me was the difference in the manner of speaking between the two ladies. In the case of Madam La Garde the bare truth on the Greek Tragedy vs the obvious waffle of the Chair Women of the Fed on the future of Interest rates in the USA, something that affects the whole world.
La Garde told it like it is. The Greek Bailout is, in real-speak, a delay of the inevitable hair cut that lenders (banks) will be forced to take on Greek Sovereign debt at some point in the future; after those same banks have been recapitalized by the European Central Bank that itself will have to recapitalized by member nations. (A case of the dog wagging the tail)
Its’ all about optics for the sake of the Germans who apparently, despite having been bankrupt on more than one occasion, cannot tolerate a member of the club being given a second chance to get their act together. I liken this to the organizations for professionals (Accountants Architects et al) who prohibit members from declaring bankruptcy even when they are insolvent.
It seems to me to be all part of a charade put on to try to fool the bond market that members of the EU do not do bankrupt. All rather like the New York Federal Reserve printing money to keep interest rates artificially low, supposedly to help employment, when in reality they are really only helping their member banks.
Where did we get off the bus on the issue of monetary policy being the only game in town? Even Milton Friedman dean of the Chicago School of Economics realized that monetary policy alone could not do the trick, and that bankers were fallible.
If the governing elite must be responsible for ensuring full employment, a task for which they have proved remarkably inept, then surely it is the legislatures rather than faceless bureaucrats, that should shoulder the responsibility.