WHATEVER IT TAKES

When attacked, go on the attack.

It's an age-old tactic and not one lost on Keynesian apologist or editorial writers like those at the Financial Times.

In a weekend editorial, "No need for hostilities in the money currency war," one anointed genius writes, "The ECB should ignore accusations of competitive devaluation."

Much of the justification for EU QE we have read came from those citing U.S. and UK monetary policy, the assumption being they were not only successful but worth emulating. After all, it seem to work for them. Why not us and what's the holdup?

Talking that up with a litany of excuses why QE is pure and devoid of any nasty ulterior motives, especially those as nasty as competitive devaluation, he writes:

There is little to suggest that the ECB is skewing its policy easing towards weakening the exchange rate.

We wonder why. Telling the population before is akin to a bank robber announcing which bank he's going to rob before he does it.

Next the editorial plays down the cynical idea of begging thy neighbor by citing that the EU trades mostly within its own currency area. The amount they buy from, and sell to, countries outside the 19-member bloc is less than one-fifth of the eurozone economy. 


Though only a small perception point, it's interesting that the writer chooses a fraction rather than a percentage to make his point in a discipline--the dismal science--that lives and breathes on percentage parameters like the percent of unemployed, interest rates or 2% inflation.

Small businesses are the purported heartbeat of the EU. Given the previous ECB tactics, with interest rates already lower than a fat duck's belly, all designed to prod banks to lend more to these small businesses--something that has yet to happen on any meaningful scale--that leaves weakening the currency.

But the writer saves his most hypocritical point for last.

Governments and central bankers would do well to look at their own monetary and fiscal policies rather than complaining about others. The ECB has a perfect right to pursue QE and is wise to do so. It should not be put off by complaints from others based on faulty understanding of monetary policy and an unwarranted degree of cynicism about its motives.

Apparently, this editorialist is either ignorant or has a faulty memory or both.

But here's a reminder, sir, of Super Mario's now famous words quoted around the globe:"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."