Bundesbank chief warns that central banks are being pushed into currency war
ECB's Weidmann: Pressure on Central Banks Risks FX Competition
Tuesday, January 22, 2013
FRANKFURT, Germany -- Loading central banks with more tasks and pressing them to pursue more aggressive monetary policies could risk a round of competitive devaluations, European Central Bank policymaker Jens Weidmann said on Monday, citing pressure on the Bank of Japan.
Weidmann is the latest in a string of policymakers worldwide to warn of the threat of a "currency war" as central banks pump out cash to support their economies, reducing their value in the process.
He said the pressure that Japan's new government has put on the Bank of Japan to deliver bolder monetary easing endangered the central bank's independence, as did the actions of Hungary's government.
"Already alarming violations can be observed, for example in Hungary or Japan, where the new government is interfering massively in the business of the central bank with pressure for a more aggressive monetary policy and threatening an end to central bank autonomy."
... Dispatch continues below ...
Fred Goldstein and Tim Murphy open All Pro Gold
All-Pro Gold, run by long-time GATA supporters Fred Goldstein and Tim Murphy, offers its services to GATA supporters and anyone else interested in precious metals. The company brokers a full line of precious metals and numismatic coins. It aims to inform prospective clients about the importance of the monetary metals as part of a diversified financial portfolio and to keep prospective clients current with market trends. All-Pro Gold has competitive pricing and ships promptly to clients so they may have physical possession. Learn more by e-mailing Fred@allprogold.com or Tim@allprogold.com or telephone 1-855-377-4653 or visit www.allprogold.com.
"A consequence, whether intentional or unintentional, could moreover be an increased politicisation of exchange rates," the Bundesbank chief, who also sits on the ECB's Governing Council, said in a speech at a Deutsche Boerse New Year's event.
"So far the international currency system has come through the crisis without a devaluation competition, and I hope very much that remains the case," Weidmann added in a section of his speech entitled "independence of central banks in danger."
Last Wednesday Russian central banker Alexei Ulyukayev said Japan is acting to weaken its currency and there is a danger that others will follow suit and foster a round of destabilising devaluations.
Russia holds the G20 presidency this year, a forum at which currencies and their relative values is likely to surface.
Plans for the ECB to begin supervising banks were consistent with a trend outside the euro zone for central banks to be given more tasks that lie beyond their core mandate, Weidmann said.
"But the overburdening of central banks with tasks and expectations is definitely not the right way to overcome the crisis in a sustainable way," he added. "Central banks protect their independence best by interpreting their task narrowly. The key to handling the crisis does not lie with the central banks."
Weidmann's comments echo remarks by James Bullard, a senior Federal Reserve official, who said this month the world's top central banks had sacrificed some of their independence to contain the financial crisis, describing the ECB's bond programme as a "fiscalisation" of monetary policy.
Weidmann struck a bleak note on the prospects of both the euro zone and the United States overcoming their debt problems, saying there was no quick, simple way to fix them.
"The adjustment process to bring state finances and economic structures back into order is not a matter of months or a few years," he said.
But he was more upbeat on the economic prospects for the German economy, saying that although it would probably be "powerless" in the first quarter it should pick up noticeably later in 2013.
"The German economy remains in good shape," Weidmann added.
He also appeared to warm to an idea put forward by an EU advisory group last October for a legal separation of banks' commercial and investment banking operations in an attempt to shield taxpayers from having to fund further bailouts and to protect savers from any more banking collapses.
"The creation of legally, organisationally, and commercially self-contained trading units can help to protect deposit banks without sacrificing the advantages of Germany's universal banks," Weidmann said in comments that marked a shift from the Bundesbank's earlier position that did not give much credit to the proposal.
* * *
Join GATA here:
California Resource Investment Conference
Saturday-Sunday, February 23-24, 2013
Hyatt Regency Indian Wells Resort and Spa
Palm Desert, California
* * *
Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:
Or by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
Opinion Around the World Is Changing
in Favor of Gold -- Find Out Why
When Deutschebank calls gold "good money" and paper "bad money". ...
When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ...
When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ...
When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ...
When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ...
World opinion is changing in favor of gold.
How can you learn why and what it will mean to you?
Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard."
Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him."
To buy a copy of "The True Gold Standard," please visit: