More Intimations by the European Central Bank of Currency Confiscation

From today’s Open Europe news summary:

Draghi suggests that the ECB could ease policy further to tackle strong euro
Speaking at the spring meetings of the IMF and World Bank over the weekend, ECB President Mario Draghi said that the further strengthening of the euro “requires further monetary stimulus”, with ECB officials suggesting that a negative deposit rate would be the most likely option if action was taken. Reuters reports that Austrian Central Bank Governor Ewald Nowotny has suggested any action is unlikely before June, when the next round of inflation forecasts will be released.

Separately, in an interview with Le Figaro, French Central Bank Governor Christian Noyer notes that the euro is “abnormally strong”, and argues, “The ECB’s monetary policy does not at all explain the euro’s current level…That said, the stronger the euro, the more accommodating the monetary policy needs to be.”
FT WSJ FT 2 FT 3 FT 4 Reuters Handelsblatt FAZ Le Figaro: Noyer La Tribune

The term “negative interest rates” means that your deposit will be charged rather than earn interest. The next step will be to restrict the amount of paper notes that people can hold, because that would be one way people could protect their hard-earned savings. When that doesn’t meet the ECB’s goals, the notes will be replaced with ones that carry expiration dates. It has happened elsewhere in the world and it will happen in Europe, if these inflationist policies are not abandoned.

The statement by M. Noyer that the euro is “abnormally strong” is preposterous. How does he know the proper exchange rate of the euro? An exchange rate today is a market phenomenon. In the past it was a legal promise by the central bank to exchange currency for gold at a certain ratio and vice versa. This made all currencies de facto substitutes for gold, and the world enjoyed FIXED exchange rates.  Patrick Barron

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