09-11-May-2011 - Open WAR IN UKIP Silence from Tim CONGDON!

 09-11-May-2011 - Open WAR IN UKIP Silence from Tim CONGDON!

Hi,

in the light of the withering attack on the patently obvious incompetence of Nigel Farage MEP as the leader of UKIP and the utterly incompetent team he had gathered around him as displayed by the catastrophic failure on virtually every fron in the local elections.


There was a total silence from Prof. Tim Congdon - in declaration of support of either Marta Andreasen's long predicted betrayal and denunciation of UKIP for her own personal interests - nor was there any intervention in support of Nigel Farage MEP who also seemed to be acting in his own personal interests.


To view the first news of Marta Andreasen's public press release:
Monday 09-May-2011 CLICK HERE 

My thoughts were published at the time:
  Hi,

it would seem that in a moment of self interest Marta Andreasen, Nigel Farage's pet project who he cheated and lied to place on UKIP MEP selection list has seen an opportunity for personal gain.

Will we shortly see hired hands march in to do battle wielding super injunctions ;-)

Whether this is an opportunistic move to join the EPP on her part, where she would benefit from membership of a larger group and more resources, where she would immediately be a Vice President as leader of a National Group in the composite as so far the EPP lacks a British flag - this then to raise her profile as a reformer in the EU so as to step across ensuring her election next time with the center right Spanish Group.

OR

This is a piece of delicate gambling where the Lib.Dims. may well be courting her to join their ALDI Group to curry favour with a hint of pretend Scepticism by capturing a UKIP scalp - which would not only enhance their group but also improve their credentials with many a EUroSceptic Tory MP or even voter.

I INCLINE TO BELIEVE:

Marta Andreasen has made this move in her own interest alone as with her earlier venal actions and dishonest claims.

Clearly her move in such a public manner is a product not of improving UKIP and its footing but her own as she is reveilled by too many in the party who have seen through her antics and note her untrustworthy, self serving dishonesty.

Some by now may have read her novella which she has used UKIP to exploit and market yet others may well have read the series of Court Cases that have consistently found against her. Some may have noted her series of departures - all too often under a cloud and others may have watched her trapped like a rabbit in headlights in her interview by Tim Sebastian which exposed her fake background and CV!

Already Farage - who is a consumate performer but utterly bereft of Officer Qualities and without leadership skills or judgement - has lost 25% of his MEPs leaving him to his racist, anti Jewish, Xenophobic, violent anti homosexual pro EU membership reformist EFD Group.

It looks as if he could loose at least 3 more if they are not as gonadically challenged as they seem and now Andreasen is clearly making a personal interest power play to position herself.

Let us watch wait and see who blinks first!

Farage has already sent in his Press Office and his puppet chairman - Let Battle Commence:

But I must say I believe the Oxus River was more spectacular and both Sorahb & Rhustum more intriguing :-)

Regards,
Greg_L-W.

For details of Marta Andreasen's Betrayal & its Prediction CLICK HERE
For more information on Marta Andreasen CLICK HERE
To additionally research use >SEARCH< at the top of the Right Hand Side Bar at:
CLICK HERE or HERE

For the bulk of the background to this denunciation and an article by The BBC
CLICK HERE
Still total silence from Tim CONGDON!

Then on Wednesday-11-May-2011 Roger Knapman the retired MEP & past leader of UKIP who led the party to some 30,000 members and from 3 to 12 MEPs figures he passed on to Nigel Farage who by din't of dishonesty and corruption was placed as the new leader - promptly alienating and losing the support of MEPs one of which he had lied to and another he lied about - Just as there was a departure from The NEC of fundamentally competent and honest individuals who wanted no part of the corruption that became increasingly apparent.

This led in turn to a collapse in real terms of membership to a figure that at one time was seemingly around 10,000.

Roger Knapman did NOT join in the condemnation of Farage but re-issued a statement he had made when he quit membership of Farage's odious claque in the Pan EU EFD Political Group unwilling to support anti Judaism, racism, violent anti homosexuality and a pro EU membership reformist stance in betrayal of the core principles of UKIP activists and members of patriotic integrity - he also renounced the EU centric self serving and self enriching betrayal of the electorate.

This announcement was a re-affirmation of his principles made AFTER the election so as not to disturb the electorate.

being a retired Leader he approached Nikki Sinclaire or a member of her staff to distribute/publish his statement.

Unfortunately a junior in Sinclaire's office sent the mail out over her contact data for press contact - when I posted this and subsequently it was posted on Junius Blog an EU employee phoned John West, who was known to be in touch with me to ask if he could contact me to request redaction of the personal and irrelevant contact data - this I did and contacted Junius as requested who also promptly removed it. I had some difficulty contacting BDF but eventually (it took a littel longer) they too redacted the error.

This detail can be seen at CLICK HERE

This takes us to Wednesday 11-May-2011 and still no sound from Tim Congdon.
.

Posted by: Greg Lance-Watkins

#08 Middle Street, Chepstow, NP16 5ET, Monmouthshire, United Kingdoms.

tel: 01291 - 62 65 62

of: Greg_L-W@BTconnect.com

on: http://GregLanceWatkins.Blogspot.com

APRIL - Tim CONGDON - 'No' to a Pan-European Party

 APRIL - Tim CONGDON - 'No' to a Pan-European Party

Betrayal of the Party's ideals

By Prof Tim Congdon

Like other members of UKIP, I have been horrified at the transfer of governmental powers from my country to the European Union. In 1972, when Parliament voted to join the then ‘Common Market’, no one foresaw how far the UK would lose its economic and political independence in less than 40 years.

Indeed, given Mr. Heath’s promises and the apparently harmless wording of the Accession Treaty, no one could have foreseen that loss of independence.
Like most members of UKIP, I am also horrified that a proposal is being made for our party to associate itself with parties from other European countries in order to create a ‘pan-European party’. As of now, no one can forecast exactly what might happen to UKIP as one element in that pan-European party, because – as usual – the relevant EU documents are badly-written, complex and open to several interpretations. But who could be surprised if the eventual outcome – over many years, perhaps – is that UKIP loses its identity and becomes absorbed in a political movement that is mostly ‘European’ in character?

The continued existence of our nation as a nation is threatened by our membership of the EU; the continued existence of our party as a party is threatened by the proposal that it belong to a pan-European party.
The debate about UKIP and pan-European parties is therefore not a minor sideshow for our party and its members; it is about nothing less than the survival of our party with its own name and identity. The UK Independence Party must remain the UK Independence Party. It must not become a subsidiary of ‘Europe of Freedom and Democracy’ or an annex to ‘the European Alliance’.

Am I exaggerating? Check the wording of the European Commission’s regulations on the subject. The last one – Regulation (EC) No. 1524/2007 (of 18 December 2007) – defined the activities that European Parliament political funding might finance. The explicit intention was to establish ‘political foundations’ at ‘the European level’. In other words, over the long run no money would be made available to political parties unless the purpose were to transform national politics into European-level politics.

All the arguments for a link-up with a pan-European party are false. First, it is claimed that – by merging UKIP into a new ‘European Alliance’ (as suggested in the notorious ‘Bonici e-mail’ of 27 October 2010) – we can tap into another million euros of European Parliament money. Indeed, the EU bureaucrats have cleverly told MEPs that the size of the jam pot is fixed, so that – if UKIP refuses to belong to a pan-European party – the remaining jam will go to the other MEPs who do form such parties.

This is the sort of cunning trick that has persuaded so many of Britain’s politicians to hand over power to Brussels, Strasbourg and Frankfurt since 1973. But in fact the million euros cannot be directed to any UKIP political activity in our own country. That is what the European Commission’s regulations say very clearly. The one million euros would not in fact be for UKIP at all.

Following the German model of state-subsidized think-tanks, the money would have to stay in Brussels to pay for ‘research’ from a new ‘foundation’ (that is, a think-tank).

Secondly, their advocates say that involvement in pan-European parties would give UKIP more prominence in debates in the European Parliament, which would then enhance our media visibility. This is nonsense.

In the brave new world of pan-European parties UKIP’s MEPs – who owe their position to the hard work and devotion of the party membership in the UK – may say and do wonderful things in the European Parliament.

But they will not do so as MEPs attached to UKIP. They will instead be advertised as MEPs of ‘Europe of Freedom and Democracy’ or ‘the European Alliance’. Sure, there will be extra media visibility for the party to which MEPs belong. To be precise, there will be extra media visibility for ‘Europe of Freedom and Democracy’ or ‘the European Alliance’.

The voice of UKIP as the United Kingdom Independence Party will not be heard more loudly if it becomes affiliated to a pan-European party. On the contrary, it will be increasingly forgotten and ignored.

Many of the party’s best and most active members are dismayed – even appalled – that UKIP participation in a pan-European party has been proposed. They see it as a betrayal of the party’s ideals, just as their country’s membership in the EU is a betrayal of their country’s institutions and traditions. They are right. The pan-European party idea does betray them. UKIP must have no connection of any sort with a pan-European party.

.

Posted by: Greg Lance-Watkins

#08 Middle Street, Chepstow, NP16 5ET, Monmouthshire, United Kingdoms.

tel: 01291 - 62 65 62

of: Greg_L-W@BTconnect.com

on: http://GregLanceWatkins.Blogspot.com

09-Apr-2011 - UKIP MEETING IN HERTFORDSHIRE!

09-Apr-2011 - UKIP MEETING IN HERTFORDSHIRE!

 

UKIP MEETING IN HERTFORDSHIRE!
With The Amount Of Publicity & The Dynamism Of Little Gerald I Guess They Will Get 20 or 30!
I'm Surprised Nigel Farage Gave Permission For Someone To Speak Without Him - I don't suppose he expects many to bother going!

Almost as lame brained as holding a London Rally on Cup Final Day!!
.

~~~~~~~~~~#########~~~~~~~~~~

 Hi,

I wonder if you have seen all the advertisements for this major even!

OK I guess not!

Questions for Gerard Batten EFD MEP

Gerard Batten is due to attend an open UKIP meeting this Saturday in Hertfordshire. We trust that Gerard will be asked why he is still prepared to sit in the extremist, racist, anti Jewish & pro EU membership EFD Group when Mike Nattrass MEP, Nikki Sinclaire MEP and Trevor Colman MEP are not.

We would also be interested in his opinions as to why no action has been taken by UKIP's NEC after The Sunday Times obtained incriminating statements that UKIP MEPs Agnew and Bannerman - the region's UKIP MEPs - were /fraudulently obtaining tax payers' money and illegally paying the UKIP Regional Organiser Peter Reeve out of their EU allowances.

Surely, their action has brought the party into disrepute as the story was featured in several newspapers and is clearly true as Agnew was caught on camera boasting of it!. See: CLICK HERE

That both Stuart AGNEW & David BANNERMAN are under investigation for Fraud with prima Facie Evidence should surely cause UKIP pause for thought and that they lacked the integrity, just as with Derek CLARK MEP, speaks volumes of the dross that are UKIP's Leadership and its parasites.

And finally, what will Gerard do to oppose Farage's desire to make UKIP part of a new pan-European party? See: CLICK HERE

Public Meeting
Broxbourne Civic Hall
Saturday April 9th
10:30 am onwards

Speakers include

GERARD BATTEN, UKIP MEP
Professor TIM CONGDON. CBE. One of the UK’s most influential economists.

Conservative and Labour governments have surrendered most of the UK’s powers of self government to the European Union. We must return the control of our Country, our laws, our economy and our borders to our own Parliament at Westminster. This is your chance to meet and question National and Local representatives of UKIP - the ONLY major political party putting Britain and the British People FIRST !

For your country’s sake, for your children's sake - Vote UKIP!

Buffet lunch available, also refreshments, see overleaf.

Website- http://www.ukipbroxbourne.org.uk e-mail; martinharveyonr@aol.com

Tickets available for the buffet lunch at £6 each, bookable in advance.
Please send me ………… tickets for the buffet lunch at the Civic Hall on 9th April 2011.

Name…………………………………………………………………………..
Address……………………………………………………………………….
Post code……………………..Tel or e-mail…………………………….

Please send to UKIP Broxbourne & Harlow Branch,
St Helens, Middle Street, Nazeing, Essex. EN9 2LB.
Telephone 01992 892101

The Civic Hall is in Hoddesdon at postcode EN11 8BE. It is situated just off Cock Lane, South of the Town Centre and Golden Lion Pub. There is ample parking between Cock Lane and the Hall Complex.

This is a great opportunity to hear and question very good speakers, and also meet old and new friends during the buffet lunch, and maybe later support our very own UKIP pub, The Golden Lion. Cromwell is said to have frequented the area, so maybe his ghost will have a few suggestions regarding the Traitors!

Hope to see you, Martin Harvey.

Printed and promoted by Martin Harvey of St Helens, Middle Street, Nazeing , EN9 2LB. on behalf of The United Kingdom Independence Party.
.

~~~~~~~~~~#########~~~~~~~~~~

 

 INDEPENDENT Leave-the-EU Alliance

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Work With THE MIDNIGHT GROUP to

Reclaim YOUR Future 

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GET YOUR COUNTRY BACK

Write Upon Your Ballot Paper at EVERY election:

(IF You Have No INDEPENDENT Leave-the-EU Alliance Candidate) .

LEAVE-THE-EU

to Reclaim YOUR Future 

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GET YOUR COUNTRY BACK

.

Posted by: Greg Lance-Watkins

tel: 01291 - 62 65 62

of: Greg_L-W@BTconnect.com

on: http://GregLanceWatkins.Blogspot.com

25-Jan-2011 - Professor Tim Congdon CBE is TFA's new Hon. Chairman

Professor Tim Congdon CBE is TFA's new Hon. Chairman

After magnificent work as TFA’s Hon Chairman, Roger Helmer has stepped down on doctor’s orders.  We are delighted that Roger will remain actively involved in our work as a Council Member of The Freedom Association.

Simon Richards, Director of TFA, writes, “It was with great regret that we accepted Roger’s resignation and I would like to thank him for the superb work he has done on our behalf.  It has been an immense pleasure to work with a man so committed to freedom in so many areas."

Welcoming Tim Congdon as TFA’s new Hon. Chairman, Simon commented, “I have admired and respected Tim for decades, and well recall that he was one of the earliest, most consistent and most eloquent opponents of the Exchange Rate Mechanism and European Monetary Union.  Tim is a man of principle, a man of intellect and a man of passionately held convictions which are entirely in line with those of The Freedom Association.  As a successful economist, businessman and writer, he will give TFA’s work new ‘clout’.”

Professor Congdon writes:
“I am much honoured to have become Chairman of the Freedom Association.  Our freedoms are more seriously challenged today than they have been since the Second World War, partly because our own political elite has forgotten why they matter, but also because our membership of the European Union has undermined our institutions and traditions.  I look forward to working with Simon Richards and his colleagues, to do what we can to restore and strengthen the freedoms associated with the British way of life.”

May I add my congratulations - Greg_L-W.

Related articles

• TFA launches new Freedom Society at Southampton University (tfa.net)
• Please donate and help The Freedom Association fight today's BBC slander (tfa.net)
• John Redwood is our MP of the week (tfa.net)
• Standing up for Freedom - The MPs who rebelled on the latest transfer of power to the EU (tfa.net)
• Prime Minister praises Better Off Out supporter (tfa.net)
• Letter: The TFA needs a dose of reality (commercialappeal.com)

01-Dec-2010 - STANDPOINT Column by Tim CONGDON

01-Dec-2010 - STANDPOINT Column by Tim CONGDON

December issue of Standpoint

The last two months have been among the most interesting of my life. Like most people in this country, I have been horrified by the transfer of powers, or so-called “competences”, from our own Parliament to the institutions of the European Union. Since I joined the UK Independence Party in January 2007 a small group of members has encouraged me to try for the leadership, even though the leader from 2006 to 2009 and the party’s most well-known publicist – Nigel Farage MEP – has a strong following. When Lord Pearson stood down from the leadership in August, I “threw my hat into the ring”. In the end Farage secured three times as many votes as me and so is again leader, but I came second and my supporters are not too unhappy. When I started in late August, I was a 50-to-1 outsider.

I am about to make a confession which beforehand I would not have believed possible: I greatly enjoyed the hubbub and tension of competitive politics. I also learned a great deal about my country and its misgovernment. In particular, the experience brought home how important the insights of the Virginia School of Political Economy, or “the economics of politics”, are to modern political activity. Its leaders – James Buchanan and Gordon Tullock – did their main work in the 1960s and 1970s, but its relevance to understanding the European Union’s emasculation of our own parliamentary institutions is greater than ever.

Buchanan and Tullock’s central point was that the tools of economic analysis can be applied to topics such as politics, bureaucracy, law, constitutions and so on, as well as to economists’ more familiar concerns like the determination of prices and quantities of goods and services. When they were writing, an implicit assumption of most public debate was that the government existed to serve the public interest. By extension, the purpose of political action was Benthamite, to achieve the greatest good of the greatest number.

The Virginia School’s most devastating proposition was that the Benthamite assumption was invalid. Politicians are human beings, not the expressions of “the general will”, whatever that might be; they are greedy and imperfect, and have their own self-interested material aspirations. So in practice many government decisions are taken with a view to the aggrandizement – including the financial aggrandizement – of political cliques, the greatest good of oneself and one’s chums.

Of course politicians’ personal gain is not the only influence on government decisions, and the balance between the high-minded public interest and low-grade private interests varies over time and between nations.  The MPs’ expenses scandal in 2009 showed that in Britain the balance had moved dangerously in the wrong direction and confirmed the validity of Peter Oborne’s analysis in his 2007 minor classic, The Triumph of the Political Class.

Oborne’s indictment extended beyond Parliament. To quote, “the civil service, the political parties, the judiciary, the intelligence services and the media have all been captured or compromised”. But Oborne was curiously silent on the greatest of these scandals in our era, the capture and compromise of virtually the entire British political system by the EU bureaucracy. Today most of our legislation, under the alien labels of “directives” and “regulations”, emerges from the European Council of Ministers by a mysterious process that only a handful of people in this country understand.

In the Britain of 1960 millions of people flocked to the cinema to view with pride such films as The Dambusters and Sink the Bismarck. How can that same nation submit, 50 years later, to foreign control of its farming, fisheries, energy resources, financial regulation and external trade, as well to the undermining of legal protections (such as habeas corpus and trial by jury) which have been basic to its constitutional tradition for centuries?

The answer, in essence, is that the British political class has been bribed. Too many of its members have taken decisions for the greater good of themselves and their chums. The corruption at work is largely insidious and opaque, with two processes being particularly important. First, lazy and rather dim politicians have ceded powers to foreign bureaucrats for the sake of a soft life. The truth is that nowadays very few government ministers write their speeches, organize their diaries and set up their meetings. In effect, they are told what they can and cannot do by civil servants.

Not surprisingly, over time the national bureaucracies have become contemptuous of the people’s elected representatives. Civil servants see the organization of an international, pan-European bureaucracy under EU auspices as the means of transferring power to where it ought to belong, namely to themselves. Bureaucrats have the great advantage over the politicians that they are much cleverer and do not have to seek re-election, and in the EU they are undoubtedly winning the battle for control.

Secondly, the civil servants invent structures that encourage politicians to approve further integration. For example, the European Parliament now offers subsidies (ostensibly to pay for “research” and such like) to MEPs who form “pan-European groupings” and “pan-European parties”. So subsidies to promote European integration are now being offered to MEPs of separatist parties – including the UK Independence Party – who are supposed to be totally opposed to it.

If the Virginia School is right, these MEPs – meant to protect their country’s independence – might even accept the money that is being dangled in front of them.

30-Nov-2010 - International Monetary Research - Tim CONGDON's News Letter

30-Nov-2010 - International Monetary Research - Tim CONGDON's News Letter


Weekly e-mail from Tim Congdon of International Monetary Research Ltd. – 30th November, 2010
Brief upturn in Eurozone M3 is fading
……………………
The first half of 2010 saw a potentially encouraging development in Eurozone money growth, with a return to growth – even if very slow growth – in M3. The resumption in money growth was most well-defined in Germany, where it owed much (in terms of the credit counterparts) to banks‟ purchases of government securities. On 22nd October I prepared a weekly e-mail noting the better numbers. I also expressed the hope that they foreshadowed a wider preparedness on the part of policy-makers to monetize budget deficits, in order to maintain money growth at a positive, although moderate, rate. (If banks are being forced to shrink risk assets – as is currently the case – some degree of deficit monetization is the only way to keep the quantity of money growing.)
The purpose of this e-mail is merely to update the story. It turns out that in the last two months Eurozone M3 has fallen slightly. The fall is not catastrophic, but my hopes of a sustained resumption of money growth have not been met. In last week‟s e-mail I was very critical of the ECB‟s current neglect of „the second pillar‟, i.e., the monetary analysis which in the Bundesbank tradition argued for low, stable growth of broad money. In fact, as far as I can see, the ECB‟s researchers are in such chaos over the various threats to the integrity of the Eurozone that they are indifferent to the stagnation of M3 since late 2008 and have no meaningful agenda to end it. The upward blip in M3 in the spring and summer of 2010 was an accident, not the result of deliberate policy. Eurozone leading indicator indices are fairly satisfactory at present, particularly for the core countries (Germany, France and so on), but early 2011 will see persisting macroeconomic agony in the peripheral PIGS nations (i.e., Portugal, Ireland, Greece and Spain). The Eurozone needs the deliberate creation of money by the state (i.e., “quantitative easing”), but that is not in prospect in the next few months. The Eurozone‟s strains will continue.
2
The latest Eurozone money trends
The ECB has just published the October M3 number. It was the second fall in a row, so that the three-month annualised rate of change is now down to almost nothing. The chart below asks, ‘as an upturn [in money growth] started?’. The answer is ‘no, not on a sustained basis’. (See the violet line in the chart below. In August Eurozone M3 jumped by 0.9% in the month, i.e., at an annualised 12%. This was heartening, but it seems in fact to have been a flash in the pan.)
With the banks in the peripheral PIGS countries still having immense difficulty in funding existing assets, and so under pressure to shrink balance sheets and liabilities, a resumption in the growth of bank balance sheets – and hence in M3 – for the Eurozone as a whole is heavily dependent on banking policy in the core countries. Attitudes in the ECB, the Bundesbank and so on are largely a matter of conjecture, but the signs are that policy-makers have no organized plan to boost Eurozone money growth. (There is an obvious contrast with the Bank of England, which introduced ‘quantitative easing’ in March 2009 deliberately to boost broad money, and – more debatably – the Federal Reserve, which has set about so-called ‘QE2’ in recent weeks.)
Since the PIGS countries cannot devalue, the easiest escape–route from their current macroeconomic agony would be a marked easing of monetary conditions in their main trading and financial partners, i.e., the other members of the Eurozone. But that does not appear to be in prospect. The early months of 2011 will see continued severe macroeconomic strains in the PIGS group, accompanied by worries about the break-up of the Eurozone.
-10-5051015% Crash in Eurozone money growth appears to be over: has an upturn started? Annual rate of change Three-month annualised rate of changeLatest value is October2010

26-Nov-2010 INTERNATIONAL MONETARY RESEARCH News Letter

  

Weekly e-mail from Tim Congdon of International Monetary Research Ltd.  – 26^th November, 2010

What of the ECB’s “second pillar” (i.e., money)?

……………………

In its early years the European Central Bank asserted – loudly and strongly – that it would follow a “stability-oriented” monetary policy. That phrase had been associated for over 30 years with the issuer of the deutschemark and the guardian of its value, the German Bundesbank. In particular, the ECB said it would adhere – like the Bundesbank – to a two-pillar approach to monetary policy-making. The first pillar was the analysis and forecasting of national income determination, the labour market and so on found in all central banks; the second pillar was more distinctive, with its centrepiece being “monetary analysis” to support a desired rate of money growth. The favoured money aggregate – like the Bundesbank’s – was generally the broad money measure, M3.

Much less is heard nowadays about the second pillar. In fact, the position of monetary analysis – let alone M3 targeting – in ECB policy-making has become unclear. In late 2008 and early 2009 the growth of Eurozone M3 collapsed, making a mockery of official claims that the ECB was pursuing a stability-oriented framework. However, the ECB’s latest Monthly Bulletin includes an article on ‘Enhancing monetary analysis’, which is not signed by its authors and so must be intended as a statement from the ECB itself. This weekly e-mail discusses the article in the context of recent Eurozone monetary developments. The main point is simple, that the ECB has participated in the international drive to make banks safe by means of a more restrictive set of Basle rules. It is engaged – like other central banks – in deterring the creation of money by the extension of bank credit to the private sector. In traditional monetary jurisdictions, like the USA or the UK, the state can replace the private sector and create new money balances by such methods as “quantitative easing”. But the article in the ECB’s November Monthly Bulletin says nothing whatever about QE or indeed about the importance of maintaining a positive rate of money growth to prevent deflation.

Eurozone money trends in the Great Financial Crisis  

Part of the ECB’s propaganda at its foundation was that it would pursue the same ‘stability-oriented’ framework as the German Bundesbank. Heavy emphasis was placed on the need for policy to be guided by a two-pillar approach. The first pillar consisted of a price level or inflation target where the forward views on price trends were based on “real forces”, such as analysis of the labour market and trends in aggregate demand. The second pillar, by contrast, focussed on money. According to Issing in his 2008 book on The Birth of the Euro,

At the press conference of 13 October 1998, when the President, Wim Duisenberg, presented the monetary policy strategy, a journalist asked about the ‘dual pillars’ for the strategy, namely the ‘monetary element’ and ‘the inflation forecast or real economy element’. Duisenberg pointed out that money would play a prominent role in the strategy of the ECB. Taking up the reference to ‘two pillars’, he emphasised that he could not say which of the two was the ‘stronger’ or ‘thicker’ one.

The initial statement of ECB strategy mentioned a ‘reference value’ for M3 broad money, although it did not include a specific target. Implicit in the ECB strategy were two understandings, that inflation was ultimately ‘a monetary phenomenon’ and that large fluctuations in money growth would engender macroeconomic instability.

For much of its life the ECB did indeed preside over fairly stable growth of Eurozone M3, and its reward was an even-keeled Eurozone economy and an impressive degree of price stability (or, at any rate, low-inflation stability). Otmar Issing, the ECB’s first chief economist, certainly paid attention to trends in money growth. However, since Issing retired in 2006, the ECB’s economics research has not had the same intellectual consistency. The closure of the wholesale money markets in summer 2007 caused some parts of the Eurozone banking system to have severe difficulties in funding their assets. Since the escalation of the Great Financial Crisis in October 2008, Eurozone M3 growth has suffered a dramatic plunge. Indeed, the yo-yoing of M3 changes since 2006 – in effect, since Issing’s retirement – makes a mockery of the ECB’s supposed commitment to a stability-oriented framework in which steady growth of money is a key desideratum.

At any rate, in mid-2007 – before the Great Financial Crisis hit seriously – the ECB’s Governing Council encouraged an intensification of the monetary research effort. An article on ‘Enhancing monetary analysis’ in the November 2010 issue of the ECB’s Monthly Bulletin is one product of this extra work. The article reiterates the ECB’s concern about trends in money as such, noting ‘compelling empirical evidence showing that, at lower frequencies, i.e., over medium to longer-term horizons, inflation shows a robust positive association with monetary growth’. The ECB’s authors seem to be particularly pleased with recent work on the household sector’s money demand function, in which they say that the desire to hold money balances is heavily influenced by wealth, including housing wealth. They also bless such constructs as ‘dynamic general equilibrium models’ – or even ‘dynamic stochastic general equilibrium models’ – of the economy. In the articles’ words, ‘Structural general equilibrium models that incorporate an active role for money and credit offer a formal and disciplined approach to explaining the money-holding decisions of households and firms.’ Such models are described as being superior to partial equilibrium exercises, since they lend themselves to testing counterfactual propositions.

But is this all so much ‘blah-blah’? Economists were assembling highly mathematical DSGE models a decade or so ago, and these were useless in anticipating or diagnosing the Great Financial Crisis, and in offering policy prescriptions for it. The article is eclectic and woolly about a number of key issues. Like similar exercises from other central banks, the article

1.      cannot make up its mind about whether ‘money’ or ‘credit’ is the variable that matters to the determination of macroeconomic outcomes,

2.      denies that a ‘single model can be expected to provide a fully satisfactory explanation of monetary developments at all times’, and

3.      invokes a ‘suite’ of models to explain different aspects of a complex reality.

In truth, the ECB’s article gives its economists a range of excuses to find numerous, often inconsistent or even contradictory answers to the many questions that are likely to be thrown at them. They can duck the single, hard and definite answer that comes from genuine understanding.

The above chart shows the dramatic crash in money growth that occurred in late 2008 and early 2009, undoubtedly a major causal influence on the collapse in demand in 2009. But the ECB article on ‘Enhancing monetary analysis’ nowhere presents a clear and exact account of the forces responsible for the money crash. In my view the omission has to be described as appalling. The article does have a review of so-called ‘shocks’ to M3 growth, but it mixes up demand factors (i.e., those that affect the demand to hold money balances) with supply factors (i.e., those which affect the rate at which banks expand their balance sheets), and – to this analyst at least – the result is cryptic, muddled and almost incomprehensible. (See the text in the box below, with its references to ‘money capital formation’.)

A quotation from the latest ECB Monthly Bulletin

Above is a quotation (p. 95) from the article ‘Enhancing monetary analysis’ in the ECB’s November 2010 Monthly Bulletin, on the ‘shocks’ – and so presumably the disruptive causal influences – that affect money growth. The emphasis is on changes in banks’ ‘monetary capital formation’, i.e., on the change in their non-deposit, non-monetary liabilities. Am I alone in finding the paragraph almost incomprehensible? The statement ‘shocks perturbing “capital formation” have exerted the most significant downward impact on GDP growth, inflation and M3 growth’ does in fact imply that the late 2008 emphasis on increasing banks’ capital/asset ratios was deflationary, but did the ECB really mean to say that? Extra bank capital was meant to boost bank lending and exert an upward impact on GDP growth!

What caused the crash in Eurozone money growth?

Assume that the traditional concern, of the Bundesbank and the original ECB, about M3 growth is correct. Assume, in other words, that the crash in M3 growth in late 2008 and early 2009 was a basic causal influence on the Great Recession in Europe. Two questions then arise, ‘what force (or forces) was (or were) responsible for the money growth crash?’ and ‘what can and should the ECB now do to restore a sensible middle-of-the-road rate of money growth similar to that which applied from 1999 to 2006?’.

The central cause of the money growth crash in the Eurozone – as elsewhere – was that banks stopped expanding their claims on the private sector. This is obvious from the chart, which shows bank lending to the private sector increasing by a mere 200b. euros in the year to September 2009 compared to about 1200b. euros in the year to September 2008. The sudden collapse in bank credit to the private sector had two main causes. First, in the middle of 2007 the international wholesale money market closed, so that banks heavily reliant on inter-bank funding (such as those in Greece, Ireland, etc.) could no longer readily expand their assets and somewhere else in the international banking system that meant slower growth of deposit liabilities (i.e., money). Secondly, in a grotesque misunderstanding of what was required for the purpose of macroeconomic stability, regulators decided in autumn 2008 to force banks quickly to raise capital/asset ratios. Subsequent efforts to boost capital/asset ratios had the effect of intensifying the money slowdown. Not surprisingly, the shedding of risk assets increased, not decreased. Meanwhile the raising of capital reduced the private sector’s deposit claims on the banks. (When I use my bank deposit to buy newly-issued bank shares, my bank deposit – and hence the quantity of money – falls.)

Banks’ capital-raising in 2009 was therefore a second force behind the money crash. ECB data show that banks’ longer-term liabilities (i.e., their equity and bond liabilities, mostly, or – in other words – their ‘monetary capital’) climbed by about 450b. euros in the year to December 2009, or by almost 7 ½% at a time when money and credit growth were virtually nothing. But in fact banks had been growing their longer-term liabilities by more than 5% a year for most of the previous decade.

Contrary to the (extraordinarily hard and frankly weird) paragraph in the ECB’s ‘Enhancing monetary analysis’ article, the change in ‘monetary capital formation’ was not a particularly salient causal influence on the 2009 money crash. What differentiated 2009 from earlier years was the collapse in bank lending to the private sector. That was the cause of the slump in Eurozone money growth. The ECB participated in the wider scramble among central bankers and regulators to raise bank capital/asset ratios, and to that extent its activities contributed to the money crash and caused the Great Recession.

And what must now be done to raise Eurozone money growth?

The accusation in the last paragraph – that the ECB contributed to the Great Recession because of its endorsement of the move to higher bank capital/asset ratios – may seem harsh. After all, all the leading central banks endorsed the move to higher capital/asset ratios in the commercial banking industry. (And more fool them.) But there is an important difference between the ECB and the other central banks.

Commercial banks have two main kinds of assets and two main kinds of liability. The two main kinds of asset are claims on the private sector and claims on the state (i.e., claims on the government and/or the central bank, with claims on the central bank usually taking the form of cash); the two main kinds of liability are deposits, which are money, and non-deposit liabilities, such as equities and bonds, which are not money. Suppose that the task is to raise money growth (and so to defeat a recession), even though an overriding external factor (the idiocy of regulators, central banks, politicians, etc.) is preventing the expansion of banks’ claims on the private sector. It is then obvious that the only variable on which policy can work – taking official idiocy on banks’ capital as a given – is the banking system’s claims on the state.

Terrible mistakes have been made in monetary and banking policy in the last few years. Nevertheless, the key central banks in the English-speaking world – the Federal Reserve and the Bank of England – have now come to understand that, in collaboration with the government, they can alter the size of the banking system’s claims on the state. As I have explained on numerous occasions (but see, particularly in the recent past, my paper on ‘Monetary policy at the zero bound’ in the first 2010 issue of World Economics), two main approaches are available,

i.         direct borrowing by the government from the commercial banks, or

ii.       central bank purchases of assets from non-banks financed by the central bank issuing new cash reserves.

My general preference is for the first of these, because it is simple, and consequently avoids overblown and needlessly controversial central bank balance sheets. However, at present the enthusiasm for central bank independence has resulted in these decisions being regarded as the province of monetary policy-making and hence of central banks. In March 2009 the Bank of England embarked on large-scale purchases of government bonds and prevented a contraction in bank deposits, in a set of operations known as ‘quantitative easing’. The Federal Reserve had at that stage been involved in massive purchases of commercial paper from non-banks, later to be replace by massive purchases of mortgage-back paper. The effects of these operations on the level of bank deposits was the same as the Bank’s gilt purchases, but the chairman of the Federal Reserve – Ben Bernanke – favoured the term “credit easing”. At any rate, earlier this month the Fed announced operations very similar in character to the Bank’s March 2009 exercise, with $600b. of purchases of longs intended to increase the quantity of money.

The case for QE2 in the Eurozone

If the ECB’s economists seriously wanted to ‘enhance’ their ‘monetary analysis’, their focus today should be designing similar operations in the Eurozone. Yes, the Maastricht Treaty prevents governments from borrowing directly on overdraft terms from the European System of Central Banks. But

1.      The ECB and its member central banks can purchase government bonds in the secondary market, with two possible strategies,

i.                     They can do so in such blatant fashion that governments are, in effect, receiving direct central bank finance. The ECB’s purchases of Greek, Irish and Portuguese government debt in 2010 show that this option is available. (I should emphasize that I strongly oppose this sort of thing in general terms, but it is there in the extreme.)

ii.                   They can agree large targeted amounts of German bund purchases, French government bond purchases, etc., with the explicit objective of boosting both broad money and banks’ cash reserves, with the proportions between the various governments’ debt stocks agreed between finance ministers. The resulting operations would amount to multi-national, pan-European QE.

2.      Since the Maastricht Treaty does not prohibit commercial banks from holding government debt, the various governments of the Eurozone can arrange for their deficits to be financed mostly from the banks. They merely have to order their Debt Management Offices – if they have such institutions – to downplay their enthusiasm for the lowest cost form of finance and instead to ensure that, as far as possible, finance is from banks rather than non-banks. This instruction would of course not be permanent, but would be in force for as long as necessary to maintain a reasonable rate of growth of broad money. The size of the purchases would

i.                     need to be calibrated so that broad money growth was neither too fast nor too slow, and

ii.                   again, proportions between the various governments’ debt stocks would have to be agreed between finance ministers.

The challenge – in other words – is to design a set of “debt market operations” (using my vocabulary in the World Economics paper) to deliver positive and stable growth of M3. The challenge is particularly difficult in political and logistical term, because the Eurozone – unlike the USA or the UK – is not a traditional monetary jurisdiction, with one government, one central bank and one currency. Nevertheless, something could be organized. This the task to which the ECB’s economists and senior staff should now be addressing their attention.

The Club Med/PIGS group of countries are trapped in a downward deflationary spiral, where efforts to improve public finances aggravate monetary contraction, asset price declines, commercial bank insolvency and so on. The banking problems could be relieved only by a return to asset price inflation in the Eurozone as a whole, some of which would filter into the Club Med/PIGS countries. If the votaries of orthodoxy insist than any kind of asset price inflation is verboten, the answer is twofold. First, asset prices have been going up and down for centuries, and to insist that only downward movements are respectable is monetary sado-masochism. Secondly, moderate but positive money growth ought to be associated with mild asset price inflation. All being well, that would help Ireland, Greece, etc., without sparking rapid inflation in goods and labour markets.

Conclusion: the ECB has no active strategy to boost M3 growth

The article on ‘Enhancing monetary analysis’ was badly-written and confusing. It gave little confidence that the ECB’s senior staff is now focussed on vital practical topics arising from the Great Recession. Most worrying of all, the ECB’s attitude towards ‘the second pillar’ – the distinctive emphasis on broad money growth for which the Bundesbank was once so celebrated – is now uncertain. The analyst has to wonder whether the ECB now has any organized view on money growth at all. Readers of the ‘Enhancing monetary analysis’ article in the November 2010 Monthly Bulletin certainly cannot find any guidance on the relative desirability of, say, 1% and 6% growth of M3 over the next twelve months.

But Europe’s macro outlook turns on whether M3 growth in 2011 is 1% rather than 6%. It is possible that – with no further prodding from policy-makers – Eurozone M3 growth next year will revive to 6%. But this seems implausible in view of the still worsening situation in the PIGS group. Particularly alarming were statements in press reports on the Irish situation that the rescue package will ensure that the Irish banks sell off a high proportion of their assets. Do any of the relevant officials understand that – when a bank sells an asset to a non-bank (say, an insurance company or a pension fund) – the effect on the quantity of money is the same as the repayment of a bank loan? Sure, the Irish banks have lost shareholders’ money and do not have enough capital to justify the present scale of their loan portfolios. But – unless offsetting steps are actively taken (by, for example, QE-type operations) – banks’ sales of loans to non-banks destroy money balances and add to the deflationary spiral. Two leading investment managers at Jupiter Asset Management – Guy De Blonay and Philip Gibbs – have today called for a QE2 programme to be unleashed by the ECB. They claim – very understandably – that Eurozone banks in general are too risky for their funds while the macroeconomic context is so disheartening. The analysis in this note supports the De Blonay-Gibbs position, although it must be recognised that QE is more difficult to structure in the Eurozone than in a traditional monetary jurisdiction. The alarming message from its November 2011 Monthly Bulletin is that the ECB has not begun to think about an agenda to restore positive money growth to the Eurozone.

26^th November, 2010