Trichet does not understand what the Lisbon treaty does to the ECB’s independence nor does he understand what the EONIA is. He has confidence and trust in the Greek and US bureaucrats. The only thing he thinks to know, i.e., that Dubai is okay, is not true.
This is an update of my previous post
ECB president Trichet should resign!
Posted by Ivo Cerckel on November 7th, 2009
http://bphouse.com/honest_money/2009/11/07/ecb-president-trichet-should-resign/
At the end of the press conference after the 05 November 2009 meeting of European Central Bank governing council, leaving interest rates unchanged at 1 percent, ECB president Jean-Claude Trichet spoke at length about the European Union reform treaty, the Lisbon treaty, which was signed by the EU member states on 13 December 2007, and entered into force on 01 December 2009,
but he didn’t mention that the latter treaty transforms the ECB into an institution of the European Union, thereby repealing whatever independence the ECB had. (1)
At the press conference after the 03 December 2009 meeting of ECB governing council, leaving interest rates unchanged at 1 percent, Trichet reminded his audience that it was the 1992 Maastricht treaty which would have instituted the independence of the ECB. To that effect, the Maastricht treaty even grants legal personality to the ECB. (2)
As regards the EONIA, the Euro OverNight Index Average rate, which is an effective overnight reference rate which has been constructed so as to be computable as a weighted average of all overnight unsecured lending transactions in the interbank MARKET (3),
Trichet said on 05 November, 2009 i.e., before the entry into force of the Lisbon treaty, that it is not his intention to change the way the market is functioning. On 03 December 2009, i.e., after the entry into force of the Lisbon treaty, he said that it is not his intention to change the way he is handling the market. That’s the result of the Lisbon treaty. Before the Lisbon treaty, the EONIA should have been computed. Since the Lisbon treaty, it is clear that it is being arbitrarily decreed by the ECB bureaucrats.
How could the ECB ever have been independent, even before the entering into force of the Lisbon treaty, if the European Union commissioner of economic and monetary affairs “from time to time” also participates in the fortnightly meetings of the ECB governing council?
If he were honest, Trichet would resign, because the Lisbon treaty takes whatever independence he had away from him.
Trichet said on 05 November 2009:
Let me only say that I am very happy that we have the Treaty of Lisbon, which is now ratified by all. Europe has demonstrated a capacity to surmount an immense difficulty in very demanding times, and this is very heartening from the perspective of ONE OF THE INSTITUTIONS OF EUROPE which has had to cope with an exceptionally demanding environment over the past two years. We are heartened by the fact that we have found an appropriate way to get out of this situation. (1, again)
Contrast this to Lorenzo Bini Smaghi, member of the governing council of the ECB, who said on 24 January 2008:
The TREATY OF LISBON strengthens the ECB’s position in several ways
[...] iv) the ECB is recognised as an INSTITUTION OF THE EUROPEAN UNION, joining the Council of the European Union, the European Commission and the European Parliament, even though it has legal personality. (4)
Trichet, on Thursday 05 November 2009, didn’t say anything about the repeal of ECB independence, if any.
What’s left of the independence of the ECB, which, as Trichet reminded us on 03 December 2009, was bestowed by the 1992 Maastricht treaty upon the ECB?
What does legal personality, which was also granted by the Maastricht treaty, mean from now on?
On 03 December 2009 Trichet said
that he “trusts” the sincerity of the US of A authorities on strong dollar, both sincerity of the Secretary of the Treasury and the sincerity, “of course”, of the Chairman of the Fed,
and that he has the “confidence” that the Greek guv’mint will take the appropriate decisions to deal with its fiscal situation.
The only thing he “knows” or rather “thinks”, he said on 03 December 2009, is that:
“As regards Dubai, I think it is an illustration of the fact that we have nervousness in the market. I do not think we should over-assess the gravity of what is happening in Dubai, but at the same time we have to consider the impact that a relatively modest event had on the market.”
Trichet didn’t say by what standards he knew that.
“Confidence will never return in Dubai”, said Jim McLean in analysis in The Times of 05 December 2009. (5)
And then came this news on Sunday, 06 December 2009:
From The Sunday Times
December 6, 2009
Banks face fresh Dubai debt fears
RBS and HSBC are among UK lenders with exposure to Dubai Holding
Jenny Davey and John Arlidge
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6945901.ece
A benchmark is anything taken or used as a standard or point of reference, says Chambers dictionary.
Saudi Aramco said on 28 October 2009 that it will now use the Argus Sour Crude Index (ASCI) marker, an index of high-sulfur oil produced in the Gulf of Mexico, to price crude for sale to US customers, instead of the West Texas Intermediate (WTI) index. This is the first month, Saudi Aramco is pricing crude against this new benchmark to US consumers. (6) And all of a sudden, crude oil prices are in “the right range” and there is no need to reduce inventories, Saudi Arabian Oil Minister Ali al-Naimi said ahead of an OPEC meeting scheduled for later this month. (7)
But for Trichet, there are no (more) standards.
Anything goes for Trichet.
Trichet should resign because the independence and legal personality of the ECB have been reduced to nothing by the Lisbon treaty. It is this reduction which led him on 03 December 2009 to think that he was entitled to arbitrarily decree the height of the EONIA, whereas the EONIA was designed to be computable from MARKET, not bureaucratic, rates. As a graduate from the French school for bureaucrats, the Ecole Nationale d’Administration, who started his career with the French tax collector and never left guv’mint employ, he is unable to understand that the Greek and US bureaucrats are just as incompetent and harmful as all bureaucrats. The only thing he thinks to know, i.e., that Dubai is okay, is not true.
Ivo Cerckel
honestmoney@maktoob.com
http://twitter.com/ivocerckel/
NOTES
(1)
Introductory statement with the Q&A
Jean-Claude Trichet, President of the ECB,
Lucas Papademos, Vice President of the ECB
Frankfurt am Main, 5 November 2009
http://www.ecb.int/press/pressconf/2009/html/is091105.en.html
(2)
Introductory statement with the Q&A
Jean-Claude Trichet, President of the ECB,
Lucas Papademos, Vice President of the ECB
Frankfurt am Main, 3 December 2009
http://www.ecb.int/press/pressconf/2009/html/is091203.en.html
(3) (a)
Eonia
From Wikipedia, the free encyclopedia
http://en.wikipedia.org/wiki/Eonia
(3) (b)
Paul Temperton, “The euro and the money market”, in Paul Temperton (ed.), “The Euro”, John Wiley & Sons, 1998, 2nd ed., 261, p. 266
(4)
The economic governance of the European Union in the light of the Treaty of Lisbon: harmonisation or competition between countries?
Lorenzo Bini Smaghi, Member of the Executive Board of the ECB
Speech given at the conference on:
The European Central Bank: a new actor on the international scene,
Milan, 24 January 2008
http://www.ecb.int/press/key/date/2008/html/sp080124.en.html
(5)
From The Times December 5, 2009
Confidence will never return in Dubai
Jim McLean: Analysis
http://www.timesonline.co.uk/tol/news/world/middle_east/article6945325.ece
(6)
Saudi Cuts Europe January Oil Prices; U.S. Marker New (Update1)
By Anthony DiPaola - Dec. 6 (Bloomberg)
http://www.bloombergnews.com/apps/news?pid=20601087&sid=amaYmxAQE9tU&pos=3
(7)
Saudi Arabia’s Al-Naimi Says Oil Price Is ‘Perfect’ (Update3)
Dec. 5 (Bloomberg)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCe.c6tlfxlg&pos