'..How credible is an announcement of “strict future rules” if at present violation of law is so widely not only accepted, but requested by academics, politicians and even central bankers?..'<blockquote>“First, that these loans should only be made at a very high rate of interest. This will operate as a heavy fine on unreasonable timidity and will prevent the greatest number of applications by persons who do not require it..."
“Secondly, that at this rate these advances should be made on all good banking securities and as largely as the public ask for them.”
This is the original definition of the role of the central bank as lender of last resort by Walter Bagehot in his famous book
Lombard Street (1873).
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..the ECB is going far beyond what Bagehot asked the central bank to do in times of panic..
..
On top of these alarming economic and monetary consequences, providing monetary financing would break the law – a constitution ratified by all governments and parliaments. Should one be surprised that a number of well-known economists ignore legal principles? Who is disappointed by the fact that numerous politicians and European bureaucrats press hard on the ECB to violate the law? Now even some central bankers follow this line. Imagine: unelected technocrats as they are often called lifting themselves above the law.
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..How credible is an announcement of “strict future rules” if at present violation of law is so widely not only accepted, but requested by academics, politicians and even central bankers?..'
- Otmar Issing,
Moral hazard will result from ECB bond buying, November 30, 2011</blockquote>
Context<blockquote>
(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'A Humane Economy - '..humane values.' - Wilhelm Röpke'Ethical problems of production .. the production of money.'</blockquote>